EXHIBIT 10.1
POST-PETITION
LOAN AND SECURITY AGREEMENT
THIS POST-PETITION LOAN AND SECURITY AGREEMENT is made this 21st day of
January, 1999, by and among FLEET CAPITAL CORPORATION, a Rhode Island
corporation ("FLEET"), with an office at 2711 Haskell Avenue, Suite 2100, LB21,
Dallas, Texas 75204, BANKBOSTON, N.A., a national banking association
("BOSTON"), with an office at 100 Federal Street, Boston, Massachusetts 02110
(Fleet and Boston are collectively referred to as "LENDERS" or each individually
a "LENDER"), FLEET, as Agent for Lenders (Fleet, in such capacity, the "AGENT"),
and BRAZOS SPORTSWEAR, L.L.C., a Delaware limited liability company and a
Chapter 11 debtor-in-possession ("BRAZOS"), with its chief executive office at
4101 Founders Boulevard, Batavia, Ohio 45103-2553, and MORNING SUN, INC., a
Washington corporation and a Chapter 11 debtor-in-possession ("MORNING SUN"),
with its chief executive office at 3500 20th Street E., Building C, Tacoma,
Washington 98401, and BRAZOS EMBROIDERY, INC., a Pennsylvania corporation and a
Chapter 11 debtor-in-possession ("EMBROIDERY"), with its chief executive office
at Route 209 North, Millersburg, Pennsylvania 17061 (Brazos and Morning Sun and
Embroidery being hereinafter individually referred to as a "BORROWER" and
collectively referred to as "BORROWERS", subject to the provisions of SECTION
1.5 of this Agreement).
A. Brazos, Morning Sun, Lenders and Agent are parties to a certain Third
Amended and Restated Loan and Security Agreement, dated as of July 2, 1997,
executed by Brazos, Inc., Morning Sun, Lenders and Agent which was amended by
the following documents: (i) First Amendment to Third Amended and Restated Loan
and Security Agreement dated September 29, 1997, executed by Brazos, Inc.,
Morning Sun, Agent and Lenders, (ii) Forbearance Agreement and Second Amendment
to Third Amended and Restated Loan and Security Agreement executed on June 30,
1998, executed by Brazos (Brazos having succeeded by operation of law to all
right, title, interest, duties and obligations of Brazos, Inc. in, to and under
the Third Amended and Restated Loan and Security Agreement), Morning Sun, Agent
and Lenders, (iii) Third Amendment to Third Amended and Restated Loan and
Security Agreement, dated November 16, 1998, executed by Brazos, Morning Sun,
Agent and Lenders, (iv) Amendment to Forbearance Agreement and Fourth Amendment
to Third Amended and Restated Loan and Security Agreement, dated November 30,
1998, executed by Brazos, Morning Sun, Agent and Lenders, (v) Fifth Amendment to
Third Amended and Restated Loan and Security Agreement, dated December 23, 1998,
executed by Brazos, Morning Sun, Agent and Lenders, and (vi) Sixth Amendment to
Third Amended and Restated Loan and Security Agreement dated January 15, 1999,
executed by Brazos, Morning Sun, Agent and Lenders (as at any time amended, the
"PRE-PETITION LOAN AGREEMENT"), pursuant to which Lenders have made revolving
loans and Agent has issued or participated in letters of credit for the account
of Borrowers (collectively, the "PRE-PETITION LIABILITIES"). As security for the
payment and performance of each Borrower's obligations to the Agent and Lenders
under or in connection with the Pre-Petition Loan Agreement and the Pre-Petition
Liabilities, each Borrower
granted to Agent, for the benefit of Lenders, a security interest in each
Borrower's accounts receivable and inventory.
B. On January 21, 1999 (herein called the "FILING DATE"), (i) Brazos filed
a voluntary petition (herein called the "BRAZOS PETITION") commencing its case
(herein called the "BRAZOS CHAPTER 11 CASE") under Chapter 11 of the Bankruptcy
Code (11 U.S.C. ss.ss. 101 ET SEQ; herEIn called the "BANKRUPTCY CODE") in the
United Stated Bankruptcy Court for the District of Delaware (herein called the
"COURT"), (ii) Morning Sun filed a voluntary petition (herein called "MORNING
SUN PETITION") commencing its case (herein called the "MORNING SUN CHAPTER 11
CASE") under Chapter 11 of the Bankruptcy Code in the Court, and (iii)
Embroidery filed a voluntary petition (herein called the "EMBROIDERY PETITION")
commencing its case (herein called the "EMBROIDERY CHAPTER 11 CASE") under
Chapter 11 of the Bankruptcy Code in the Court (the Brazos Petition, the Morning
Sun Petition and the Embroidery Petition being hereinafter sometimes
individually referred to as a "PETITION" collectively referred to as the
"PETITIONS", and the Brazos Chapter 11 Case, the Morning Sun Chapter 11 Case and
the Embroidery Chapter 11 Case being hereinafter sometimes individually referred
to as a "CHAPTER 11 CASE" and collectively referred to as the "CHAPTER 11
CASES").
C. Each Borrower is continuing to manage its business and properties as
debtor in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
D. The Borrowers have requested that the Lenders make funds available to
the Borrowers pursuant to Section 364(c)(1), (c)(2) and (c)(3) of the Bankruptcy
Code for such purposes as are hereinafter described in this Agreement.
E. The Borrowers have been unable to obtain debtor in possession financing
on an unsecured basis or on terms as favorable or more favorable than the terms
provided herein, and an immediate need exists for the Borrowers to obtain funds
to continue in the operation of their business.
F. To provide security for, and to assure the repayment of the Obligations
(as hereinafter defined), Borrowers have agreed to provide to the Agent, for the
benefit of Lenders, INTER ALIA, security interests in all of their property and
interests, whether real or personal, tangible or intangible, on the terms and
conditions set forth herein and in accordance with Section 364(c)(1), (c)(2) and
(c)(3) of the Bankruptcy Code.
G. The Lenders are willing to make funds available to the Borrowers for
the aforementioned purposes, subject to the terms and provisions of this
Agreement and subject to the terms and conditions set forth in an order of the
Court approving the proposed financing.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used herein, 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):
1999 FORECAST - the forecast of Borrowers' business operations and
financial position on a month-by-month basis for calendar year 1999 which has
been supplied by Borrowers to Lenders prior to the date of this Agreement and
which is attached hereto as EXHIBIT G.
ACCOUNT DEBTOR - any Person who is or may become obligated under or on
account of an Account.
ACCOUNTS - all accounts, whether now owned or hereafter created or
acquired by a Borrower or in which a Borrower now has or hereafter acquires any
interest.
ADVANCE - the disbursement by a Lender (or by Agent on behalf of Lenders)
of a Loan to Borrowers pursuant to this Agreement.
AFFILIATE - a Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Borrower; (b) which beneficially owns or holds
10% or more of any class of the Voting Stock of a Borrower; or (c)10% or more of
the Voting Stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by a
Borrower or a Subsidiary of a Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
AGENT - as defined in the preamble of this Agreement, and any successor
Agent appointed pursuant to the terms of this Agreement.
AGREEMENT - this Post-Petition Loan and Security Agreement, including all
Exhibits hereto, as the same may be modified, supplemented, extended, amended,
or restated from time to time.
APPLICABLE ANNUAL RATE - as defined in SECTION 3.1(A) of this Agreement.
AVAILABILITY RESERVE - on any date of determination thereof, an amount
equal to the sum of the following (without duplication): (i) any amount that a
Borrower is obligated to pay pursuant to the provisions of any of the DIP
Financing Documents that Agent or any Lender elects to pay for the account of
Borrower in accordance with authority contained in any of the DIP Financing
Documents; and (ii) reserves established by Agent and/or Lenders from time to
time pursuant to SECTION 2.1(A) hereof.
AVERAGE DAILY LOAN BALANCE - for any relevant period of time, the amount
obtained by adding the unpaid balance of the Loans owing by Borrowers to Lenders
at the end of each day for each day during the time period in question (as
reflected in the records of Agent) and by dividing such sum by the number of
days in such time period.
AVERAGE EXCESS AVAILABILITY - an amount equal to (a) the sum, determined
at the end of each day during the period of time in question, of (i) the
Borrowing Base MINUS (ii) the unpaid balance of Loans owing by Borrowers to
Lenders (as reflected in the records of Agent) at the end of each day during
such period, divided by (b) the number of days in such period of time.
AVERAGE MONTHLY LOAN BALANCE - the amount obtained by adding the unpaid
balance of Loans owing by Borrowers to Lenders at the end of each day for each
day during the month in question (as reflected in the records of Agent) and by
dividing such sum by the number of days in such month.
AVERAGE MONTHLY REVOLVING CREDIT LOANS USAGE - as defined in SECTION
3.1(I) of this Agreement.
AVOIDANCE CLAIM - any claim that could be asserted by or on behalf of a
Borrower or the Estate in such Borrower's Chapter 11 Case against a Person under
11 U.S.C. ss.ss. 544, 546, 547, 548, 549, 550 or 553.
BANK - Fleet National Bank and its successors and assigns.
BANKRUPTCY CODE - as defined in the preamble hereto.
BASE RATE - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if the prime
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.
BORROWER SUBORDINATED DEBT - Indebtedness of a Borrower that is expressly
subordinated to the Obligations upon terms satisfactory to Lenders.
BORROWING - the combined Advances made to Borrowers on a single date.
BORROWING BASE - as at any date of determination thereof, an amount equal
to the lesser of:
(a) (i) the DIP Facility Limit; MINUS (ii) 100% of the face amount of
all standby Letters of Credit which are part of the DIP Facility (including any
standby Rollover Letters of Credit) which are either issued by Agent or issued
by Bank and are covered by the provisions of an LC Risk Participation Agreement
which are outstanding at such date;
MINUS (iii) 45% of the face amount of all documentary Letters of Credit which
are part of the DIP Facility (including any documentary Rollover Letters of
Credit) which are either issued by Agent or are issued by Bank and covered by
the provisions of an LC Risk Participation Agreement which are outstanding at
such date; MINUS (iv) the Availability Reserve; MINUS (v) the Carve-Out Reserve;
or
(b) an amount equal to:
(i) 85% (or such lesser percentage as Lenders may in their
sole discretion determine from time to time after the occurrence of a
Default or an Event of Default) of the net amount of Eligible Accounts
outstanding as of the applicable Calculation Date;
PLUS
(ii) the lesser of (A) $35,000,000 or (B) the sum of: (1) the
LESSER of (x) $5,000,000 or (y) 55% (or such lesser percentage as Lenders
may in their sole discretion determine from time to time after the
occurrence of a Default or an Event of Default) of the value of Eligible
Finished Goods Inventory consisting of "printed" finished goods as of the
applicable Calculation Date, PLUS (2) the sum of: (x) 55% (or such lesser
percentage as Lenders may in their sole discretion determine from time to
time after the occurrence of a Default or an Event of Default) of the
value of Eligible Inventory (other than Eligible Finished Goods Inventory
consisting of "printed" finished goods), as of the applicable Calculation
Date, PLUS (y) the Seasonal Inventory Amount as of the applicable
Calculation Date;
PLUS
(iii) the Equipment Revolver Subline Amount;
MINUS
(subtract from the sum of CLAUSES (I), (II) and (III) above)
(iv) the sum of: (a) 100% of the face amount of all standby
Letters of Credit which are part of the DIP Facility (including any
standby Rollover Letters of Credit) which are either issued by Agent or
are issued by Bank and are covered by the provisions of an LC Risk
Participation Agreement which are outstanding at such date, (b) 45% of the
face amount of all documentary Letters of Credit which are part of the DIP
Facility (including any documentary Rollover Letters of Credit) which are
either issued by Agent or are issued by Bank and covered by the provisions
of an LC Risk Participation Agreement which are outstanding at such date,
(c) the Availability Reserve, and (d) the Carve-Out Reserve.
For purposes of CLAUSE (B)(I) above, the net amount of Eligible Accounts
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 Accounts at such time.
For purposes of CLAUSE (B)(II) above the value of Eligible Inventory on a
date shall be calculated on the basis of the lower of cost or market. Cost shall
be calculated on a first-in, first-out basis.
Without limiting Lenders' discretion to adjust advance rates from time to
time after the occurrence of a Default or an Event of Default as provided above,
Borrowers acknowledge that Lenders may from time to time before or after the
occurrence of a Default reduce the Inventory advance rate if Lenders determine
that the size mix of any Borrower's finished goods has materially changed from
the size mix as of the Closing Date.
In addition to and not in limitation of any of the other rights of Lenders
and Agent contained in this Agreement, the Borrowers hereby agree and
acknowledge that to the extent that the proceeds received by Borrowers, Agent or
Lenders on or after the date of this Agreement from the disposition of
Collateral exceed the amount of the Revolving Credit Loans advanced on such
Collateral (the "EXCESS AMOUNT"), such Excess Amount will be applied in such a
manner as Agent determines, in its sole discretion, is necessary in order that
no additional Borrowing Base availability is created by such Excess Amount
(which may be effectuated, in the sole discretion of Agent, among other methods,
by a permanent reduction in the Equipment Revolver Subline Amount).
Notwithstanding the foregoing, the term "Excess Amount" shall not include
proceeds from the disposition of Inventory or collection of Accounts in the
ordinary course of business or proceeds from the disposition of the Cincinnati
Facility Inventory .
BORROWING BASE REPORT - as defined in SECTION 9.1(R) hereof.
BOSTON - as defined in the preamble to this Agreement.
BRAZOS - as defined in the preamble to this Agreement.
BRAZOS CHAPTER 11 CASE - as defined in the preamble to this Agreement.
BRAZOS PETITION - as defined in the preamble to this Agreement
BUSINESS DAY - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Texas or is a day on which banking
institutions located in such state are closed.
BUSINESS PLAN - the business plan to be prepared by Borrowers and
delivered to Lenders by March 15, 1999, to be in form and scope satisfactory to
Lenders, and to detail (i) the financial
forecast of Borrower's financial position during the Chapter 11 Cases, including
the cash flows, profit and loss, Borrowing Base availability, Revolving Credit
Loans balance, and liquidity of Borrowers; (ii) the timetable during the period
before final confirmation of the Reorganization Plan for achieving the proposed
strategy relating to the reorganization of Borrowers' business, including,
without limitation, the timetable for the liquidation of the Cincinnati Facility
Inventory and the method and manner by which all Obligations will be paid in
full in cash upon the earlier to occur of the Maturity Date or the final
confirmation of the Reorganization Plan; and (iii) an outline of the joint plan
of reorganization Borrowers intend to propose in their jointly administered
Chapter 11 Case.
CALCULATION DATE - as at any date when the Borrowing Base is to be
determined the effective date of the most recent Borrowing Base Report submitted
to Agent pursuant to SECTION 9.1(R) hereof (provided that if the Borrowing Base
Report required by SECTION 9.1(R) hereof is due and has not been delivered by
Borrowers to Agent, Agent shall have the right to determine in its credit
judgment what should be the relevant "Calculation Date" for purposes of
calculation of the Borrowing Base).
CAPITAL EXPENDITURES - expenditures made and liabilities incurred
(including the principal portion of Capitalized Lease Obligations, but excluding
capitalized interest) for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.
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.
CARVE-OUT RESERVE - on any date of determination thereof, an amount equal
to the sum of: (i) $250,000.00; PLUS (ii) the Post Default Carve Out Amount (as
defined in the Interim Financing Order); PLUS (iii) allowed accrued professional
fees in the Chapter 11 Cases which are unpaid at such date.
CHANGE IN CONTROL - (i) the first date that those Persons who on the date
of this Agreement hold all of the outstanding Voting Stock of Brazos (including
options, warrants and other Securities convertible into or exchangeable with
such Voting Stock), together with their respective Affiliates, hold less than
fifty percent (50%) of the outstanding Voting Stock of the Brazos determined on
a fully diluted basis (assuming full conversion or exchange of all options,
warrants, or other Securities which are convertible into or exchangeable with
such Voting Stock), and/or (ii) the first date Brazos holds less than one
hundred percent (100%) of the outstanding capital stock of Morning Sun.
CHAPTER 11 CASE and CHAPTER 11 CASES - as defined in the preamble to this
Agreement.
CHATTEL PAPER - shall have the meaning ascribed to "chattel paper" in the
Code.
CINCINNATI FACILITY - Brazos' facility at 4101 Founders Boulevard,
Batavia, Ohio.
CINCINNATI FACILITY INVENTORY - the Inventory of Brazos located at the
Cincinnati Facility on the date hereof, as reported on or prior to the date
hereof to Lenders by Borrowers.
CLOSING DATE - the date of execution of this Agreement.
CODE - the Uniform Commercial Code as adopted and in force in the State of
Texas, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property of each
Borrower described in SECTION 4 hereof and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of the
Obligations, whether or not such Property or interest in Property was existing
or acquired by such Borrower prior to or after the Filing Date.
CONSOLIDATED - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
COURT - as defined in the preamble to this Agreement.
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 - as defined in SECTION 3.1(B) of this Agreement.
DIP FACILITY - the credit facilities established by Lenders in favor of
Borrowers pursuant to SECTION 2 hereof.
DIP FACILITY LIMIT - on any date of determination thereof, an amount equal
to $62,500,000.00, MINUS the DIP Facility Limit Reduction Amount on such date.
Fleet's maximum portion of the DIP Facility Limit (assuming the DIP Facility
Limit Reduction Amount on such date is $0.00) is $36,750,000.00, i.e., Fleet's
DIP Facility Limit (assuming the DIP Facility Limit Reduction Amount on such
date is $0.00) is $36,750,000.00. Boston's maximum portion of the DIP Facility
Limit (assuming the DIP Facility Limit Reduction Amount on such date is $0.00)
is $25,750,000.00, i.e., Boston's DIP Facility Limit (assuming the DIP Facility
Limit Reduction Amount on such date is $0.00) is $25,750,000.00.
DIP FACILITY LIMIT REDUCTION AMOUNT - on any date of determination
thereof, the aggregate amount of proceeds received by Borrowers, Agent or
Lenders from the disposition of Collateral after the Closing Date.
Notwithstanding the foregoing, the term "DIP Facility Limit Reduction Amount"
shall not include proceeds from the sale of Inventory or the collection of
Accounts in the ordinary course of business or proceeds from the sale of the
Cincinnati Facility Inventory.
DIP FINANCING DOCUMENTS - this Agreement and any and all other agreements,
instruments and documents now or hereafter executed by a Borrower in favor of
Agent and/or Lenders with respect to any of the transactions contemplated by
this Agreement.
DIP ORDERS - means the Interim Financing Order and the Permanent Financing
Order.
DISNEY - means Disney Enterprises, Inc. or any affiliate of Disney
Enterprises, Inc.
DOCUMENTS - shall have the meaning ascribed to the term "document" in the
Code.
DISTRIBUTION - in respect of any corporation means and includes: (a) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (b) the redemption or
acquisition of its capital stock (or any rights, warrants or options relating to
the acquisition of any Borrower's capital stock) unless made contemporaneously
from the net proceeds of the sale of Securities.
DOLLAR - lawful money of the United States of America.
DOMINION ACCOUNT - a special account of Lenders established by Borrowers
pursuant to the Pre-Petition Loan Documents at a bank selected by Borrowers, but
acceptable to Agent, and over which Agent, for the benefit of Lenders, shall
have sole and exclusive access and control for withdrawal purposes.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of a
Borrower's business from the sale of goods or rendition of services which Agent,
in its reasonable credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if: (a) it arises out of a sale made by a Borrower to a Subsidiary or an
Affiliate of a Borrower or to a Person controlled by an Affiliate of such
Borrower; or (b) it is unpaid for more than 60 days after the original due date
shown on the invoice; or (c) it is due or unpaid more than 90 days after the
original invoice date (PROVIDED, HOWEVER, that in circumstances where the
relevant Account Debtor is given payment terms of equal to or greater than 60
days after invoice date and such Account Debtor is specifically described on
EXHIBIT V attached hereto, this ineligibility classification shall instead apply
to any Account from such Account Debtor which is due or unpaid more than 120
days after the original invoice date); or (d) 20% or more of the Accounts from
an Account Debtor to a Borrower are not deemed Eligible Accounts hereunder
(PROVIDED, HOWEVER, that in circumstances where either (i) an Account Debtor is
specifically listed on EXHIBIT W attached hereto or the Agent and Lenders, in
their reasonable credit judgment, have pre-approved such a change for a specific
Account Debtor, this ineligibility classification shall instead apply to the
situation where 50% or more of the Accounts from such an Account Debtor to such
Borrower are not deemed Eligible Accounts hereunder); or (e) any covenant,
representation or warranty contained in this Agreement with respect to such
Account has been breached; or (f) the Account Debtor is also such Borrower's
creditor or supplier, 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 such Borrower, or the Account otherwise is subject to any right of
setoff by the Account Debtor, to the
extent of any offset, dispute or claim; or (g) the Account Debtor has commenced
a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter 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 other 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; or (h) it arises from a sale to
an Account Debtor outside the United States, unless a documentary Letter of
Credit has been issued with respect to such Account, by an issuer and in form
and substance satisfactory to Lenders, or the Lenders otherwise approve such
Account; or (i) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; or (j) Agent in good faith believes 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 (k) the
Account Debtor is the United States of America or any department, agency or
instrumentality thereof, unless such Borrower assigns its right to payment of
such Account to Agent, on behalf of Lenders, in form and substance satisfactory
to Agent, so as to comply with the Assignment of Claims Act of 1940, as amended
(31 U.S.C. Sub-Section 203 ET SEQ.); or (l) the Account Debtor is located in
either the state of New Jersey, the state of Minnesota, the state of Indiana,
the state of West Virginia or any other state requiring the filing of a Business
Activity Report or similar document in order for such Borrower to bring suit or
otherwise enforce its remedies against such Account Debtor in the courts or
through any judicial process of such state, unless such Borrower has qualified
to do business as a foreign corporation or has filed a Notice of Business
Activities Report or similar required report with the appropriate officials in
those states for the then current year; or (m) the Account is subject to a Lien
other than a Permitted Lien (which Permitted Lien, if so required by Lenders,
has been satisfactorily subordinated to Agent's Lien, for the benefit of
Lenders, in such Account pursuant to an intercreditor agreement or similar
document acceptable in form and substance to Lenders, in their sole discretion);
or (n) 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 such Borrower and accepted by the Account Debtor or the
Account otherwise does not represent a final sale; or (o) the total unpaid
Accounts of the Account Debtor exceed a credit limit determined by Agent to the
extent such Account exceeds such limit; or (p) the Account is evidenced by
chattel paper or an instrument of any kind, or has been reduced to judgment; or
(q) such Borrower 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
for prompt payment are reflected in the calculation of the face value of each
invoice related to such Account, to the extent of such deduction; or (r) such
Borrower has made an agreement with the Account Debtor to extend the time of
payment thereof; or (s) the Account arises from a retail sale of goods to a
Person who is purchasing same primarily for personal, family or household
purposes; or (t) Lenders do not have a perfected first priority Lien in the
Account. Notwithstanding anything herein to the contrary, Accounts of Embroidery
shall at no time constitute "Eligible Accounts".
ELIGIBLE EQUIPMENT - such Equipment of a Borrower which Agent, in its
reasonable credit judgment, deems to be Eligible Equipment and which is covered
by the Equipment Appraisal. Without limiting the generality of the foregoing, no
Equipment shall be Eligible Equipment unless, in Agent's credit judgment, it (a)
is in good operating condition and repair (reasonable wear and tear excepted),
(b) is not affixed to any real Property owned or leased by a Borrower so that an
interest arises therein under the real estate laws of the applicable
jurisdiction, (c) conforms in all respects to the warranties and representations
set forth in SECTION 7.1 hereof, (d) is at all times subject to Agent's for the
benefit of Lenders, duly perfected, first priority security interest and no
other Lien except a Permitted Lien, (e) is situated at a location in compliance
with SECTION 4.5 hereof and is not in transit, and (f) is owned by Brazos or
Morning Sun.
ELIGIBLE FINISHED GOODS INVENTORY - Eligible Inventory consisting of
"blank" or "printed" finished goods of a Borrower.
ELIGIBLE INVENTORY - such Inventory of a Borrower (other than packaging
materials and supplies) which Agent, in its reasonable credit judgment, deems to
be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory unless, in Agent's opinion, it (a) is (i)
cloth rolls, piece goods and other raw materials acceptable to Agent or (ii)
"blank" or "printed" finished goods of a Borrower or (iii) the portion of
work-in-process of the Plymouth division consisting of completed "blank"
T-shirts, sweatshirts and polo shirts, (b) is in good, new and saleable
condition, (c) is not obsolete or unmerchantable, (d) meets all standards
imposed by any governmental agency or authority, (e) conforms in all respects to
the warranties and representations set forth in SECTION 6.1 hereof, (f) is at
all times subject to Agent's, for the benefit of Lenders, duly perfected, first
priority security interest and no other Lien except a Permitted Lien, (g) is
situated at a location in compliance with SECTION 4.5 hereof and is not
in-transit; PROVIDED, HOWEVER, Agent shall include in-transit Inventory as
Eligible Inventory so long as such Inventory would otherwise constitute Eligible
Inventory hereunder and each of the following statements is true and accurate as
determined by Agent, in its reasonable credit judgment: (i) a documentary Letter
of Credit has been issued in connection with the purchase of such Inventory by
such Borrower, (ii) such Inventory satisfies the other requirements herein and
title thereto is in the name of such Borrower; (iii) Agent or an agent or bailee
of Agent has itself received appropriate documentation evidencing title of such
Borrower in such Inventory and the other relevant shipping documents (which
documentation shall consist of items requested by Agent, in its sole discretion,
but at a minimum such items shall include all of the clean, negotiable on-board
bills of lading issued by the relevant carrier and describing the Inventory,
together with a commercial invoice describing the Inventory, a packing list, and
if shipment is C.I.F. rather than F.O.B., a certificate of insurance regarding
the Inventory), unless such documentation is at such time in the possession of a
customs broker covered by a satisfactory customs broker agreement, as described
below in CLAUSE (IV), and (iv) a customs broker is used in connection with the
transit of such Inventory, and there is in effect a customs broker agreement in
form and substance satisfactory to Agent, in Agent's reasonable credit judgment,
executed by such customs broker and such Borrower covering such Inventory and
the documents of title relating thereto; PROVIDED, FURTHER, Inventory which is
situated at the location of a processor of such Inventory shall not be included
within Eligible Inventory unless such processor has entered into a written
agreement with Agent, on
behalf of and for the benefit of Lenders, in form and substance satisfactory to
Lenders, in their sole discretion, providing, among other things, that such
processor will not assert any lien with respect to any Collateral for unpaid
processing or storage charges, and (i) is not consigned by a Person to such
Borrower or by such Borrower to any Person. Notwithstanding the foregoing, in no
event (x) shall Inventory of a Borrower produced under a license with Disney or
having printed thereon a Disney character ever constitute Eligible Inventory, or
(y) Inventory of Embroidery ever constitute Eligible Inventory. The parties
hereto agree that the amount of the Cincinnati Facility Inventory which will be
not Eligible Inventory because it is obsolete or slow-moving Inventory will be
$1,615,000.
EMBROIDERY - Brazos Embroidery, Inc., a Pennsylvania corporation.
EMBROIDERY CHAPTER 11 CASE - as defined in the preamble to this Agreement.
EMBROIDERY IRB - the obligations and liens (a) evidenced by (i) that
certain $720,713 promissory note dated April 1, 1995, executed by Needleworks,
Inc., a Pennsylvania corporation ("Needleworks") and Old Mill Holdings, Inc., a
Delaware corporation ("Old Mill") and made payable to the order of Meridian
Bank, a Pennsylvania banking corporation ("Meridian"), (ii) that certain
Security Agreement dated April 1, 1995 executed by Old Mill and Needleworks for
the benefit of Meridian, (iii) that certain Mortgage, Assignment of Leases and
Security Agreement dated April 1, 1995, executed by Needleworks for the benefit
of Meridian, (iv) that certain Reimbursement Agreement dated April 1, 1995 among
Meridian and Old Mill and Needleworks, and (b) assumed by Embroidery under that
certain Assumption and Modification Agreement dated as of December 1, 1995,
among Meridian, Old Mill, Needleworks, and Embroidery.
EMBROIDERY PETITION - as defined in the preamble to this Agreement.
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 other tangible personal Property (other than
Inventory) of every kind and description used in a Borrower's operations or
owned by a Borrower or in which a Borrower has an interest, whether now owned or
hereafter acquired by a Borrower and wherever located and whether owned or
acquired prior to or after the Filing Date, and all parts, accessories and
special tools and all increases and accessions thereto and substitutions and
replacements therefor.
EQUIPMENT APPRAISAL - the appraisal prepared by Agent as to certain
Equipment of Borrowers located at the Cincinnati Facility, the Equipment located
at the Tacoma, Washington location, the Equipment located at the Staten Island,
New York location, and the Equipment located at the College Station, Texas
location, which appraisal is based on a physical inspection of the Equipment
located at the Cincinnati Facility, the Tacoma, Washington location, and the
Staten Island, New York location.
EQUIPMENT REVOLVER SUBLINE AMOUNT - at any specific date of determination
during the Equipment Revolver Subline Period, the amount calculated as follows:
(i) $3,500,000 (or, if the Equipment Appraisal shows an appraised value of the
Eligible Equipment less than $3,500,000, the Agent, in its sole and absolute
discretion, may replace the $3,500,000 amount with such lower appraised value of
the Eligible Equipment), MINUS (ii) the aggregate proceeds received by a
Borrower or Agent or Lender during the Equipment Revolver Subline Period from
dispositions of Eligible Equipment; PROVIDED, HOWEVER, that beginning September
30, 1999, and continuing thereafter, the Equipment Revolver Subline Amount shall
be equal to $0.00.
EQUIPMENT REVOLVER SUBLINE CONDITIONS - the Equipment Revolver Subline
Period shall not begin until the following conditions precedent are satisfied in
a manner satisfactory to Agent, in its sole discretion:
(i) No Event of Default or Default shall exist;
(ii) Lenders shall have received and reviewed the Equipment Appraisal,
which shall be in form and scope satisfactory to Agent and Lenders; and
(iii) Agent shall have received evidence satisfactory to it, in its sole
discretion, that Agent, for the benefit of Lenders, has a first priority Lien in
the Equipment covered by the Equipment Appraisal, and the Court shall have
issued an order that such Lien conferred upon Agent for the benefit of Lenders,
against such Equipment constitutes, pursuant to Section 364(c)(2) of the
Bankruptcy Code, a first priority Lien and security interest in all of such
Equipment.
EQUIPMENT REVOLVER SUBLINE PERIOD - the period of time beginning with the
date, if ever, that the Equipment Revolver Subline Conditions are satisfied in a
manner satisfactory to Agent, in its sole discretion, and continuing through
(but no longer than) September 29, 1999.
ESTATE - the estates created in the Chapter 11 Cases pursuant to 11 U.S.C.
ss.541(a).
ERISA - the Employee Retirement Income Security Act of 1974 and all rules
and regulations promulgated thereunder.
EVENT OF DEFAULT - as defined in SECTION 11.1 of this Agreement.
EXCESS - as defined in SECTION 3.1(D) of this Agreement.
EXCESS AMOUNT - as defined in the definition of "Borrowing Base" contained
in this Agreement.
FLEET BANK RISK PARTICIPATION AGREEMENT - that certain Letter of Credit
Risk Participation Agreement executed by and between Fleet and Bank, dated
August 9, 1996, as amended and restated or substituted for from time to time.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
GENERAL INTANGIBLES - all general intangibles of each Borrower, whether
now owned or hereafter created or acquired by such Borrower, including all
choses in action, causes of action, company or other business records,
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 belonging to or attributable to Borrower, computer programs,
operational manuals, all claims under guaranties, security interests or other
security held by or granted to such Borrower to secure payment of any such
Borrower's Accounts by an Account Debtor, all rights to indemnification and all
other intangible property of Borrower of every kind and nature (other than
Accounts).
GUARANTOR - any Person who may now or hereafter guarantee payment of or
performance of the whole or any part of the Obligations, including, without
limitation; (i) as to the Obligations of Brazos, the respective guarantee of
payment and performance of each of Morning Sun and Embroidery, (ii) as to the
Obligations of Morning Sun, the respective guarantee of payment and performance
of each of Brazos and Embroidery, and (iii) as to the Obligations of Embroidery,
the respective guarantee of payment and performance of Brazos and Morning Sun.
GUARANTY AGREEMENTS - the Continuing Guaranty Agreement which is executed
by the relevant Guarantor, in favor of Agent, for the benefit of Lenders, in
form and substance satisfactory to Agent, covering all Obligations of the
relevant Borrower to Lenders and Agent.
INDEBTEDNESS - as applied to a Person means, without duplication (a) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (b) all obligations of other Persons
which such Person has guaranteed and (c) in the case of a Borrower (without
duplication), the portion of the Obligations which would be shown on the
liability side of a balance sheet of such Borrower as at the date of
determination.
INSOLVENCY PROCEEDING - any action, case or proceeding commenced by or
against a Person, or any agreement of such Person, for (i) the 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), (ii) the appointment of a
receiver, trustee, liquidator or other custodian for such Person or any part of
its Property, (iii) an assignment or trust mortgage for the benefit of creditors
of such Person, or (iv) the liquidation, dissolution or winding up of the
affairs of such Person.
INSTRUMENT - shall have the meaning ascribed to the term "instrument" in
the Code.
INTERIM FINANCING ORDER - the order entered by the Court pursuant to
Section 364(c) of the Bankruptcy Code and Bankruptcy Rule 4001(c), authorizing
Borrowers to incur post-petition secured and super-priority indebtedness under
the DIP Facility in accordance with this Agreement
on an interim basis, granting Agent, for the benefit of Lenders, a right to the
proceeds from all Collateral in accordance with this Agreement (including,
without limitation, a specific grant of a security interest to Agent, for the
benefit of Lenders, in all Equipment of Borrowers), providing for the immediate
payoff in full of all the Pre-Petition Debt, and providing that all Letters of
Credit existing on the Filing Date are to be part of the DIP Facility and that
the reimbursement obligations and other liabilities of Borrowers in connection
therewith constitute "Obligations" under this Agreement, such order to be in
form and substance satisfactory to Lenders.
INVENTORY - all of each Borrower's inventory, whether now owned or
hereafter acquired and wherever located, including, but not limited to, all
goods intended for sale or lease by such Borrower, 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 Borrower's business; and all Documents evidencing and General Intangibles
relating to any of the foregoing.
JAPANESE SUBSIDIARY - Brazos Sportswear Japan, KK, a corporation organized
under the laws of Japan and a wholly-owed subsidiary of Brazos.
LC PAYMENT - as defined in SECTION 2.3(A) of this Agreement.
LC RISK PARTICIPATION AGREEMENT - each of the Fleet Bank Risk
Participation Agreement and each other agreement, in form and substance
satisfactory to Lenders, executed by Agent with Bank, pursuant to which Agent
agrees to purchase a one hundred percent (100%) participation in any payments
made by Bank under such Letters of Credit which are not immediately reimbursed
to Bank by Borrowers.
LETTER OF CREDIT - a standby or documentary Letter of Credit, as the case
may be, at any time issued by Agent or Bank for the account of a Borrower.
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 the common law, statute or contract, and including, but not limited to,
the security interest, security title or lien arising from a security agreement,
mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
LOAN ACCOUNT - the loan account established on the books of Agent pursuant
to SECTION 2.6 hereof.
LOANS - all loans and advances made by Lenders pursuant to this Agreement,
including, without limitation, all Revolving Credit Loans.
MATURITY DATE - one year from the date of this Agreement, or any later
date that is mutually agreed to in writing by Borrowers and Lenders.
MAXIMUM LEGAL RATE - as defined in SECTION 3.1(C) of this Agreement.
MONEY BORROWED - as applied to Indebtedness, means (a) Indebtedness for
borrowed money; (b) Indebtedness, whether or not in any such case the same was
for borrowed money, (i) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (ii) which constitutes obligations evidenced
by bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (c) Indebtedness that
constitutes a Capitalized Lease Obligation; and (d) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (a) through (c) hereof.
MORNING SUN - as defined in the preamble of this Agreement.
MORNING SUN CHAPTER 11 CASE - as defined in the preamble of this
Agreement.
MORNING SUN PROCEEDING - as defined in the preamble of this Agreement.
MORTGAGES - all mortgages, deeds of trust, security deeds and other
instruments encumbering any real Property or leasehold interests of a Borrower
as security for the Obligations.
MOTION - the Motion of Borrowers for approval of the financing pursuant to
the terms of this Agreement.
MULTI-EMPLOYER PLAN - has the meaning set forth in SECTION 4001(A)(3) of
ERISA.
NOTES - the Revolving Credit Notes executed by Borrowers and delivered
pursuant to the terms of this Agreement, together with any renewals, extensions
or modifications thereof.
OBLIGATIONS - all Loans and all other advances, reimbursement obligations
under Letters of Credit (including, without limitation, the Rollover Letters of
Credit, the intent of the parties being that all Letters of Credit existing on
the Filing Date are to be part of the DIP Facility and all reimbursement
obligations and other liabilities of Borrowers in connection therewith shall be
"Obligations" for the purposes of this Agreement), LC Payments, debts,
liabilities, obligations, covenants and duties arising or otherwise accrued
under this Agreement or any of the other DIP Financing Documents owing, arising,
due or payable from a Borrower to Agent and/or Lenders of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and however
acquired. The term "Obligations" includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and any other sums chargeable to a
Borrower under this Agreement or any of the other DIP Financing Documents.
OSHA - the Occupational Safety and Health Act and all rules and
regulations from time to time promulgated thereunder.
OVERADVANCE - the amount, if any, by which the outstanding principal
amount of the Revolving Credit Loans on any date for any reason exceeds the
Borrowing Base on such date.
PARENT - Brazos Sportswear, Inc., a Delaware corporation.
PERMANENT FINANCING ORDER - an order to be entered by the Court as to
which no stay has been entered and which has not been vacated, modified, or
overturned; is in form and substance substantially similar to the Interim
Financing Order; and authorizes the incurrence by Borrower of permanent
post-petition super-priority indebtedness under the DIP Facility in accordance
with this Agreement and the DIP Financing Documents.
PERMITTED INSURER - an insurance company rated AA+, AA or higher by
Standard and Poors Corporation and AA or higher by Moody's Investor Services,
Inc. and which is otherwise reasonably satisfactory to Agent.
PERMITTED LIENS - any Lien of a kind specified in CLAUSES (I) THROUGH (X)
of SECTION 9.2(H) of this Agreement.
PERSON - an individual, partnership, corporation, joint stock company,
land trust, business trust or unincorporated organization, or a government or
agency or political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for employees
of a Borrower that is covered by Title IV of ERISA.
PETITION and PETITIONS - as defined in the preamble to this Agreement.
PRE-PETITION DEBT - all indebtedness, liabilities and obligations owed by
a Borrower to Agent and Lenders on the Filing Date (including, without
limitation, the Pre-Petition Liabilities described in the preamble to this
Agreement) whether direct or indirect, absolute or contingent or due or to
become due, including all interest thereon accruing after the Filing Date and
all legal fees and collection expenses heretofore or hereafter incurred in
collecting any of such indebtedness and any amounts that a Borrower may be
obligated to pay Agent and Lenders in connection with Letters of Credit issued
by Agent prior to the Filing Date or covered by LC Risk Participation Agreements
and existing on the Filing Date.
PRE-PETITION LIABILITIES - as defined in the preamble to this Agreement.
PRE-PETITION LOAN AGREEMENT - as defined in the preamble to this
Agreement.
PRE-PETITION LOAN DOCUMENTS - the Pre-Petition Loan Agreement and all
instruments, agreement, pledges, assignments, and other documents executed in
connection therewith or with reference thereto or to evidence or secure payment
of the whole or any part of the Pre-Petition Debt.
PROHIBITED TRANSACTION - any transaction set forth in SECTION 406 of ERISA
or SECTION 4975 of the Internal Revenue Code of 1986.
PROPERTY - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
RENTALS - as defined in SECTION 9.2(W) of this Agreement.
REORGANIZATION PLAN - a plan of reorganization proposed by a Borrower or
any other Person in any of the Chapter 11 Cases.
REPORTABLE EVENT - any of the events set forth in SECTION 4043(B) of ERISA
which is required to be reported to the PBGC.
RESTRICTED INVESTMENT - any investment in cash or by delivery of Property
to any Person including without limitation, Japanese Subsidiary and Parent,
whether by acquisition of stock, Indebtedness or other obligation or Security,
or by loan, advance or capital contribution, or otherwise, or in any Property
except the following: (a) Property to be used in the ordinary course of
business; (b) proceeds arising from the sale of goods and services in the
ordinary course of business of Brazos, Morning Sun and Embroidery; (c)
investments in direct obligations of the United States of America, or any agency
thereof or obligations guaranteed by the United States of America, provided that
such obligations mature within one year from the date of acquisition thereof;
(d) demand deposit accounts maintained in the ordinary course of business with
federally insured financial institutions; (e) investments in certificates of
deposit issued by Boston or Bank or by any other bank or financial institution
with combined capital surplus and undivided profits of at least $100,000,000
maturing within one year from the date of acquisition; (f) investments in
commercial paper given the highest rating by a national credit rating agency and
maturing not more than 270 days from the date of creation thereof; (g)
investments by Brazos in Morning Sun and Embroidery and by Morning Sun in Brazos
and Embroidery and by Embroidery in Brazos and Morning Sun; (h) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in CLAUSE (C) above entered into with any commercial bank
meeting the requirements of CLAUSE (E) above; and (i) investments in money
market or other mutual funds substantially all the assets of which are comprised
of securities of the types referred to in CLAUSES (C), (E) and (H) above.
REVOLVING CREDIT LOAN - a Loan made by a Lender as provided in SECTION
2.1(A) of this Agreement.
REVOLVING CREDIT NOTES - those certain Post-Petition Revolving Credit
Notes to be executed by Borrowers in favor of each Lender to evidence Borrowers'
Indebtedness to such Lender for its Revolving Credit Percentage, the
Post-Petition Revolving Credit Note in favor of Fleet to be in the form of
EXHIBIT A-1 attached hereto, as the same may be amended, renewed, extended,
modified or restated from time to time and the Post-Petition Revolving Credit
Note in favor of Boston to be in
the form of EXHIBIT A-2 attached hereto as the same may be amended, renewed,
modified, extended or restated from time to time.
REVOLVING CREDIT PERCENTAGE - each Lender's percentage of the DIP Facility
Limit, which as to Fleet is 58.8%, and which as to Boston is 41.2%.
ROLLOVER LETTERS OF CREDIT - Letters of Credit existing on the Filing Date
to the extent the DIP Orders provide such Letters of Credit are to be part of
this DIP Facility and that the reimbursement obligations and other liabilities
thereunder of Borrowers constitute "Obligations" under this Agreement.
SEASONAL INVENTORY AMOUNT - during the period (BUT ONLY DURING THE PERIOD)
beginning the effective date of the Interim Financing Order, and continuing
through September 30, 1999, 10% (or such lesser percentage as Lenders may in
their discretion determine from time to time after the occurrence of a Default)
of the value of the Eligible Inventory consisting of 'blank' finished goods
inventory of Borrowers at such date. Beginning October 1, 1999, and continuing
thereafter, the Seasonal Inventory Overadvance Amount shall be $0.00.
SCHEDULE OF ACCOUNTS - as defined in SECTION 5.2 of this Agreement.
SECURITY - shall have the same meaning as in SECTION 2(1) of the
Securities Act of 1933, as amended.
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.
STOCK PLEDGE AGREEMENT - that certain Stock Pledge Agreement, executed by
Brazos, whereby Brazos grants to Agent, for the benefit of Lenders, as security
for the Obligations, a first priority security interest in all the capital stock
of Morning Sun, such Stock Pledge Agreement to be in form and substance
satisfactory to Agent and Lenders.
SUBSIDIARY - as to any Person, any corporation of which such Person owns,
directly or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
VOTING STOCK - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial
statements referred to in SECTION 9.1(J), and all financial data pursuant to the
Agreement shall be prepared in accordance with such principles.
1.3. OTHER TERMS. All other terms contained in this 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.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the DIP Financing Documents, shall include any
and all modifications or amendments thereto and any and all extensions or
renewals thereof.
1.5 THE TERM "BORROWER" OR "BORROWERS". Unless otherwise specifically
provided herein, all representations contained herein of a "Borrower" shall be
deemed to be separately made by each Borrower, and each of the covenants,
agreements and obligations set forth herein shall be deemed to be the joint and
several covenants, agreements and obligations of Borrower. Any notice, request,
consent, report or other information or agreement delivered to Agent or a Lender
by any Borrower shall be deemed to be ratified by, consented to and also
delivered by the other Borrower. Each Borrower recognizes and agrees that each
covenant and agreement of "Borrower" or "Borrowers" under this Agreement and the
other DIP Financing Documents shall create a joint and several obligation of the
Borrowers, which may be enforced against Borrowers, jointly, or against each
Borrower separately. Without limiting the terms of this Agreement and the other
DIP Financing Documents, security interests granted under this Agreement and
other DIP Financing Documents in properties, interests, assets and collateral
shall extend to the properties, interests, assets and collateral of each
Borrower. Similarly, the term "Obligations" shall include, without limitation,
all obligations, liabilities and indebtedness of Borrowers under the DIP
Financing Documents, or any one of them, to Agent and to Lenders, whether such
obligations, liabilities and indebtedness shall be joint, several, joint and
several or individual.
SECTION 2. DIP FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other DIP
Financing Documents, each Lender agrees to make Revolving Credit Loans in an
amount of up to such Lender's Revolving Credit Percentage of the DIP Facility
Limit available upon Borrowers' request therefor, as follows:
2.1. REVOLVING CREDIT LOANS.
(A) Subject to all of the terms and conditions of this Agreement,
Lenders agree, for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrowers from time to time, as requested by Borrowers
in accordance with the terms of SECTION 2.3 hereof, up to a maximum principal
amount at any time outstanding equal to the Borrowing Base at such time, as
evidenced by the Revolving Credit Notes; PROVIDED, HOWEVER, that (i) no Lender
shall be obligated to make Advances in excess of such Lender's Revolving Credit
Percentage of the DIP Facility Limit and (ii) each Borrowing shall be made
ratably by all Lenders in accordance with their respective Revolving Credit
Percentages. It is expressly understood and agreed that Agent may use the
Borrowing Base as a maximum ceiling on Revolving Credit Loans outstanding to
Borrowers at any time. If the unpaid balance of the Revolving Credit Loans
should for any reason exceed the Borrowing Base or any other limitation set
forth in this Agreement, such Revolving Credit Loans shall nevertheless
constitute Obligations that are secured by the Collateral and entitled to all
the benefits thereof. In no event shall Borrowers be authorized to request a
Loan at any time that there exists a Default or an Event of Default.
Notwithstanding the foregoing provisions of this SECTION 2.1(A), Borrowers and
Lenders agree that at any time and at all times Agent shall have the right to
establish and/or eliminate reserves in such amounts, and with respect to such
matters, as Agent shall in its reasonable credit judgment deem necessary or
appropriate, against the amount of Revolving Credit Loans which Borrowers may
otherwise request under this SECTION 2.1(A), including, without limitation, with
respect to (i) price adjustments, damages, unearned discounts, returned products
or other matters for which credit memoranda are issued in the ordinary course of
Borrowers' business; (ii) shrinkage and obsolescence of Inventory; (iii) slow
moving Inventory; (iv) other sums chargeable against Borrowers' Loan Account as
Revolving Credit Loans under any section of this Agreement; (v) tax liabilities;
and (vi) such other matters, events, conditions or contingencies as to which
Agent, in its reasonable credit judgment, determines reserves should be
established from time to time hereunder. In addition to the foregoing, at any
time, Lenders shall have the right to establish and/or eliminate reserves
against the amount of Revolving Credit Loans for accrued and unpaid royalty
payments based on the amount of such accrued and unpaid payments which is shown
on Borrower's financial statements at such time; PROVIDED, HOWEVER, that no
reserve shall be created for accrued and unpaid royalty payments pursuant to
license agreements entered into by a Borrower with Disney or any affiliate of
Disney. Upon the occurrence of a Default or Event of Default, no reserves shall
be eliminated by Agent without the consent of the Lenders.
(B) The proceeds of the Revolving Credit Loans shall be used solely
(i) to pay off in full all the Pre-Petition Debt, the intent of the parties
hereto being that the proceeds of the initial Revolving Credit Loan under this
Agreement will be used to pay off in full all the Pre-Petition Debt, (ii) to
purchase Eligible Inventory, and (iii) may be used to pay for (a) those
post-petition operating expenses of the Borrowers, inclusive of the payment of
interest and other fees and expenses when due as to the Pre-Petition Debt and
Obligations as required by this Agreement, incurred in the ordinary course of
business, (b) other expenditures as may be authorized and approved by an order
of the Court as reasonable, necessary costs and expenses of preserving or
disposing of the properties and interests in property held by the Borrowers and
in administering their respective Estates (other than fees and disbursements
described in CLAUSE (III)(C) of this SECTION
2.1(B) which are indicated to be improper uses of the proceeds of the Revolving
Credit Loans), and (c) those fees and disbursements which are allowed by the
Court and paid by a Borrower to such Borrower's professionals and any fees and
disbursements paid to the Agent and Lenders and their professionals and agents
in accordance with this Agreement; PROVIDED, HOWEVER that no amounts shall be
paid pursuant to this SECTION 2.1(B)(III)(C) for fees and disbursements incurred
by a Borrower or for which a Borrower may be liable in connection with any
proceeding commenced, including, without limitation, any motion or other
pleading filed to contest (1) the attachment, perfection or priority of the
Liens created by the Pre-Petition Loan Documents, (2) the validity, binding
effect or enforceability of the Pre-Petition Loan Documents or any of the DIP
Financing Documents, (3) the amount of the Obligations or Pre-Petition Debt, or
(4) any other rights or interests of the Agent or Lenders under the DIP
Financing Documents other than prechallenge investigative fees and expenses for
work by or on behalf of an official committee appointed in a Chapter 11 Case to
the extent such investigative work takes place prior to 60 days after the
appointment of such committee. Borrowers agree that the pre-Petition Liens of
Agent and Lenders shall continue or be reinstated to the extent provided for in
the DIP Orders.
2.2. JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION.
(A) Each Borrower states and acknowledges that: (i) pursuant to this
Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Agent and Lenders hereunder
and a desire of the Borrowers that each Borrower execute and deliver to Agent
and Lenders this Agreement; and (iv) Borrowers have requested and bargained for
the structure and terms of and security for the advances contemplated by this
Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i) agrees
that it is jointly and severally liable to Agent and Lenders for the full and
prompt payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it;
(iii) agrees as a primary obligation to indemnify Agent and Lenders on demand
for and against any loss incurred by Agent or Lenders as a result of any of the
Obligations of any Borrower being or becoming void, voidable, unenforceable or
ineffective for any reason whatsoever, whether or not known to Agent or any
Lender or any Person, the amount of such loss being the amount which Agent or
such Lender would otherwise have been entitled to recover from Borrower; (iv)
agrees that a Loan to one Borrower's account is a Loan to all the Borrowers; and
(v) that until notice to the contrary is given to Agent, Brazos is appointed by
the Borrowers to act as Agent for and on behalf of all the Borrowers in
connection with the DIP facility, including, without limitation, in connection
with the Loans.
(C) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to challenge on
any basis. Accordingly, as of the date hereof, the liability of each Borrower
under this SECTION 2.2, together with all of its other
liabilities to all Persons as of the date hereof and as of any other date on
which a transfer is deemed to occur by virtue of this Agreement, calculated in
amount sufficient to pay its probable net liabilities on its existing
Indebtedness as the same become absolute and matured ("DATED LIABILITIES") is,
and is to be, less than the amount of the aggregate of a fair valuation of its
Property as of such corresponding date ("DATED ASSETS"). To this end, each
Borrower under this SECTION 2.2 (i) grants to and recognizes in each other
Borrower, ratably, rights of subrogation and contribution in the amount, if any,
by which the Dated Assets of such Borrower, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the Dated
Liabilities of such Borrower or, as the case may be, (ii) acknowledges receipt
of and recognizes its right to subrogation and contribution ratably from the
other Borrower in the amount, if any, by which the Dated Liabilities of such
Borrower, but for the aggregate of subrogation and contribution in its favor
recognized herein, would exceed the Dated Assets of such Borrower under this
SECTION 2.2; PROVIDED, HOWEVER, that each Borrower's rights of subrogation and
contribution are subordinated in all respects to the full, final and
indefeasible payment of the Obligations. In recognizing the value of the Dated
Assets and the Dated Liabilities, it is understood that Borrowers will
recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this SECTION 2.2 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by reason of any arbitrary interpretation of its joint
and several obligations hereunder.
2.3. MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under the
credit facility established pursuant to SECTION 2.1 hereof shall be as follows:
(A) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrowers may give Agent notice
of their intention to borrow, in which notice Borrowers shall specify the amount
of the proposed borrowing and the proposed borrowing date; (ii) the becoming due
of any amount required to be paid under this Agreement or the Notes as interest
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
due date in the amount required to pay such interest; (iii) the becoming due of
any amount required to be paid under the Notes as principal shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date for the
amount required to pay such principal; (iv) any payment made by Agent pursuant
to a Letter of Credit issued as part of the DIP Facility (including each
Rollover Letter of Credit) issued by Agent or issued by Bank pursuant to the
Fleet Bank Risk Participation Agreement or any other LC Risk Participation
Agreement which is not immediately reimbursed by Borrowers (each such reimbursed
payment made by Agent being referred to individually as an "LC PAYMENT") shall
be deemed irrevocably to be a request for a Revolving Credit Loan on the date
such LC Payment was made; and (v) the becoming due of any other Obligations
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
due date in the amount then so due.
(B) Each Borrower hereby irrevocably authorizes Agent to disburse
the proceeds of each Revolving Credit Loan requested, or deemed to be requested,
pursuant to this SECTION 2.3 as follows: (i) the proceeds of each Revolving
Credit Loan requested under SECTION 2.3(A)(I) shall
be disbursed by Agent in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from Borrowers, 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; and (ii) the proceeds of
each Revolving Credit Loan requested under SECTION 2.3(A)(II), (III) OR (IV)
shall be disbursed by Agent by way of direct payment of the relevant Obligation.
(C) SETTLEMENT. On or about 10:00 A.M. (Dallas, Texas time) on
Friday of each week during the term of this Agreement (or, if any such Friday is
not a Business Day, the next preceding Business Day), Agent shall notify each
Lender by telephone (confirmed immediately by facsimile or cable), facsimile or
cable of (i) the terms of Borrowers' Borrowings at the time of such notice and
the amount of such Lender's Revolving Credit Percentage of such Borrowings, and
(ii) the aggregate principal amount of all Letters of Credit issued in
connection with this Agreement (including all Rollover Letters of Credit) and
outstanding at the end of such week, the aggregate amount of any LC Payments
made by Agent, such Lender's participation therein and the total amount of
commissions paid to the Lenders with respect thereto. Contemporaneously with the
giving of such notice, Agent shall deliver to each Lender copies of (i) any
Letters of Credit which were issued during such week, and (ii) any LC Risk
Participation Agreements which were executed during such week. Each Lender
shall, before 2:00 P.M. (Dallas, Texas time) on the day of such notice, deposit
with Agent the amount of such Lender's Revolving Credit Percentage of such
Borrowings and/or LC Payments. In the event of any failure by a Lender to make
an Advance required hereunder, the other Lenders may (but shall not be required
to) purchase (on a pro rata basis, according to their respective Revolving
Credit Percentages) such Lender's Revolving Credit Percentage of such Borrowings
and/or LC Payments. Upon the failure of a Lender to make an Advance required to
be made by it hereunder, Agent shall use good faith efforts to obtain one or
more banks, acceptable to the Lenders, to replace such Lender, but neither Agent
nor any other Lender shall have any liability or obligation whatsoever as a
result of the failure to obtain a replacement for such Lender.
Lenders hereby agree with Borrowers and Agent, and hereby direct Agent,
that Agent may assume that each notified Lender will make such Lender's
Revolving Credit Percentage of the Borrowings and/or LC Payments available to
Agent in accordance with the terms of this SECTION 2.3(C) and Agent shall, in
reliance upon such assumption, make available a corresponding amount to or on
behalf of Borrowers on the requested date of each Borrowing or make the LC
Payment subject to the terms and conditions of this Agreement. If and to the
extent any Lender shall not make its Revolving Credit Percentage of any
Borrowing or LC Payment, Borrowers agree to repay to Agent forthwith on demand
such corresponding amount. Each Lender shall be solely responsible for its
Revolving Credit Percentage of any Borrowing or LC Payment hereunder, and in no
event shall Agent or any Lender (including Agent in its capacity as a Lender)
bear any financial risk for the failure of any other Lender to make an Advance
required hereunder.
2.4. LETTERS OF CREDIT, LC RISK PARTICIPATION AGREEMENTS. If requested to
do so by a Borrower and subject to the terms of this Agreement and any documents
executed in connection with any Letter of Credit, the Fleet Bank Risk
Participation Agreement, or any other LC Risk
Participation Agreement, Agent shall issue its, or cause Bank to issue Letters
of Credit for the account of such Borrower or execute an LC Risk Participation
Agreement, PROVIDED THAT no Event of Default then exists, and further provided
that the aggregate face amount of all such Letters of Credit (including all
Rollover Letters of Credit) may at no time exceed $7,500,000.00. The aggregate
face amount of all standby Letters of Credit (including any standby Rollover
Letters of Credit) issued by Agent and issued by Bank at any time shall not
exceed $1,500,000.00. No standby Letter of Credit will contain an automatic
renewal provision. No Letter of Credit issued by Agent or issued by Bank and
covered by an LC Risk Participation Agreement may have an expiry date that is
after the Maturity Date. Further, no documentary Letter of Credit issued by
Agent or Bank shall have a term exceeding 180 days, and no standby Letter of
Credit issued by Agent or Bank shall have a term exceeding one year. A
documentary Letter of Credit may only be issued by Agent or Bank if such
documentary Letter of Credit is issued in connection with the purchase of
inventory by such Borrower. By the issuance of a Letter of Credit hereunder by
Agent and without further action on the part of the Agent or the Lenders, each
Lender hereby accepts from the Agent an undivided participation (which
participation shall be nonrecourse to the Agent) in such Letter of Credit and in
each LC Payment equal to such Lender's pro rata (based on its Revolving Credit
Percentage) share of such LC Payment under such Letter of Credit, effective upon
the issuance of such Letter of Credit and, in addition, without further action
on the part of the Agent or the Lenders, each Lender agrees to purchase, and
Agent agrees to sell, an undivided participation equal to such Lender's pro rata
(based on its Revolving Credit Percentage) share, in any LC Payment made
pursuant to the Fleet Bank Risk Participation Agreement or any other LC Risk
Participation Agreement. Each Lender hereby absolutely and unconditionally
assumes, as primary obligor and not as a surety, and agrees to pay and
discharge, and to indemnify and hold the Agent harmless from liability in
respect of such Lender's pro rata share of the amount of any LC Payment. Each
Lender acknowledges and agrees that its obligation to acquire participations in
either (x) each Letter of Credit issued by Agent or (y) each LC Payment made by
Agent and its obligation to make the payments specified herein, and the right of
the Agent to receive the same, in the manner specified herein, are absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of an Event of
Default hereunder, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
2.5. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall constitute
one general obligation of Borrowers, and shall be secured by Agent's security
interest, for the benefit of Lenders, in and Lien upon all of the Collateral,
and by all other security interests and Liens now or at any time or times
hereafter granted by Borrower to Agent, for the benefit of Lenders.
2.6. LOAN ACCOUNT. Agent shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrowers
on the Loans and all proceeds of Collateral which are finally paid to Lenders,
and may record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrowers hereunder.
2.7. SHARING OF SETOFFS. Each Lender agrees that if it shall, through the
exercise of a right of banker's lien, setoff or counterclaim against the
Borrower, including, but not limited to, a
secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar law
or otherwise, obtain payment (voluntary or involuntary) in respect of any Loan
made by it or in respect of a participation held by it in a Letter of Credit or
an LC Payment as a result of which the unpaid principal portion of the Loans
made by it plus the participations held by it in Letters of Credit and LC
Payments shall be proportionately less than the unpaid principal portion of the
Loans made by any other Lender plus outstanding participations held by such
other Lender in Letters of Credit and LC Payments, it shall be deemed to have
simultaneously purchased from such other Lender a participation in the Loans
made by such other Lender and outstanding participations held by such Lender in
Letters of Credit and LC Payments, so that (a) the aggregate unpaid principal
amount of the Loans and participations in Loans made by it plus the outstanding
participations held by it in Letters of Credit and LC Payments shall be in the
same proportion to (b) the sum of the aggregate unpaid principal amount of the
Loans plus the aggregate participations held by all Lenders in Letters of Credit
and LC Payments then outstanding as (i) the sum of the principal amount of the
Loans and participations in the Loans held by it plus participations held by it
in the Letters of Credit and LC Payments prior to such exercise of banker's
lien, setoff or counterclaim was to (ii) the sum of the aggregate unpaid
principal amount of the Loans outstanding plus the aggregate participations held
by all Lenders in the Letters of Credit and LC Payments prior to such exercise
of banker's lien, setoff or counterclaim; PROVIDED, HOWEVER, that if any such
purchase or purchases or adjustments shall be made pursuant to this SECTION 2.7
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustments restored without interest. Each
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan or another Lender's participating
interest in any Letters of Credit and LC Payments deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by such Borrower to such
Lender under the DIP Financing Documents as fully as if such Lender held a Loan
or direct participation in a Letter of Credit or LC Payment in the amount of
such participation.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. INTEREST, FEES AND CHARGES.
(A) INTEREST. Outstanding principal on the Loans shall bear
interest, calculated daily (computed on the actual days elapsed over a year of
360 days), at a fluctuating rate per annum equal to one and one-half percent
(1.50%) above the Base Rate (the "APPLICABLE ANNUAL RATE"). The Applicable
Annual Rate shall be increased or 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. The Base Rate in effect on the date hereof shall be
the Base Rate effective as of the opening of business on the date hereof, but if
this Agreement is executed on a day that is not a Business Day, the Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the date hereof. For the
purpose of computing interest, all items of payment received by Agent, for the
benefit of Lenders, shall be applied by Agent (subject to final payment of all
drafts and other items received in form other than immediately available funds)
against the Obligations on the second Business Day after receipt. The
determination of when a payment is received by Agent will be made in accordance
with SECTION 3.5.
(B) DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
the Loans and other Obligations shall bear interest, calculated daily (computed
on the actual days elapsed over a year of 360 days), at 2.00% above the
Applicable Annual Rate or other applicable rate of interest (a "DEFAULT RATE").
(C) MAXIMUM RATE OF INTEREST. Notwithstanding the foregoing, (i) if
at any time the amount of interest computed as provided in the DIP Financing
Documents would exceed the amount of such interest computed upon the basis of
the maximum rate of interest permitted by applicable state or federal law in
effect from time to time hereafter (the "MAXIMUM LEGAL RATE"), the interest
payable under this Agreement shall be computed upon the basis of the Maximum
Legal Rate, but any subsequent reduction in the Applicable Annual Rate, Default
Rate or other rate, as applicable, shall not reduce such interest thereafter
payable hereunder below the amount computed on the basis of the Maximum Legal
Rate until the aggregate amount of such interest accrued and payable under this
Agreement equals the total amount of interest which would have accrued if such
interest had been at all times computed solely as provided in the DIP Financing
Documents. To the extent that any of the optional interest rate ceilings
provided for in Chapter 303 of the Texas Finance Code (Vernon's Texas Code
Annotated), as amended from time to time (as amended, the "TEXAS FINANCE CODE")
may be applicable to any Loans or any extensions of credit made pursuant to this
Agreement for the purpose of determining the maximum allowable interest
hereunder pursuant to the Texas Finance Code, the applicable "weekly ceiling"
(as such term is defined in Chapter 303 of the Texas Finance Code) from time to
time in effect shall be used to the extent that it is so available. If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of
interest allowed by applicable state or federal law as amended, which increase
shall be effective hereunder on the effective date of such amendment, and all
interest charges owing to Lenders by reason thereof shall be payable upon
demand.
(D) EXCESS INTEREST. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument, document or
agreement between a Borrower, Agent and/or any Lender, or default of a Borrower,
or the exercise by Agent or Lenders of the right to accelerate the payment of
the maturity of principal and interest, or to exercise any option whatsoever
contained in this Agreement or any other DIP Financing Document, or the arising
of any contingency whatsoever, shall entitle Agent or any Lender to contract
for, charge, or receive, in any event, interest exceeding the Maximum Legal
Rate. In no event shall any Borrower be obligated to pay interest exceeding such
Maximum Legal Rate and all agreements, conditions or stipulations, if any, which
may in any event or contingency whatsoever operate to bind, obligate or compel
such Borrower to pay a rate of interest exceeding the Maximum Legal 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 Legal Rate. In the event any interest
is contracted for, charged or received in excess of the Maximum Legal Rate
("EXCESS"), each Borrower acknowledges and stipulates that any such contract,
charge, or receipt shall be the result of an accident and BONA FIDE error, and
that any Excess received by Agent and/or any Lender shall be applied, first, to
reduce the principal then unpaid hereunder; second, to reduce the other
Obligations; and third, returned to such Borrower, it being the intention of the
parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Each Borrower recognizes that, with fluctuations in the Base Rate
and the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, each Borrower covenants that the credit or return
of any Excess shall constitute the acceptance by each Borrower of such Excess.
For the purpose of determining whether or not any Excess has been contracted
for, charged or received by Agent and/or Lender, all interest at any time
contracted for, charged or received by Agent and/or Lender in connection with
the DIP Financing Documents shall be amortized, prorated, allocated and spread
in equal parts during the entire term of this Agreement and the Loans.
(E) INCORPORATION BY THIS REFERENCE. The provisions of SECTIONS
3.1(C) AND 3.1(D) shall be deemed to be incorporated into every document or
communication relating to the Obligations which sets forth or prescribes any
account, right or claim or alleged account, right or claim of Agent and/or any
Lender with respect to such Borrower (or any other obligor in respect of
Obligations), whether or not any provision of SECTION 3.1 is referred to
therein. All such documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the Obligations and
obligations of any Borrower (or other obligor) asserted by Agent and/or any
Lender thereunder, be automatically re-computed by such Borrower or obligor, and
by any court considering the same, to give effect to the adjustments or credits
required by SECTION 3.1(D).
(F) CAPITAL ADEQUACY CHARGE. In the event that Agent or any Lender
shall have determined that the adoption after the date hereof of any law, rule
or regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof or compliance by
Agent or any 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
or any Lenders' capital as a consequence of its obligations hereunder to a level
below that which Agent or such Lender could have achieved but for such adoption,
change or compliance (taking into consideration Agent's and each Lender's
policies with respect to capital adequacy) by an amount deemed by Agent or such
Lender, in its sole discretion, to be material, then from time to time, after
submission by Agent or such Lender to Borrowers of a written demand therefor,
the Borrower shall pay to Agent or such Lender such additional amount or amounts
as will compensate Agent or such Lender for such reduction. A certificate of
Agent or any Lender claiming entitlement to payment as set 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 Agent or such Lender, and the method by which such
amounts were determined. In determining such amount, Agent or such Lender may
use any reasonable averaging and attribution method.
(G) LETTER OF CREDIT; LC FEES. As additional consideration for
Agent's issuing its or causing Bank to issue its Letters of Credit for a
Borrower's account or for entering into LC Risk Participation Agreements at a
Borrower's request pursuant to SECTION 2.4 hereof, each Borrower agrees to pay
Agent, for the account of Lenders in accordance with their respective Revolving
Credit Percentages, a fee equal to (i) two percent (2.00%) per annum of the face
amount of each standby Letter of Credit issued by Agent or Bank for the account
of a Borrower, which fee shall be deemed fully earned upon issuance of each such
standby Letter of Credit, and shall be due and payable upon the issuance of each
such standby Letter of Credit, and (ii) one and one-half percent (1.50%) per
annum of the face amount of each documentary Letter of Credit issued for the
account of a Borrower by Agent or Bank or covered by an LC Risk Participation
Agreement, which fee shall be deemed fully earned upon issuance of each such
documentary Letter of Credit and shall be due and payable upon issuance of each
such documentary Letter of Credit. Other fees and other charges relevant to
standby Letters of Credit and documentary Letters of Credit are set forth in
EXHIBIT T attached hereto. No fee payable by Borrowers under this SECTION 3.1(G)
or as set forth on EXHIBIT T attached hereto shall be subject to rebate or
proration upon the termination of this Agreement for any reason.
(H) CLOSING FEE. Each Borrower agrees to pay to Agent on the Closing
Date, for the account of Lenders (Lenders to determine between themselves the
portion of such fee to which each Lender is entitled), an amount equal to
$625,000.00, which fee shall be deemed fully earned and non-refundable as of the
Closing Date; PROVIDED, HOWEVER, there shall be credited against the amount of
the closing fee otherwise payable on the Closing Date (i) the portion of the
$100,000.00 fee actually received by Lenders pursuant to SECTION 3.05 of that
certain Amendment to Forbearance Agreement and Fourth Amendment to Third Amended
and Restated Loan and Security Agreement dated November 30, 1998, executed by
Brazos, Morning Sun, Agent and Lenders ("FOURTH AMENDMENT TO PRE-PETITION LOAN
AGREEMENT"), and (ii) the portion of the second $50,000.00 installment of the
fee actually received by Lenders pursuant to SECTION 2.03 of that certain Fifth
Amendment to Third Amended and Restated Loan and Security Agreement dated
December 23, 1998, executed by Brazos, Morning Sun, Agent and Lenders ("FIFTH
AMENDMENT TO
PRE-PETITION LOAN AGREEMENT"). The parties hereto agree and acknowledge that if
by the Closing Date Borrowers have not paid the second $50,000.00 installment of
the fee provided for in SECTION 2.03 of the Fifth Amendment to Pre-Petition Loan
Agreement, Borrowers shall pay on the Closing Date under this SECTION 3.1(H) an
amount equal to $525,000.00 (which reflects the $100,000.00 credit for the fee
paid by Brazos and Morning Sun pursuant to SECTION 3.05 of the Fourth Amendment
to Pre-Petition Loan Agreement), and upon receipt of such $525,000.00 payment,
Agent and Lenders will waive the payment of the second $50,000.00 installment of
the fee provided for in SECTION 2.03 of the Fifth Amendment to Pre-Petition Loan
Agreement. After receipt of the closing fee, Agent shall pay to Boston the
portion of such fee to which Boston is entitled.
(I) UNUSED FACILITY FEE. From the date hereof, each Borrower agrees
to pay to Agent, for the account of Lenders, in accordance with their respective
Revolving Credit Percentages, a monthly unused facility fee, equal to
one-quarter of one percent (0.25%) per annum (calculated on the basis of a year
of 360 days) of the difference between the DIP Facility Limit and the sum of (i)
the Average Monthly Loan Balance for the Revolving Credit Loans for such month,
PLUS (ii) the average face amount of outstanding Letters of Credit (including
any Rollover Letters of Credit) issued by Agent, PLUS (iii) the average face
amount of outstanding Letters of Credit (including any Rollover Letters of
Credit) which are covered by an LC Risk Participation Agreement for such month
(the sum of CLAUSES (I), (II) and (III) above being referred to as the "AVERAGE
MONTHLY REVOLVING CREDIT LOANS USAGE"), payable in arrears with the first
payment being due on February 1, 1999, and continuing regularly thereafter
during the term of this Agreement, and upon the termination hereof. In no event,
however, shall any charge be payable for any month for which the Average Monthly
Revolving Credit Loans Usage was less than the DIP Facility Limit by reason of
any Lender's declining to extend Revolving Credit Loans to Borrower in amounts
equal to the Borrowing Base, to the extent of such refusal, for any month for
which the Average Monthly Revolving Credit Loans Usage was less than the DIP
Facility Limit by reason of Agent's determination to reduce applicable advance
rates under the Borrowing Base, to the extent of such reduction, or for any
month during which or after Agent or Lenders accelerate the maturity or demands
payment of the Obligations by reason of the occurrence of any Event of Default.
3.2. TERM AND TERMINATION. Subject to Lenders' right to cease making Loans
to Borrowers at any time upon or after the occurrence of a Default or Event of
Default, the DIP Facility shall be in effect for the period of time commencing
on the date of entry of the Interim Financing Order and ending on the Maturity
Date, unless sooner terminated as herein provided. The foregoing term may be
extended by written agreement between Borrowers and Lenders without further
notice, hearing or order of the Court. Lenders may terminate the DIP Facility at
any time without notice upon or after the occurrence of an Event of Default; and
the DIP Facility shall automatically terminate upon the earliest to occur of the
Maturity Date, the dismissal of either or both of the Chapter 11 Cases, the
conversion of any or all of the Chapter 11 Cases to a case under Chapter 7, the
consummation of any Reorganization Plan, the entry for an order approving a sale
of all or substantially all of the Collateral, or the appointment of a trustee
in any of the Chapter 11 Cases. All of the Obligations shall be forthwith due
and payable upon any termination of the DIP Facility. No termination (regardless
of cause or procedure) of the DIP Facility shall in any way affect or impair the
rights, powers or privileges of Agent and/or any Lender or the obligations,
duties, or liabilities of any Borrower or Agent and/or any Lender in any way
relating to (i) any transaction or event occurring prior to such termination or
(ii) any of the undertakings, agreements, covenants, warranties or
representations of any Borrower contained in this Agreement or any of the other
DIP Financing Documents. All such undertakings, agreements, covenants,
warranties and representations of each Borrower shall survive such termination
and Agent, for the benefit of Lenders, shall retain its Liens in the Collateral
and all of its rights and remedies under this Agreement and the other DIP
Financing Documents notwithstanding such termination until all of the
Obligations have been indefeasibly paid in full, in immediately available funds,
and all Letters of Credit have expired or been confirmed by another Person
satisfactory to Lenders, in their sole discretion.
3.3. PAYMENTS. Except where evidenced by notes or other instruments issued
or made by a Borrower to Agent or any Lender specifically containing payment
provisions which are in conflict with this SECTION 3.3 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), that portion of the Obligations consisting of:
(A) Principal payable on account of Revolving Credit Loans made by
Lenders to Borrowers pursuant to SECTION 2.1 of this Agreement shall be payable
by Borrowers to Agent, for the account of Lenders, immediately upon the earliest
of (i) the receipt by Agent or a Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds (except that to the extent Agent
elects to apply, and is not prohibited by the DIP Order from applying, any such
proceeds to the Pre-Petition Debt), (ii) the occurrence of an Event of Default
in consequence of which Agent or Lenders elect to accelerate the maturity and
payment of such Loans, or (iii) termination of this Agreement pursuant to
SECTION 3.2 hereof; PROVIDED, HOWEVER, that if the principal balance of
Revolving Credit Loans outstanding at any time shall exceed the Borrowing Base
at such time, Borrowers shall, on demand, repay the Revolving Credit Loans in an
amount sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess.
(B) Interest accrued on the Revolving Credit Loans shall be due and
payable to Agent, for the account of Lenders, on the earliest of (i) the first
day of each month (for the immediately preceding month), computed through the
last calendar day of the preceding month, (ii) the occurrence of an Event of
Default in consequence of which Agent or Lenders elect to accelerate the
maturity and payment of the Obligations or (iii) termination of this Agreement
pursuant to SECTION 3.2 hereof; PROVIDED, HOWEVER, that each Borrower hereby
irrevocably authorizes Agent, in Agent's sole discretion, to advance to
Borrowers, and to charge to Borrowers' Loan Account hereunder as a Revolving
Credit Loan, a sum sufficient each month to pay all interest accrued on the
Obligations during the immediately preceding month.
(C) Costs, fees and expenses payable pursuant to this Agreement
shall be payable by each Borrower, on demand by Agent, to Agent, for its benefit
and the benefit of Lenders, or to any other Person designated by Lenders in
writing. Agent will promptly provide Borrowers with written notice detailing any
such costs, fees and expenses payable by Borrowers.
(D) The balance of the Obligations requiring the payment of money,
if any, shall be payable by Borrowers to Agent and/or to Lenders as and when
provided in the DIP Financing Documents, or, if no provision is made in the DIP
Financing Documents for payment of any such Obligations, such Obligations shall
be payable on demand.
3.4. APPLICATION OF PAYMENTS AND COLLECTIONS. Each Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Agent or any Lender from
or on behalf of such Borrower. Except as may be expressly provided in the DIP
Order, each Borrower does hereby irrevocably agree that Agent shall have the
continuing exclusive right to apply and reapply any and all such payments and
collections 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 upon any of its books and records, so long as
such payments and collections are first applied to the portion of the
Obligations then due. If as the result of collections of Accounts as authorized
by SECTION 5.4 hereof a credit balance exists in the Loan Account, such credit
balance shall not accrue interest in favor of Borrowers, but shall be available
to Borrowers at any time or times for so long as no Default or Event of Default
exists. Notwithstanding the foregoing, Agent may offset such credit balance
against the Obligations upon or after the occurrence of an Event of Default.
Payments and collections received by Agent, for the benefit of Lenders, from the
Dominion Account or otherwise in Providence, Rhode Island (a) before 2:00 p.m.
(Dallas, Texas time) on a Business Day shall be deemed received on such Business
Day, and (b) after 2:00 p.m. (Dallas, Texas time) on a Business Day shall be
deemed received on the next succeeding Business Day, in each case for purposes
of determining the amount of Revolving Credit Loans available for borrowing
hereunder and for purposes of computing interest on the Loans (subject in each
case to final payment of all items and collections received in form other than
immediately available funds).
3.5. STATEMENTS OF ACCOUNT. Agent will account to Borrowers monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent absent manifest error shall be deemed final,
binding and conclusive upon Borrowers unless Agent is notified by Borrowers in
writing to the contrary within sixty (60) days after the date each account is
mailed to Borrowers. Such notice shall only be deemed an objection to those
items specifically objected to therein.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lenders of the Obligations, each Borrower hereby grants to Agent,
for the benefit of Lenders, a continuing security interest in and Lien upon all
of the Property of such Borrower, including without limitation, all of the
Property of such Borrower described below, whether now owned or existing or
hereafter created, acquired or arising, and whether created, acquired or arising
prior to or on the Filing Date, and wheresoever located:
(A) Accounts;
(B) Inventory;
(C) all Equipment;
(D) all General Intangibles;
(E) all Investment Property;
(F) all Chattel Paper;
(G) all Documents;
(H) all monies and other Property of any kind, now or at any time or
times hereafter, in the possession of or under the control of Agent or a Lender
or a bailee of Agent or a Lender;
(I) all accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D), (E), (F), (G) and
(H) above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(J) 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 (A), (B), (C), (D), (E), (F), (G),
(H) or (I) above.
4.2. REAL PROPERTY COLLATERAL. The Obligations shall also be secured by
all real Property of Borrowers and improvements thereon pursuant to the
Mortgages.
4.3. NO LIENS IN AVOIDANCE ACTIONS. The Liens and security interests
granted to Agent, for the benefit of Lenders, pursuant to the provisions of this
SECTION 4 and pursuant to any of the other DIP Financing Documents shall not
include a Lien against or security interest in any proceeds from any Avoidance
Actions.
4.4. PRIORITY OF LIENS; FURTHER ASSURANCES.
(A) The Liens granted pursuant to the terms of this Agreement and
the other DIP Financing Documents, and the Liens conferred upon Agent, for the
benefit of Lenders, pursuant to the terms of the DIP Orders, shall constitute
first priority Liens and security interests in all of the Collateral except to
the extent otherwise expressly provided in the DIP Orders.
(B) Each Borrower shall take such action and execute such
instruments and documents as Agent may request from time to time to perfect,
continue the perfection of or give notice of perfection of any Liens granted in
favor of Agent, for the benefit of Lenders, pursuant to
any of the DIP Financing Documents or conferred upon Agent pursuant to the terms
of either of the DIP Orders, all at the cost and expense of Borrowers.
4.5. LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit, will at all times be kept by each Borrower at one or more of the
business locations set forth in EXHIBIT B or other locations permitted pursuant
to SECTION 9.2(M) hereof and shall not, without the prior written approval of
Agent, be moved therefrom except, prior to an Event of Default, for (A) sales of
Inventory in the ordinary course of business; (B) the storage of Inventory at
locations within the continental United States other than those shown on EXHIBIT
B if (i) Borrowers give Agent written notice of the new storage location prior
to storing Inventory at such location, (ii) Agent's security interest, for the
benefit of Lenders, in such Inventory is and continues to be a duly perfected,
first priority Lien thereon, (iii) neither Borrowers' nor Agent's nor any
Lender's right of entry upon the premises where such Inventory is stored, or its
right to remove the Inventory therefrom, is in any way restricted, (iv) the
owner of such premises agrees with Agent and/or Lenders not to assert any
landlord's, bailee's or other Lien in respect of the Inventory for unpaid rent
or storage charges, and (v) all negotiable documents and receipts in respect of
any Collateral maintained at such premises are promptly delivered to Agent; and
(C) temporary transfers of Inventory from a location set forth on EXHIBIT B to
another location if done for the limited purpose of additional processing to
such Inventory in the ordinary course of a Borrower's business.
4.6. INSURANCE OF COLLATERAL. Each Borrower agrees to maintain and pay for
insurance upon all Collateral wherever located, in storage or in transit in
vehicles, including goods evidenced by documents, covering casualty, hazard,
public liability and such other risks and in such amounts and with a Permitted
Insurer to insure Agent's and Lenders' interest in the Collateral. Borrowers
shall deliver the originals or certified copies of such policies to Agent with
satisfactory endorsements naming Agent, for the benefit of Lenders, as loss
payee and as mortgagee pursuant to a standard mortgagee clause. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Agent in the event of cancellation
of the policy for any reason whatsoever and a clause that the interest of Agent
and Lenders shall not be impaired or invalidated by any act or neglect of any
Borrower or owner of the Property nor by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrowers fail to
provide and pay for such insurance, Agent may, at Borrowers' expense, procure
the same, but shall not be required to do so. Each Borrower agrees to deliver to
Agent, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies. Borrowers will maintain, with Permitted Insurers,
insurance with respect to its Properties and business against such casualties
and contingencies of such type (including public liability, product liability,
larceny, embezzlement, or other criminal misappropriation insurance) and in such
amounts as is customary in the business or as otherwise reasonably required by
Agent.
4.7. PROTECTION OF COLLATERAL. All insurance expenses and all expenses of
protecting, storing, warehousing, insuring, handling, maintaining and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral or in respect of
the sale thereof shall be borne and paid by Borrowers. If Borrowers fail to
promptly pay any portion thereof when due, Agent may, at its option, but shall
not be required to,
pay the same and charge the Loan Account therefor. Each Borrower agrees to
reimburse Agent promptly for any amounts not charged to the Loan Account with
interest accruing thereon daily at the Default Rate. All sums so paid or
incurred by Agent for any of the foregoing and all costs and expenses (including
reasonable attorneys' fees, legal expenses, and court costs) which Agent may
incur in enforcing or protecting its Lien on or rights and interest in the
Collateral or any of its rights or remedies under any Loan Document or in
respect of any of the transactions to be had hereunto, together with interest at
the Default Rate, shall be considered Obligations hereunder secured by all
Collateral. Neither Agent nor any Lender shall 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 or any Lender'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
Borrowers' sole risk.
4.8. COLLATERAL REPORTING. Borrowers shall report to Agent, at such
intervals as shall be required by Agent, on forms of reporting approved or
designated by Agent, concerning the status, value and amount of each Borrowers'
Accounts and Inventory.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to all
Accounts, each Borrower represents and warrants to Agent and Lenders that Agent
and Lenders may rely, in determining which Accounts are Eligible Accounts, on
all statements and representations made by a Borrower with respect to any
Account or Accounts, and, unless otherwise indicated in writing to Agent, that
with respect to each Account which is represented by a Borrower to be an
Eligible Account:
(A) it is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(B) it arises out of a completed, BONA FIDE sale and delivery of
goods or rendition of services by a Borrower 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 such Borrower and the Account Debtor;
(C) it is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Agent;
(D) such Account, and Agent's security interest, for the benefit of
Lenders, therein, is not, and will not be in the future, subject to any offset,
Lien, deduction, defense, dispute, counterclaim or any other adverse condition
except for disputes resulting in returned goods where the amount in controversy
is deemed by Agent to be immaterial, and each such Account is absolutely owing
to a Borrower and is not contingent in any respect or for any reason;
(E) No Borrower has made any agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
granted by such Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of each
respective invoice related thereto;
(F) there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements delivered
to Agent with respect thereto;
(G) to the best of each Borrower's knowledge, the Account Debtor
thereunder (i) is Solvent and (ii) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed; and
(H) No Borrower has any knowledge of any fact or circumstance which
would impair the validity or collectability of the Account, and to the best of
each Borrower's knowledge there are no proceedings or actions which are
threatened or pending against any Account Debtor thereunder which might result
in any material adverse change in such Account Debtor's financial condition or
the collectability of such Account.
5.2. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. Each Borrower shall
execute and deliver to Agent formal written assignments of all of its Accounts
weekly, or, if requested by Agent, daily, which shall include all Accounts that
have been created since the date of the last assignment, together with copies of
invoices or invoice registers related thereto. Each Borrower shall keep accurate
and complete records of its Accounts and all payments and collections thereon
and, if requested by Agent, shall submit to Agent on a daily basis a sales and
collections report for the preceding day, in form satisfactory to Agent. On
Wednesday of each week from and after the date hereof, each Borrower shall
deliver to Agent, in form satisfactory to Agent, a summary of the aged trial
balance of all Accounts existing as of the last day of the preceding week
("SCHEDULE OF ACCOUNTS"), and if so requested by Agent, such Schedule of
Accounts shall include a detailed aged trial balance of all Accounts existing as
of the last day of the preceding week, specifying the names, addresses, face
value, dates of invoices and due dates for each Account Debtor obligated on an
Account so listed, and, upon Agent's 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 the Accounts so
scheduled and such other matters and information relating to the status of then
existing Accounts as Agent shall reasonably request.
5.3. ADMINISTRATION OF ACCOUNTS.
(A) Upon the granting of any discounts, allowances or credits by a
Borrower that are not shown on the face of the invoice for the Account involved,
such 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 5.2. Upon and
after the occurrence of an Event of Default, Agent shall have the right to
settle or adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Agent may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including reasonable attorney's fees,
to Borrowers.
(B) If an Account 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
Borrowers and to charge the Loan Account therefor. Borrower shall notify Agent
if any Account includes any tax due to any governmental taxing authority and, in
the absence of such notice, Agent, for the benefit of Lenders, shall have the
right to retain the full proceeds of the Account and shall not be liable for any
taxes to any governmental taxing authority that may be due by any Borrower by
reason of the sale and delivery creating the Account.
(C) Whether or not a Default or an Event of Default has occurred,
any of Agent's officers, employees or agents shall have the right, at any time
or times hereafter, in the name of Agent, any designee of Agent or a Borrower,
to verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrowers shall cooperate fully with
Agent in an effort to facilitate and promptly conclude any such verification
process.
5.4. COLLECTION OF ACCOUNTS.
(A) To expedite collection, each Borrower shall endeavor in the
first instance to make collection of its Accounts for Agent and Lenders. All
remittances received by each Borrower on account of Accounts shall be held as
Lenders' property by such Borrower as trustee of an express trust for Lenders'
benefit and such Borrower shall immediately deposit or cause to be deposited
same in the Dominion Account. Agent shall have the right at any time after the
occurrence of an Event of Default to notify Account Debtors that Accounts have
been assigned to Agent and Lenders and to collect Accounts directly in its own
and Lenders' name and to charge the collection costs and expenses, including
reasonable attorneys' fees, to Borrowers. Neither Agent nor any Lender has any
duty to protect, insure, collect or realize upon the Accounts or preserve rights
in them.
(B) Each Borrower shall deposit all proceeds of the Collateral or
cause the same to be deposited in kind in a Dominion Account pursuant to a
lockbox arrangement with such banks as may be selected by Borrowers and be
acceptable to Agent. Each Borrower shall issue to any such banks, an irrevocable
letter of instruction directing such banks to deposit all payments or other
remittances received in the lockbox to the Dominion Account for application on
account of the
Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lenders and Borrowers shall obtain the agreement by such
banks to waive any offset rights against the funds so deposited. Neither Agent
nor any Lender assumes any responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
(C) Attached hereto as EXHIBIT Q is a listing of all current bank
accounts of Borrowers. No new banking accounts may be established by Borrowers
without the prior consent of Agent.
SECTION 6. PROVISIONS RELATING TO INVENTORY
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to Inventory,
each Borrower represents and warrants to Agent and Lenders that Agent and
Lenders may rely, in determining which items of Inventory constitute Eligible
Inventory, on all statements and representations made by any Borrower with
respect to any Inventory and that:
(A) all Inventory is presently and will continue to be located at
Borrowers' places of business listed on EXHIBIT B and will not be removed
therefrom except as authorized by SECTION 4.5 of this Agreement or in connection
with changes in business locations permitted under SECTION 9.2(M) of this
Agreement;
(B) no Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party without
Agent's prior written consent and, if Agent gives such consent, Borrowers will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Agent, in form and substance acceptable to Agent, warehouse
receipts therefor in Agent's name, for the benefit of Lenders;
(C) no Inventory is or will be consigned to any Person without
Agent's prior written consent, and, if such consent is given, Borrowers shall,
prior to the delivery of any Inventory on consignment, (i) provide Agent with
all consignment agreements to be used in connection with such consignment, all
of which shall be acceptable to Agent, (ii) prepare, execute and file
appropriate financing statements with respect to any consigned Inventory,
showing Agent, for the benefit of Lenders, as assignee, (iii) conduct a search
of all filings made against the consignee in all jurisdictions in which any
consigned Inventory is to be located and deliver to Agent copies of the results
of all such searches, and (iv) notify, in writing, all the creditors of the
consignee which are or may be holders of Liens in the Inventory to be consigned
that Borrowers expect to deliver certain Inventory to the consignee, all of
which Inventory shall be described in such notice by item or type;
(D) to the best of each Borrower's knowledge, no Inventory is or
will be produced by Borrowers in violation of the Fair Labor Standards Act or in
violation of any international law prohibiting child labor; and
6.2. INVENTORY REPORTS. Subject to SECTION 9.1(K) of this Agreement,
Borrowers agree to furnish Agent with Inventory reports at such times as Agent
may request, but at least once each week as to all of Borrowers' Inventory. In
addition, Borrowers agree to furnish on a daily basis to Agent daily shipments
as to the Cincinnati Facility Inventory, Borrowers hereby agreeing and
acknowledging that Agent will make adjustments to the Cincinnati Facility
Inventory in a method and manner determined by Agent, in its sole discretion.
All of the above reports shall be in form and detail satisfactory to Agent.
Borrowers shall conduct a physical count of Inventory no less frequently than
semi-annually and shall provide to Agent a report based on each such physical
count of Inventory promptly thereafter, together with such supporting
information as Agent shall in its discretion request.
6.3. RETURNS OF INVENTORY. If at any time or times hereafter any Account
Debtor returns any Inventory to a Borrower the shipment of which generated an
Account on which such Account Debtor is obligated in excess of $100,000, such
Borrower shall notify Agent of the same immediately, specifying the reason for
such return and the location and condition of the returned Inventory. After the
occurrence of an Event of Default, each Borrower shall hold all returned
Inventory in trust for each Lender, shall segregate all returned Inventory from
all other Property owned by a Borrower or in its possession and shall
conspicuously label such Inventory as the Property of Agent and each Lender.
SECTION 7. PROVISIONS RELATING TO EQUIPMENT
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to the
Equipment, each Borrower represents, warrants and covenants to and with Agent
and Lenders that:
(A) in all material respects, the Equipment 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 shall be maintained and preserved,
reasonable wear and tear excepted; and
(B) No Borrower will permit any of the Equipment to become affixed
to any real Property leased to such Borrower so that an interest arises therein
under the real estate laws of the applicable jurisdiction unless the landlord of
such real Property has executed a landlord waiver or leasehold mortgage in favor
of Agent, for the benefit of Lenders, and no Borrower will permit any of the
Equipment to become an accession to any personal Property other than Equipment
subject to first priority Liens in favor of Agent, for the benefit of Lenders,
or subject to Permitted Liens.
7.2 EVIDENCE OF OWNERSHIP OF EQUIPMENT. Immediately on request therefor by
Agent, Borrowers shall deliver to Agent any and all evidence of ownership, if
any, of any of the Equipment (including, without limitation, certificates of
title and applications for title).
7.3 RECORDS AND SCHEDULES OF EQUIPMENT. Borrowers shall maintain accurate
records itemizing and describing the kind, type, quality, quantity and value of
their Equipment and all
dispositions made in accordance with SECTION 7.4 hereof, and upon request shall
furnish Agent with a current schedule containing the foregoing information.
7.4 DISPOSITIONS OF EQUIPMENT. No Borrower will sell, lease or otherwise
dispose of or transfer any of the Equipment or any part thereof without the
prior written consent of Agent and Lenders, other than (i) dispositions of
office equipment provided that the aggregate amount of all such dispositions by
Borrowers arising after the date hereof shall not in the aggregate be in excess
of $100,000.00, and (ii) dispositions approved by a Court order in connection
with a Chapter 11 Case.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders
to enter into this Agreement, to establish the DIP Facility, and to induce
Lenders to make advances hereunder, each Borrower warrants, represents and
covenants to Agent and Lenders as follows:
(A) ORGANIZATION AND QUALIFICATION. Brazos is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Morning Sun is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington.
Embroidery is a corporation duly organized, validly existing and in good
standing under the laws of the State of Pennsylvania. Each Borrower has duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in each state or jurisdiction listed on EXHIBIT C attached hereto
and made a part hereof and in all other states and jurisdictions where the
character of its Properties or the nature of its activities make such
qualification necessary.
(B) POWER AND AUTHORITY. Upon entry of the DIP Orders, each Borrower
has the right and power and is duly authorized and empowered to enter into,
execute, deliver and perform this Agreement and each of the other DIP Financing
Documents to which it is a party. The execution, delivery and performance of
this Agreement and each of the other DIP Financing Documents have been duly
authorized by all necessary company action on the part of each Borrower and by
the date of initial funding of Loans hereunder will be authorized by the Interim
Financing Order pursuant to Sections 363 and 364 of the Bankruptcy Code, and do
not and will not (i) require any consent or approval of the members or
shareholders of any Borrower that has not been obtained; (ii) contravene any
Borrower's organizational documents or by-laws; (iii) violate, or cause any
Borrower 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 a Borrower (following entry of the Interim Financing
Order); or (iv) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by a Borrower.
(C) SUBSIDIARIES. Brazos has no Subsidiaries except for (i) Morning
Sun, (ii) Stadium Apparel, Inc., a Texas corporation, which is a dormant
Subsidiary with no assets or
operations, and (iii) Japanese Subsidiary. Morning Sun has no Subsidiaries.
Embroidery has no Subsidiaries.
(D) LEGALLY ENFORCEABLE AGREEMENT. Upon entry of the DIP Orders,
this Agreement is, and each of the other DIP Financing Documents when delivered
under this Agreement will be, a legal, valid and binding obligation of each
Borrower and each other Person party thereto, enforceable against them in
accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally or by principles of equity
pertaining to the availability of equitable remedies.
(E) VALID, ENFORCEABLE, AND PERFECTED LIENS. Upon entry of the
Interim Financing Order, and thereafter upon entry of the Permanent Financing
Order the security interests granted pursuant to the DIP Financing Documents
constitute valid, enforceable and perfected Liens on the Collateral having the
priority specified in the DIP Orders.
(F) USE OF PROCEEDS. Borrowers' uses of the proceeds of any Loans
pursuant to this Agreement are, and will continue to be, legal and proper
organizational uses, duly authorized by such Borrower's board of directors or
board of managers, as the case may be, and such uses will not violate any
applicable laws, including, without limitation, the Foreign Assets Control
Regulations, the Foreign Funds Control Regulations and the Transaction Control
Regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended).
(G) MARGIN STOCK. No Borrower is engaged principally, or as one of
its important activities, in the business of purchasing or carrying "margin
stock" (within the meaning of Regulation G or U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loans to any
Borrower will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock or be used
for any purpose which violates or is inconsistent with the provisions of
Regulation G, T, U or X of said Board of Governors.
(H) GOVERNMENTAL CONSENTS. Each Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it.
(I) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Except as
otherwise disclosed to Lenders, each Borrower owns or possesses all the patents,
trademarks, service marks, trade names, copyrights and licenses necessary for
the present and planned future conduct of its business without any known
conflict with the rights of others. All such patents, trademarks, service marks,
trade names, licenses and other similar rights owned or possessed as of the date
of this Agreement are listed on EXHIBIT E attached hereto and made a part
hereof. Borrowers agree to provide to Lenders by March 15, 1999 a list of all of
the copyrights then owned or possessed by Borrowers.
(J) CAPITAL STRUCTURE. EXHIBIT F attached hereto and made a part
hereof states (i) the correct name of each of the Subsidiaries of each Borrower,
the jurisdiction of incorporation and the percentage of its Voting Stock owned
by such Borrower, (ii) the name of each of each Borrower's corporate or joint
venture Affiliates and the nature of the affiliation, (iii) the number, nature
and holder of all outstanding Securities of each Borrower and each Subsidiary of
such Borrower, and (iv) the number of authorized, issued and treasury shares of
such Borrower and each Subsidiary of such Borrower. Each Borrower has good title
to all of the shares it purports to own of the stock of each Subsidiary of such
Borrower, 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 nonassessable.
Except as set forth on EXHIBIT F attached hereto, there are not outstanding any
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any Borrower. There are not outstanding any agreements or instruments
binding upon any of any Borrower's shareholders or members relating to the
ownership of its shares of capital stock or its membership interest.
(K) RESTRICTIONS. Neither any Borrower nor any of such Borrower's
Subsidiaries has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether now owned
or hereafter acquired, to be subject to a Lien that is not a Permitted Lien,
other than in connection with the Indenture (as such term is defined in the
Pre-Petition Loan Agreement).
(L) LITIGATION. Except as set forth on EXHIBIT H attached hereto or
otherwise disclosed in writing and made a part hereof, there are no actions,
suits, proceedings or investigations pending, or to the knowledge of any
Borrower, threatened, against or affecting such Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of such Borrower or any of its Subsidiaries, in any court or before
any governmental authority or arbitration board or tribunal which involves the
possibility of materially and adversely affecting the Properties, business,
prospects, profits or financial condition of any Borrower or the ability of any
Borrower to perform this Agreement. Neither any Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
(M) TITLE TO PROPERTIES. Each Borrower and its Subsidiaries each has
good, indefeasible 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 its
other Property, in each case, free and clear of all Liens except Permitted
Liens.
(N) FINANCIAL STATEMENTS; FISCAL YEAR. The Consolidated and
consolidating balance sheets of Parent and its Consolidated Subsidiaries
described therein as of November 4, 1998, and the related statements of
operations, stockholder's equity and cash flows for the period ended on such
date, have been prepared in accordance with GAAP (except for changes in
application in which Parent's independent certified public accountants concur
and except for normal year-end adjustments), and present fairly, in all material
respects, the financial positions of
Parent and its Consolidated Subsidiaries at such dates and the results of the
operations of Parent and its Consolidated Subsidiaries for such periods. The
fiscal year of Parent and each of its Consolidated Subsidiaries ends on the
Saturday closest to December 31.
(O) FULL DISCLOSURE. The financial statements referred to in SECTION
8.1(N) above, do not, nor does this Agreement or any other written statement of
any Borrower to Agent and/or any Lender, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact which any Borrower has failed
to disclose to Agent or any Lender which materially affects adversely or, so far
as such Borrower can now foresee, will materially affect adversely the
Properties, business, prospects, profits, or condition (financial or otherwise)
of any Borrower or any of its Subsidiaries or the ability of any Borrower or its
Subsidiaries to perform this Agreement.
(P) PENSION PLANS. Except as disclosed on EXHIBIT H attached hereto
and made a part hereof, no Borrower nor any of its Subsidiaries has any Plan. No
Borrower nor any of its Subsidiaries has received any notice to the effect that
it is not in full compliance with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could result in a
material adverse change in the financial condition of any Borrower (including,
but not limited to, any Reportable Event or Prohibited Transaction) exists in
connection with any Plan. Neither any Borrower nor any of its Subsidiaries has
any withdrawal liability in connection with a Multi-Employer Plan.
(Q) TAXES. Brazos' federal tax identification number is 74-1897317.
Morning Sun's federal tax identification number is 13-3701740. Embroidery's
federal tax identification number is 25-1777234. Each Borrower and its
Subsidiaries each has 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, assessments, fees and other governmental charges that are
due and payable. The provision for taxes on the books of each Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current fiscal year. EXHIBIT P contains an accurate list of all taxing
authorities to which each Borrower and its Subsidiaries and their respective
Properties are subject. No Properties of any Borrower or its Subsidiaries are or
could become subject to any Lien in favor of any such taxing authorities for
nonpayment of taxes, except for inchoate liens for taxes not yet due and payable
and as specified on EXHIBIT P.
(R) LABOR RELATIONS. Except as described on EXHIBIT J attached
hereto and made a part hereof, neither any Borrower nor any of its Subsidiaries
is a party to any collective bargaining agreement, and there are no material
grievances, disputes or controversies with any union or any other organization
of any Borrower's employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
(S) COMPLIANCE WITH LAWS. Each Borrower has duly complied in all
material respects with, and its Properties, business operations and leaseholds
are in compliance in all material respects with, the provisions of all federal,
state and local laws, rules and regulations applicable to such Borrower, its
Properties or the conduct of its business, including, without
limitation, OSHA and all Environmental Laws, and there have been no citations,
notices or orders of noncompliance issued to any Borrower or any of its
Subsidiaries under any such law, rule or regulation.
(T) SURETY OBLIGATIONS. No Borrower is obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into any agreement to assure payment, performance or completion of performance
of any undertaking or obligation of any Person.
(U) NO DEFAULTS. No event has occurred and no condition exists which
would, upon the execution and delivery of this Agreement, constitute a Default
or an Event of Default. Neither any Borrower nor any of any Borrower's
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 for post-Petition Money Borrowed arising after the Filing Date.
(V) BROKERS. There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions contemplated
by this Agreement, for which any Borrower is responsible.
(W) MANAGEMENT FEES. No Borrower is now required and no Borrower
will in the future be required to pay any management fees to any Person;
PROVIDED, HOWEVER, the foregoing shall not prevent payment of fees to Osnos &
Company, Inc.
(X) BUSINESS LOCATIONS; AGENT FOR PROCESS. During the preceding
seven year period, no Borrower has had any office, place of business or agent
for service of process located in any state or county other than as shown on
EXHIBIT B.
(Y) LEASES. EXHIBIT K attached hereto is a complete listing of all
capitalized leases of Borrowers and EXHIBIT L attached hereto is a complete
listing of all operating leases of Borrowers (excluding any operating leases for
copiers and other office equipment).
(Z) INVESTMENT COMPANY ACT. No Borrower is an "investment company"
and no Borrower is "controlled" by any "investment company", (within the meaning
of the Investment Company Act of 1940, as amended) except Equus II Incorporated,
a Delaware corporation, which is a "business development company."
8.2. REAFFIRMATION. Each request for a Loan made by Borrowers pursuant to
this Agreement or any of the other DIP Financing Documents shall constitute (i)
an automatic representation and warranty by Borrowers to Agent and Lenders that
there does not then exist any Default or Event of Default and (ii) a
reaffirmation as of the date of said request that all of the representations and
warranties of Borrowers contained in this Agreement and the other DIP Financing
Documents are true in all material respects except for any changes in the nature
of Borrowers' business or operations that would render the information contained
in any exhibit (other
than EXHIBIT H) attached hereto either inaccurate or incomplete, so long as
Lenders have consented to such changes or such changes are not restricted or
prohibited by this Agreement.
8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each Borrower covenants,
warrants and represents to Agent and Lenders that all representations and
warranties of Borrowers contained in this Agreement or any of the other DIP
Financing Documents shall be true at the time of Borrowers' execution of this
Agreement and the other DIP Financing Documents, and shall survive the
execution, delivery and acceptance thereof by Agent, Lenders 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. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or to any Lender,
each Borrower covenants that, unless otherwise consented to by Lenders in
writing, it shall:
(A) TAXES AND LIENS. Pay and discharge, and cause each Subsidiary to
pay and discharge, all post-Petition taxes, assessments and governmental charges
upon it, its income and Properties as and when such post-Petition taxes,
assessments and charges are due and payable (and, if requested by any Lender,
provide Agent and each Lender with proof that such Borrower or such Subsidiary
has done so), except and to the extent only that such taxes, assessments and
charges are being actively contested in good faith and by appropriate
proceedings, such Borrower maintains adequate reserves on its books therefor and
the nonpayment of such taxes, assessments and charges does not result in a Lien
upon any Properties of a Borrower other than a Permitted Lien. Each Borrower
shall also pay and discharge any such lawful claims which, if unpaid, might
become a Lien against any of any Borrower's Properties except for Permitted
Liens.
(B) TAX RETURNS. File, and cause each Subsidiary to file, all
federal, state and local tax returns and other reports such Borrower or such
Subsidiary is required by law to file and maintain adequate reserves 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.
(C) PAYMENT OF BANK CHARGES. Pay to Agent and/or Lenders, on demand,
any and all fees, costs or expenses which Agent or any Lender pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to any Borrower or any other Person on behalf of such Borrower
proceeds of Loans made by any Lender to Borrowers pursuant to this Agreement and
(ii) the depositing for collection, by any Lender, of any check or item of
payment received or delivered to Agent or any Lender on account of the
Obligations.
(D) BUSINESS AND EXISTENCE. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its separate corporate or limited liability
company existence and all rights, privileges, and franchises in connection
therewith, and maintain, and cause each Subsidiary to maintain, its
qualification and good standing in all states in which such qualification is
necessary.
(E) MAINTAIN PROPERTIES. Maintain, and cause each Subsidiary to
maintain, its Properties in good condition and make, and cause each Subsidiary
to make, all necessary renewals, repairs, replacements, additions and
improvements thereto, reasonable wear and tear excepted.
(F) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with all laws, ordinances, governmental rules and regulations to which
it is subject, including, without limitation, all OSHA and Environmental Laws,
and obtain and keep in force any and all licenses, permits, franchises, or other
governmental authorizations necessary to the ownership of its Properties or to
the conduct of its business, which violation or failure to obtain might
materially and adversely affect the business, prospects, profits, Properties, or
financial condition of such Borrower.
(G) 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 such 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.
(H) BUSINESS RECORDS. Keep, and cause each Subsidiary 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.
(I) VISITS AND INSPECTIONS. Permit representatives of Agent and
Lenders, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of such
Borrower, inspect and make extracts from its books and records, and discuss with
its officers, its employees and its independent accountants, Borrowers'
business, assets, liabilities, financial condition, business prospects and
results of operations.
(J) 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 such 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 one hundred twenty
(120) days after the close of each fiscal year of Borrowers, audited
Consolidated financial statements of Parent and its Consolidated Subsidiaries as
of the end of such year consisting of a Consolidated balance sheet, income
statement and statement of cash flows, audited by independent certified public
accountants of recognized national standing or otherwise acceptable to Agent,
together with consolidating financial statements of Parent and its Consolidated
Subsidiaries as of the end of such
year, consisting of balance sheets, income statements and statements of cash
flows, certified by the principal financial officer of each Borrower as prepared
in accordance with GAAP and fairly presenting in all material respects the
Consolidated financial position and results of operations of Parent and its
Consolidated Subsidiaries for such period (except for any change in accounting
principles with which the independent public accountants concur);
(ii) as soon as possible, but not later than forty-five (45)
days after the end of January, 1999, February, 1999, March, 1999, and April,
1999, and not later than thirty (30) days after the end of each month occurring
after April, 1999 (including the calendar month ending on the last day of the
fiscal year), unaudited interim Consolidated financial statements of Parent and
its Consolidated Subsidiaries, consisting of a Consolidated balance sheet,
income statement and statement of cash flows, together with consolidating
financial statements of Parent and its Consolidated Subsidiaries as of the end
of such month and of the portion of Parent's fiscal year then elapsed,
consisting of balance sheets, income statements and statements of cash flows,
certified by the principal financial officer of each Borrower as prepared in
accordance with GAAP and fairly presenting in all material respects the
Consolidated financial position and results of operations of Parent and its
Consolidated 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 any Borrower or Parent has made available to its shareholders and copies
of any regular, periodic and special reports or registration statements which
any Borrower or Parent 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 and Lenders, from time to time, may reasonably request, bearing upon or
related to the Collateral, such Borrower's financial condition or results of
operations, including, without limitation, federal income tax returns of such
Borrower, accounts payable ledgers, and bank statements. Concurrently with the
delivery of the financial statements described in CLAUSE (I) of this SECTION
9.1(J), each Borrower shall forward or cause to be forwarded to Agent and each
Lender a copy of the accountant's letter to such Borrower's management that is
prepared in connection with such financial statements. Concurrently with the
delivery of the financial statements described in CLAUSES (I) AND (II) of this
SECTION 9.1(J), each Borrower shall cause to be prepared and furnished to Agent
and each Lender a certificate from each of the principal financial officer and
chief executive officer of each Borrower certifying to Agent and each Lender
that, to the best of his knowledge, each Borrower has kept, observed, performed
and fulfilled each and every covenant, obligation and agreement binding upon
Borrowers in this Agreement and the other DIP Financing Documents and that no
Default or Event of Default has occurred, or, if such Default or Event of
Default has occurred, specifying the nature thereof, which certificate shall be
accompanied by a detailed schedule demonstrating compliance or non-compliance
with such covenants under this Agreement as shall be required by Agent.
(K) NOTICES TO AGENT AND LENDERS. Notify Agent and each Lender in
writing: (i) promptly after such Borrower's learning thereof, of the
commencement of any litigation affecting any Borrower or any of its Properties,
whether or not the claim is considered by such Borrower to be covered by
insurance, and of the institution of any administrative proceeding which may
materially and adversely affect any Borrower's operations, financial condition,
Properties or business or Agent's Lien, for the benefit of Lenders, upon any of
the Collateral; (ii) at least fifteen (15) days prior thereto, of any Borrower's
opening of any new office or place of business or any Borrower's closing of any
existing office or place of business; PROVIDED, HOWEVER, no Borrower shall open
a new office or place of business unless it shall have previously provided a
duly executed landlord's waiver in favor of Agent, for the benefit of Lenders,
in form and substance satisfactory to Agent, in its sole discretion, covering
such new office or place of business; (iii) promptly after such Borrower's
learning thereof, of any material labor dispute to which any Borrower may become
a party, any material strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (iv) promptly after such Borrower's learning thereof, of
any material default by any Borrower under any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any
post-Petition Indebtedness of any Borrower exceeding $100,000; (v) promptly
after the occurrence thereof, of any Default or Event of Default; (vi) promptly
after the occurrence thereof, of any default by any obligor under any note or
other evidence of Indebtedness payable to any Borrower in excess of $100,000;
and (vii) promptly after the rendition thereof, of any judgment in an amount in
excess of $50,000 rendered against any Borrower or any of its Subsidiaries. In
addition, each Borrower shall cause its counsel in its Chapter 11 Case to
provide Agent's counsel with copies of all pleadings, motions, applications, and
other papers to the Court.
(L) LANDLORD AND STORAGE AGREEMENTS. Provide Agent with copies of
all agreements between any Borrower and any landlord or warehouseman which owns
any premises at which any Inventory or other Collateral may, from time to time,
be kept.
(M) SUBORDINATIONS. Provide Agent and each Lender with a debt
subordination agreement in form and substance satisfactory to Lenders, executed
by any Borrower and any Person who is an officer, director or Affiliate of such
Borrower to whom such Borrower is or hereafter becomes indebted for Money
Borrowed, subordinating in right of payment and claim all of such Indebtedness
and any future advances thereon to the full and final payment and performance of
the Obligations.
(N) 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 necessary by Agent to give effect to or carry out the terms or
intent of this Agreement or any of the other Loan Documents. Without limiting
the generality of the foregoing, if any of the Accounts, the aggregate face
value of which exceeds $100,000, arises out of a contract with the United States
of America, or any department, agency, subdivision or instrumentality thereof,
such Borrower shall promptly notify Agent thereof in writing and shall execute
any instruments and take any other action required or requested by Agent to
comply with the provisions of the Federal Assignment of Claims Act.
(O) COMPLIANCE CERTIFICATE. As soon as possible, but not later than
thirty (30) days after the end of each month, or more frequently if requested by
Agent, cause the principal financial officer of each Borrower to prepare and
deliver to Agent and Lenders a Compliance Certificate in the form of EXHIBIT N
attached hereto, with appropriate insertions and accompanied by detail showing
the required calculations.
(P) DIP ORDERS. Comply with each of the provisions of the Interim
Financing Order and the Permanent Financing Order.
(Q) [This Section is intentionally omitted.]
(R) BORROWING BASE REPORT. As soon as possible, but not later than
weekly, or more frequently if requested by Agent, cause the principal financial
officer of the Borrowers to prepare and deliver to Agent a Borrowing Base Report
("BORROWING BASE REPORT") in a form acceptable to Agent, containing consolidated
and consolidating information as to Borrowers' Accounts and Inventory,
accompanied by the relevant supporting materials.
(S) PAYMENT OF POST-PETITION CHARGES. Pay and discharge, or cause to
be paid and discharged, promptly all lawful claims incurred by or imposed upon
any Borrower after the Filing Date, including all lawful claims for labor,
materials, supplies or services.
(T) SALE OF ASSETS. Promptly deliver to Agent all proposals, term
sheets, commitment letters and drafts of purchase agreements with respect to any
proposed sale of assets of any Borrower, but in all events (unless otherwise
authorized by Court order pursuant to a Chapter 11 Case), any such sale shall
only be on such terms and conditions and for such a purchase price as shall be
acceptable to Lenders, in Lenders' sole discretion. The proceeds of such sale
(whether or not such disposition was acceptable to Lenders) shall be disbursed
to Agent for the benefit of Lenders at the closing of such sale, with such
proceeds to be applied in the manner determined by Agent, in its sole
discretion. Subject to the rights of any holders of Liens superior to those of
Agent in such asset, Borrowers agree that in each circumstance where they ask
permission from the Court to sell an asset, Borrowers shall as part of such
request specify that proceeds from such sale shall be distributed as specified
in the Agreement.
(U) CASH RECEIPTS AND CASH DISBURSEMENTS. Deliver to Agent, on the
date hereof, and thereafter on the Wednesday of each calendar week for the week
ending the previous Saturday, the Borrowers' forecasted cash receipts and
disbursements (containing a comparison of forecasted to actual cash receipts and
disbursements) on a weekly basis for the next 13 weeks, such projections to be
in a form and scope satisfactory to Agent. Borrowers shall reformulate such 13-
week projections each month.
(V) BUSINESS CONSULTANT OF LENDERS. Cooperate in all respects with,
and reimburse Agent and Lenders for all the fees and expenses of, the business
consultant to be employed by Lenders to assist Lenders in evaluating the
forecasts of the Borrowers and to their future business operations, the business
restructuring plan of the Borrowers, the forecasted cash
flows, Borrowing Base availability, Revolving Credit Loans balance, liquidity
and related financial matters concerning Borrowers during the Chapter 11 Cases
and such other items and matters relating to Borrowers as shall be requested by
Lenders. Notwithstanding the foregoing, Borrowers shall not be liable for
reimbursement of more than $150,000 in reasonable fees and expenses of such
business consultant.
(W) BUSINESS PLAN. Furnish the Business Plan to Lenders by March 15,
1999, which Business Plan shall demonstrate to Lenders' satisfaction that
Borrowers have the ability within the existing structure of the credit
facilities provided for in this Agreement (i) to achieve the cash flows, profit
and loss, Borrowing Base availability, Revolving Credit Loans balance and
liquidity, business prospects and related financial items of Borrowers
forecasted in the Business Plan, (ii) to achieve the indicated timetable for
reorganization of Borrowers' business, including the timetable for the
liquidation of the Cincinnati Facility Inventory and (iii) to achieve the plan
of reorganization Borrowers intend to propose in their Chapter 11 Cases.
Borrowers further agree that if after Lenders' review of the Business Plan the
Lenders, in their credit judgment, determine that changes in any of the
covenants contained in this Agreement are necessary to reflect more accurately
the information contained in the Business Plan (which may include, without
limitation, establishment of new covenants, as well as revisions of existing
covenants), Borrowers shall agree upon with Lenders and Borrowers shall execute,
upon approval by the Court, but no later than April 15, 1999 (subject, however,
to the availability of the Court), such amendments to this Agreement as shall be
required by Lenders in order to effectuate such changes in such covenants.
(X) PLAN OF LIQUIDATION OF CINCINNATI FACILITY INVENTORY. Promptly
commence and implement in a commercially reasonable manner the liquidation of
the Cincinnati Facility Inventory In addition to and not in limitation of the
foregoing, Borrowers agree that in furtherance of the provisions of the 1999
Forecast regarding the liquidation of the Cincinnati Facility Inventory, the
value of the Cincinnati Facility Inventory owned by Borrowers, whether located
at the Cincinnati Facility or elsewhere, shall not exceed the amount indicated
below on the date corresponding thereto (which amount in each case is no less
than 115% of the corresponding amount provided for in the 1999 Forecast):
DATE AMOUNT
(i) February 28, 1999 (ii) $11,500,000.00
(ii) March 31, 1999 (iii) $ 5,000,000.00
--------------
(iii) April 30, 1999 (iv) $ 2,000,000.00
--------------
(iv) May 31, 1999 (v) $ 0.00
--------------
(Y) AVERAGE AVAILABILITY. Maintain as of the first and third Fridays
of each calendar month, beginning with February 5, 1999, Average Availability
for the two calendar week period ending on such Friday of not less than
$1,500,000.00.
9.2. NEGATIVE COVENANTS. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Agent or any Lender, each Borrower
covenants that, unless Lenders have first consented thereto in writing, it will
not:
(A) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate, or
permit any Subsidiary to merge or consolidate, with any Person, except a
consolidation or merger involving only a Borrower and one or more wholly owned
Subsidiaries of a Borrower; nor acquire all or any substantial part of the
Properties of any Person.
(B) LOANS. Make, or permit any Subsidiary to make, any loans or
other advances of money to any Person, including, without limitation, any of any
Borrower's Affiliates, officers or employees, other than salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business; PROVIDED, HOWEVER, any Borrower and each Subsidiary
of a Borrower may make loans or other advances of money to the extent such loans
or other advances of money are permitted pursuant to the provisions of SECTION
9.2(C)(III) hereof.
(C) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to exist,
or permit any Subsidiary to create incur or suffer to exist, any Indebtedness,
except: (i) Obligations owing to Agent or any Lender; (ii) Borrower Subordinated
Debt; (iii) Indebtedness of Morning Sun to Brazos and of Brazos to Morning Sun,
and, if consented to by Lenders, Indebtedness of any other Subsidiary of a
Borrower to such a Borrower; (iv) unsecured accounts payable to trade creditors
which are not aged more than one hundred eighty (180) days from billing date and
current operating expenses (other than for Money Borrowed) which are not more
than sixty (60) days past due, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are actively being
contested in good faith and by appropriate and lawful proceedings and Borrowers
shall have set aside such reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by Borrowers and its independent public accountants;
(v) Capitalized Lease Obligations or purchase money Indebtedness incurred to
finance Capital Expenditures permitted by SECTION 9.2(L); (vi) Obligations to
pay Rentals permitted by SECTION 9.2(X); (vii) contingent liabilities arising
out of endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business; (viii) accruals (including
interest accruals) in accordance with GAAP in the normal course of Borrowers'
business; (ix) guarantees of Indebtedness otherwise permitted pursuant to the
provisions of this SECTION 9.2(C); and (x) Indebtedness existing on the Filing
Date.
(D) AFFILIATE TRANSACTIONS. Absent prior Court approval, enter into,
or be a party to, or permit any Subsidiary to enter into or be a party to, any
transaction with any Affiliate or stockholder, except in the ordinary course of
and pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and each Lender and are no less favorable to such Borrower
than would obtain in a comparable arm's length transaction with a Person not an
Affiliate or stockholder of such Borrower or such Subsidiary.
(E) PARTNERSHIPS OR JOINT VENTURES. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
(F) ADVERSE TRANSACTIONS. Enter into any transaction, or permit any
Subsidiary to enter into any transaction, which materially and adversely affects
or may materially and adversely affect the Collateral or any Borrower's ability
to repay the Obligations or permit or agree to any material extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto,
other than discounts, compromises, settlements and allowances in the ordinary
course of business, all of which shall be reflected in the Schedules of Accounts
submitted to Agent pursuant to SECTION 5.2 of this Agreement.
(G) GUARANTIES. Guarantee, assume, endorse or otherwise, in any way,
become directly or contingently liable with respect to the Indebtedness of any
Person (other than a Borrower) except by endorsement of instruments or items of
payment for deposit or collection.
(H) LIMITATION ON LIENS. Create or suffer to exist, or permit any
Subsidiary to create or suffer to exist, any Lien upon any of its Property,
income or profits, whether now owned or hereafter acquired, except: (i) Liens at
any time granted in favor of Agent or any Lender and other Liens in existence on
the Filing Date that were not created or suffered to exist in violation of the
Pre-Petition Loan Agreement; (ii) Liens for post-Petition taxes (excluding any
Lien imposed pursuant to any of the provisions of ERISA) not yet due or being
contested as permitted by SECTION 9.1(A) hereof, but only if in Agent's judgment
such Lien does not affect adversely Lenders' rights or the priority of Agent's
Lien, for the benefit of Lenders, in the Collateral; (iii) Liens securing the
claims or demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons for labor, materials, supplies or rentals incurred in the
ordinary course of Borrowers' business, but only if the payment thereof is not
at the time required or is being actively contested in good faith and by
appropriate proceedings (with adequate reserves maintained on Borrowers' books
to cover the amount of such payment) and only if such Liens are junior to the
Liens in favor of Agent, for the benefit of Lenders, on terms satisfactory to
Lenders; (iv) Liens resulting from deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed on appeal in a manner satisfactory to Lenders for the full
amount thereof, the validity and amount of the claims secured thereby are being
actively contested in good faith and by appropriate lawful proceedings and such
Liens do not, in the aggregate, materially detract, in the judgment of Agent,
from the value of the Property of such Borrower or materially impair the use
thereof in the operation of such Borrower's business; (vi) reservations,
exceptions, easements, rights of way, and other similar encumbrances affecting
real Property, provided that, in Agent's judgment, they do not in the aggregate
materially detract from the value of said Properties or materially interfere
with their use in the ordinary conduct of either Borrower's business; (vii)
Liens securing Indebtedness of a Subsidiary to a Borrower or another Subsidiary;
(viii) such other Liens as appear on EXHIBIT M attached hereto; (ix) Capital
Lease Obligations or purchase money Liens securing Indebtedness
incurred to finance Capital Expenditures permitted by SECTION 9.2(L); and (x)
such other Liens as Lenders may hereafter approve in writing.
(I) SUBORDINATED DEBT. Make, or permit any Subsidiary to make, any
payment of any part or all of any Borrower Subordinated Debt, or otherwise
repurchase, redeem or retire any instrument evidencing any such Borrower
Subordinated Debt prior to maturity; or enter into any agreement (oral or
written) which could in any way be construed to amend, modify, alter or
terminate any one or more instruments or agreements evidencing or relating to
any Borrower Subordinated Debt.
(J) DISTRIBUTIONS. Declare or make, or permit any Subsidiary to
declare or make any Distributions.
(K) SUBSIDIARIES. Hereafter create any Subsidiary or divest itself
of any material assets by transferring them to any Subsidiary to whose existence
Lenders have consented.
(L) CAPITAL EXPENDITURES. Make Capital Expenditures which, in the
aggregate, as to Brazos and its Subsidiaries, exceed $250,000 for calendar year
1999.
(M) BUSINESS LOCATIONS. Transfer its principal place of business or
chief executive office, or open new manufacturing plants, or transfer existing
manufacturing plants, or maintain warehouses or records with respect to Accounts
or Inventory, to or at any locations other than those at which the same are
presently kept or maintained, as set forth on EXHIBIT B hereto (which shall be
updated quarterly so long as no Default or Event of Default exists and, during
the existence of a Default or Event of Default, as frequently as shall be
requested by Lenders), except upon at least 30 days prior written notice to
Agent and at least 30 days after the delivery to Agent of financing statements,
if required by Agent, in form satisfactory to Agent to perfect or continue the
perfection of Agent's Lien, for the benefit of Lenders, and security interest
hereunder.
(N) [This Section is intentionally omitted.]
(O) DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of any
of its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of a Borrower's business for so long as no
Event of Default exists hereunder, (ii) dispositions expressly authorized by
this Agreement or otherwise consented to in writing by Agent and Lenders or
authorized by the Court after notice and hearing, and (iii) dispositions in
connection with which all of the Pre-Petition Debt and all of the Obligations
are paid in full.
(P) NAME OF BORROWER. Use any corporate name (other than its own) or
any fictitious name, tradestyle or "d/b/a" except for the names disclosed on
EXHIBIT D attached hereto, unless Borrowers shall have given Agent and each
Lender sixty days prior written notice of such new corporate name, fictitious
name, tradestyle or d/b/a.
(Q) BILL-AND-HOLD SALES, ETC. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
(R) MARGIN SECURITIES. Own, purchase or acquire (or enter into any
contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect 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 T, U or X or any other regulation of
the Federal Reserve Board then in effect.
(S) RESTRICTED INVESTMENT. Make or have, or permit any Subsidiary to
make or have, any Restricted Investment.
(T) STOCK OF SUBSIDIARY, ETC. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary of such Borrower, except in connection
with a transaction permitted under SECTION 9.2(A), or permit any Subsidiary to
issue any additional shares of its capital stock except director's qualifying
shares.
(U) TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than Parent and its
Subsidiaries.
(V) LEASES. Become a lessee under any new operating lease (other
than a lease under which any Borrower is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve consecutive months
under the new lease in question and all other operating leases entered into on
or after the Filing Date under which any Borrower is then lessee would exceed
$100,000.00. The term "RENTALS" means, as of the date of determination, all
payments which the lessee is required to make by the terms of any lease.
Borrowers agree that none of them shall, without the prior consent of Agent,
which consent will not be unreasonably withheld, become a lessee under any new
lease with a duration of longer than six months.
(W) COMPROMISE OF ACCOUNTS. Notwithstanding anything herein to the
contrary, compromise or settle, or extend the time of payment of, any Account
without Agent's prior written consent, unless such compromise, settlement or
extension involves an amount of less than $100,000.
(X) PAYMENT OF CLAIMS. Make any payment of principal or interest on
account of any claim against any Borrower that arose prior to the Filing Date,
except to the extent authorized by the Court after notice and a hearing.
(Y) RETURNS TO VENDORS. Enter into any agreement, under Section
546(g) of the Bankruptcy Code, to return any Inventory to any creditor of any
Borrower for application against or credit to the claim of such creditor arising
on or before the Filing Date, unless, after full performance of any such
agreement, no Default or Event of Default would occur as a result thereof
and the total amount of the Loans outstanding at the time in question do not
exceed the Borrowing Base after giving effect to such agreement.
(Z) FILINGS OF MOTIONS AND APPLICATIONS. No Borrower shall apply to
the Court for authority to take any action that is prohibited by the terms of
any of the DIP Financing Documents, refrain from taking any action that is
required to be taken by the terms of any of the DIP Financing Documents or
permit any Indebtedness or claim to be PARI PASSU with or senior to any of the
Obligations.
(AA) MODIFICATIONS TO DIP ORDERS. No Borrower shall consent to any
amendment, supplement or any other modification of any of the terms of the
Interim Financing Order or Permanent Financing Order.
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
DIP Financing 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 the establishment of the DIP Facility and the funding by Lenders of
any Loans under SECTION 2 of this Agreement shall be subject to the satisfaction
of the conditions precedent set forth below, all to be in form and substance
satisfactory to Agent and its counsel (unless Agent and Lenders elect, in their
sole and absolute discretion, to waive any one or more of such conditions):
10.1. DOCUMENTATION. Agent shall have received the following documents and
materials, each to be in form and substance satisfactory to Agent and Lenders
and their respective counsel:
(A) This Agreement, duly executed by Borrowers;
(B) (i) Post-Petition Revolving Credit Note in favor of Fleet, duly
executed by Borrowers, in the form of EXHIBIT A-1 attached hereto, and (ii)
Post-Petition Revolving Credit Note in favor of Boston, duly executed by
Borrowers, in the form of EXHIBIT A-2 attached hereto;
(C) The Guaranty Agreements, respectively executed by each Borrower;
(D) the Stock Pledge Agreement duly executed by Brazos, together
with the original stock certificates evidencing all the capital stock in Morning
Sun owned by Brazos, together with stock powers duly executed in blank by
Brazos;
(E) All of the other DIP Financing Documents, duly executed by the
relevant parties thereto; and
(F) such other documents, instruments and agreements as Lenders or
their legal counsel shall request.
10.2. OTHER CONDITIONS. The following conditions have been and shall
continue to be satisfied:
(A) No Default or Event of Default shall have occurred and be
continuing or shall result from the funding of any requested Loan unless such
Default or Event of Default shall have been specifically waived in writing by
Lenders;
(B) The representations and warranties contained herein and the
other DIP Financing Documents shall be true and correct as of the date thereof,
as if made on the date hereof;
(C) Borrowers shall have paid to Agent, for its account and the
account of Lenders, in immediately available funds, the closing fee set forth in
SECTION 3.1(H), which closing fee is non-refundable and shall be deemed fully
earned as of the date of execution of this Agreement;
(D) The Interim Financing Order shall have been entered, shall be in
full force and effect and shall not have been vacated, reversed, modified or
stayed in any respect (and, if such Order is the subject of any pending appeal,
no performance of any obligation of any party hereto shall have been stayed
pending such appeal);
(E) All fees and expenses payable by Borrowers hereunder shall have
been paid in full;
(F) Not later than thirty (30) days after the date hereof, the
Permanent Financing Order shall have been entered; and
(G) All corporate proceedings taken in connection with the
transactions contemplated by this Agreement and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lenders and their
legal counsel.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) PAYMENT OF NOTES. Borrowers shall fail to pay any installment of
principal, interest or premium, if any, owing on any Note on the due date of
such installment.
(B) PAYMENT OF OTHER OBLIGATIONS. Borrowers shall fail to pay any of
the Obligations that are not evidenced by the Notes on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise).
(C) MISREPRESENTATIONS. Any warranty, representation, or other
statement made or furnished to Agent and/or Lenders by or on behalf of any
Borrower or Guarantor 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.
(D) BREACH OF COVENANTS. Any Borrower shall fail or neglect to
perform, keep or observe (i) any covenant contained in SECTIONS 4.3, 4.4, 4.5,
4.6, 5.4(B), 9.1(F), 9.1(K), 9.1(P), 9.1(T), 9.1(U), 9.1(V), 9.1(W), 9.1(Y) or
9.2 (other than 9.2(H)) of this Agreement, or (ii) any covenant contained in
SECTIONS 5.2 or 5.3 and the breach of such covenant is not cured to Lenders'
satisfaction within 2 days after the sooner to occur of any Borrower's receipt
of notice of such breach from Agent or the date on which such failure or neglect
becomes known to any executive officer of any Borrower or (iii) any covenant
contained in SECTIONS 9.1(A), 9.1(O), 9.1(J), or 9.2(H) and the breach of such
covenant is not cured to Lenders' satisfaction within 5 days after the sooner to
occur of any Borrower's receipt of notice of such breach from Agent or the date
on which such failure or neglect becomes known to any executive officer of any
Borrower, or (iv) any other covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in this SECTION 11.1) and
the breach of such other covenant is not cured to Lenders' satisfaction within
10 days after the sooner to occur of any Borrower's receipt of notice of such
breach from Agent or the date on which such failure or neglect becomes known to
any executive officer of any Borrower.
(E) DEFAULT UNDER OTHER DIP FINANCING DOCUMENTS. Any event of
default shall occur under, or any Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the other DIP Financing Documents and such default shall continue beyond any
applicable period of grace.
(F) OTHER DEFAULTS. (i) There shall occur any default or event of
default on the part of any Borrower (including specifically, but without
limitation, due to nonpayment) under any agreement, document or instrument to
which such Borrower is a party or by which such Borrower or any of its
respective Property is bound, creating or relating to any post-Petition
Indebtedness (other than the Obligations) in excess of $100,000 if the payment
or maturity of such Indebtedness is accelerated in consequence of such event of
default or demand for payment of such Indebtedness is made.
(G) UNINSURED LOSSES; UNAUTHORIZED DISPOSITIONS. Any material loss,
theft, damage or destruction not fully covered by insurance (as required by this
Agreement and subject to reasonable deductibles), or sale, lease or encumbrance
of any of the Collateral or the making of any levy, seizure, or attachment
thereof or thereon except in all cases as may be specifically permitted by other
provisions of this Agreement.
(H) FILING OF REORGANIZATION PLAN AND RELATED DISCLOSURE STATEMENT.
Borrowers shall fail to file their Reorganization Plan and related disclosure
statement by July 31, 1999.
(I) CERTAIN OTHER BANKRUPTCY EVENTS. Any Borrower shall fail to
comply with any of the provisions of any of the DIP Orders; a trustee shall be
appointed in either or both of the
Chapter 11 Cases; an examiner shall be appointed in either or both of the
Chapter 11 Cases with enlarged powers (powers beyond those set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code; either or both of the Chapter 11 Cases shall be dismissed or
converted to a case under Chapter 7; Borrowers shall seek confirmation by the
Court of any Reorganization Plan other than a Reorganization Plan proposed or
accepted in writing by Lenders or any Reorganization Plan that is not accepted
in writing by Lenders shall be confirmed by order of the Court, whether or not
confirmation thereof is sought by Borrowers, unless such Reorganization Plan (i)
provides for the payment in full in cash of all the Obligations prior to the
Maturity Date, (ii) does not adversely affect the rights of Agent or Lenders
under the DIP Financing Documents, and (iii) does not contain any claims by
Borrowers against Agent or Lenders; there shall be filed by any Borrower any
motion to sell all or a substantial part of the assets of such Borrower's Estate
without Lenders' prior written consent; any Borrower shall file any motion to
alter, amend, vacate, supplement, modify, or reconsider, in any respect, any of
the DIP Order or, without Lenders' prior written consent, any of the DIP Orders
are amended, vacated, stayed, reversed or otherwise modified; the Court shall
enter an order granting to any Person other than Agent, for the benefit of
Lenders, relief from the automatic stay to foreclose upon a Lien with respect to
any assets of a Borrower other than for the holder of the Embroidery IRB as to
the property securing the Embroidery IRB and other than a circumstance where the
value of the asset is less than $500,000; or any Borrower or any other Person
having standing or authority to do so shall challenge the validity, extent,
priority or enforceability of any of the Pre-Petition Loan Documents or
Pre-Petition Debt.
(J) ERISA. A Reportable Event shall occur which Lenders shall
determine in good faith constitutes grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed, or
if any Borrower is in "default" (as defined in SECTION 4219(C)(5) of ERISA) with
respect to payments to a Multi-Employer Plan resulting from Borrower's complete
or partial withdrawal from such Plan.
(K) SUBORDINATED DEBT. Any Borrower shall make any payment on
account of Borrower Subordinated Debt other than specifically permitted by the
provisions of the subordination agreement relating to such Borrower's
Subordinated Debt.
(L) CHANGE IN CONTROL.A Change in Control shall occur.
(M) REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. Guarantor
shall revoke or attempt to revoke the Guaranty Agreement to which it is a party
or shall repudiate its liability thereunder or shall be in default under the
terms thereof.
(N) FAILURE OF DIP FINANCING DOCUMENTS. Any covenant, agreement or
obligation of any Borrower contained in or evidenced by any of the DIP Financing
Documents shall cease to be enforceable or shall be determined to be
unenforceable in accordance with its terms; any Borrower shall deny or disaffirm
its obligations under any of the DIP Financing Documents or Liens granted in
connection therewith; or any Liens granted in any of the Collateral to secure
Obligations hereunder shall be determined to be voidable, invalid or
unperfected, or subordinated or not given the priority contemplated by this
Agreement.
(O) SUBSTANTIVE CONSOLIDATION WITH A NON-BORROWER. Any Borrower is
substantively consolidated with any Person other than another Borrower in any
proceeding under the Bankruptcy Code.
11.2. ACCELERATION OF THE OBLIGATIONS; TERMINATION OF DIP FACILITY.
Without in any way limiting the right of Agent and/or Lenders to demand payment
of any portion of the Obligations payable on demand in accordance with SECTION
3.3 hereof, upon or at any time after the occurrence of an Event of Default as
above provided, (i) all or any portion of the Obligations due or to become due
from Borrower to Agent and/or any Lender (whether under this Agreement, or any
of the other DIP Financing Documents or otherwise) shall, at Lenders' option,
become at once due and payable without presentment, demand, protest, notice of
dishonor, notice of default, notice of intent to accelerate, notice of
acceleration, or any other notice whatsoever, and Borrower shall forthwith pay
to Agent, for the account of Lenders, in addition to any and all sums and
charges due, the entire principal of and interest accrued on the Obligations,
and/or (ii) Lenders may, at their option, terminate the DIP Facility.
11.3. REMEDIES. Upon and after the occurrence of an Event of Default (but
subject at all times to any limitation in the DIP Order), Agent, with the prior
consent of Lenders and on behalf of Lenders, shall have and may exercise from
time to time the following rights and remedies, upon giving 5 Business Days
notice to Borrowers, the U.S. Trustee and any official statutory committee
created in connection with the administration of the relevant Estate, of the
lifting the automatic stay pursuant to Section 362 of the Bankruptcy Code,
whereupon after such notice has been given the automatic stay pursuant to
Section 362 of the Bankruptcy Code shall be automatically lifted:
(A) All rights of set off;
(B) The right to collect Accounts, Chattel Paper, Instruments and
General Intangibles and all other rights of Borrowers to the payment of money
from any Person obligated therefor; and all of the other 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 or any Lender may be entitled, all of
which rights and remedies shall be cumulative, and none of which shall be
exclusive, and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other DIP Financing Documents.
(C) The right to take immediate possession of the Collateral, and
(i) to require Borrowers to assemble the Collateral, at Borrowers' expense, and
make it available to Agent at a place designated by Agent which is reasonably
convenient to both parties, and (ii) to enter any of the premises of Borrowers
or wherever any of the Collateral shall be located, and to keep and store the
same on said premises until sold (and if said premises be the Property of a
Borrower, such Borrower agrees not to charge Lender for storage thereof).
(D) The right to sell or otherwise dispose of all or any Inventory
or Equipment 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 discretion, may deem advisable. Borrowers agree that ten days written notice
to Borrowers of any public or private sale or other disposition of such
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Agent shall have the right to
conduct such sales on Borrowers' premises, 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 such
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Agent or any Lender may purchase all or any part of such 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.
(E) The right to foreclose or otherwise realize upon any real
Property forming a part of the Collateral in accordance with the Mortgages and
applicable law.
(F) Agent, for the benefit of Lenders, is hereby granted a license
and a right to use, without charge, (i) each Borrower's Equipment, and all other
Property of each Borrower deemed useful by Agent, in finishing out and preparing
for sale and selling any Collateral and (ii) each Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
licenses 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 in collecting any of the Accounts, and each Borrower's rights under all
licenses and all franchise agreements shall inure to Agent's and Lenders'
benefit. Such rights and licenses hereunder of Agent shall continue until the
earlier to occur of (x) disposition of all the Collateral and collection of all
the Accounts or (y) payment in full of all Obligations and termination of all
obligations under this Agreement of Agent and Lenders. As to licenses held by
each Borrower for the manufacture of trademarked goods, Agent and Lenders
acknowledge that the foregoing sentences shall not entitle Agent or Lender to
manufacture or finish-out inventory in violation of the provisions of such
licenses. In addition to and not in limitation of the foregoing provisions, each
Borrower agrees that if it can not legally grant to Agent, for the benefit of
Lenders, any of the licenses or rights described above, each Borrower will use
its best efforts to obtain for Agent and Lenders substantially the same rights,
benefits and protections Agent and Lenders otherwise would have received from
the grant of such right or license.
(G) The proceeds realized from the sale of any Collateral may be
applied, after allowing two Business Days for collection, first to the costs,
expenses and reasonable attorneys' fees incurred by Agent in collecting the
Obligations, in enforcing the rights of Agent and Lenders under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivery any of the Collateral;
secondly, to interest due upon any of the Obligations; and thirdly, to the
principal of the Obligations and fourthly, at the option of Agent, to the
establishment of a cash collateral fund to be held as a reserve to fund future
drawings made under Letters of Credit issued by Agent or Bank and future LC
Payments. If any deficiency shall arise, Borrowers shall remain liable to Agent
and Lenders therefor.
11.4. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrowers contained in this Agreement and the other DIP Financing Documents, or
in any document referred to herein or contained in any agreement supplementary
hereto or in any schedule given to Agent and/or any Lender or contained in any
other agreement between Agent or any Lender and any 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 rights, remedies, powers and
privileges of Agent and Lenders hereunder and under the DIP Financing Documents
shall be in addition to and cumulative with, and not in lieu of, all of the
rights, remedies, powers and privileges of Agent and Lenders under the
Pre-Petition Loan Agreement and all instruments, agreements and documents
executed in connection therewith or referred to therein. The failure or delay of
Agent or any Lender to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such Liens, rights,
powers and remedies, but all such 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 Borrowers to Agent and/or any Lender shall have
been fully satisfied, and all Liens, rights, powers, and remedies herein
provided for are cumulative and none are exclusive.
SECTION 12. THE AGENT
12.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under this Agreement and the other DIP Financing Documents as are
delegated to Agent by the terms thereof, together with such powers as are
reasonably incidental thereto. With respect to its DIP Facility Limit, the
Advances made by it, and the Note issued to it, Agent shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include the Agent, in its capacity as a Lender.
The Agent and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
any Borrower and its Affiliates, and any Person which may do business with such
Borrower or its Affiliates, all as if Agent were not Agent hereunder and without
any duty to account therefor to Lenders.
12.2. NOTE HOLDERS. Agent may treat the payee of any Note as the holder
thereof until written notice of transfer shall have been filed with it signed by
such payee and in form satisfactory to Agent.
12.3. CONSULTATION WITH COUNSEL. Lenders agree that Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
12.4. DOCUMENTS. Agent shall not be under a duty to examine or pass upon
the validity, effectiveness, enforceability, genuineness or value of any of the
DIP Financing Documents or any other instrument or document furnished pursuant
thereto or in connection therewith, and Agent shall be
entitled to assume that the same are valid, effective, enforceable and genuine
and what they purport to be.
12.5. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving written notice thereof to Lenders and Borrowers and the Agent may
be removed at any time with or without cause by any number of Lenders whose
aggregate Revolving Commitment Percentages total at least 51%. Upon any such
resignation or removal, Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by Lenders and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation or Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon
the acceptance by any Person of any appointment as successor Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this SECTION 12 shall continue in effect for its benefit with respect to any
actions taken or omitted to be taken by it while it was acting as Agent.
12.6. RESPONSIBILITY OF AGENT. It is expressly understood and agreed that
the obligations of Agent under the DIP Financing Documents are only those
expressly set forth in the DIP Financing Documents and that Agent shall be
entitled to assume that no Default or Event of Default has occurred and is
continuing, unless Agent has actual knowledge of such fact or has received
notice from Borrower or a Lender that a Default or an Event of Default has
occurred and is continuing and specifying the nature thereof. Neither Agent nor
any of its directors, officers or employees shall be liable for any action taken
or omitted to be taken by it under or in connection with the DIP Financing
Documents, except for its own gross negligence or willful misconduct. Agent
shall incur no liability under or in respect of any of the DIP Financing
Documents by acting upon any notice, consent, certificate, warranty or other
paper or instrument believed by it to be genuine or authentic or to be signed by
the proper party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment or discretion, or
which may seem to it to be necessary or desirable in the premises.
Agent shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any Lender
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any document referred to or
provided for herein or for any failure by any Borrower to perform any of its
obligations hereunder. Agent may employ agents and attorneys-in-fact and shall
not be answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
The relationship between Agent and each of the Lenders is only that of
agent and principal and has no fiduciary aspects. Nothing in this Agreement or
elsewhere contained shall be construed to impose on Agent any duties or
responsibilities other than those for which express provision is herein made. In
performing its duties and functions hereunder, Agent does not assume and shall
not be deemed
to have assumed, and hereby expressly disclaims, any obligation or
responsibility toward or any relationship of agency or trust with or for any
Borrower. As to any matters not expressly provided for by this Agreement, Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of Lenders and such
instructions shall be binding upon all Lenders; PROVIDED, HOWEVER, that Agent
shall not be required to take any action which exposes Agent to personal
liability or which is contrary to this Agreement or applicable law.
12.7. NOTICES OF EVENT OF DEFAULT. In the event that Agent shall have
acquired actual knowledge of any Event of Default or of an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default, Agent shall promptly give notice thereof to the Lenders.
12.8. REQUESTS FOR INFORMATION. In the event that Agent shall have
received any information, notices, or documents of any kind which are not
required to be provided to Lenders pursuant to the terms of this Agreement,
Agent shall, upon any Lender's request, use its best efforts to provide copies
of the same to such Lender. In addition, contemporaneously with the giving of
the settlement notice pursuant to SECTION 2.3(C) hereof, Agent shall deliver to
each Lender an analysis of Borrowers' Borrowing Base and availability as of the
preceding Business Day, detailed to show Collateral categories and ineligibles.
12.9. INDEPENDENT INVESTIGATION. Each of the Lenders severally represents
and warrants to Agent that it has made its own independent investigation and
assessment of the financial condition and affairs of the Borrowers in connection
with the making and continuation of its participation in the Loans hereunder and
has not relied exclusively on any information provided to such Lender by Agent
in connection herewith, and each Lender represents, warrants and undertakes to
Agent that it shall continue to make its own independent appraisal of the
creditworthiness of Borrowers while the Loans are outstanding or its DIP
Facility Limit hereunder is in force.
12.10.INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers), ratably according to their respective Revolving
Commitment Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of the DIP
Financing Documents or any action taken or omitted by Agent under the DIP
Financing Documents, provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross negligence
or willful misconduct.
12.11.BENEFIT OF SECTION 12. The agreements contained in SECTION 12 hereof
are solely for the benefit of Agent and Lenders, and are not for the benefit of,
or to be relied upon by, Borrowers, or any third party.
SECTION 13. MISCELLANEOUS
13.1. POWER OF ATTORNEY. Each Borrower hereby irrevocably designates,
makes, constitutes and appoints Agent (and all Persons designated by Agent) as
such Borrower's true and lawful attorney (and agent-in-fact) and Agent, or
Agent's agent, may, without notice to such Borrower and in either such
Borrower's or Agent's name, but at the cost and expense of Borrowers:
(A) At such time or times hereafter as Agent or said agent may
determine, endorse such 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 any Lender or under
Agent's or any Lender's control; and
(B) At such time or times upon or after the occurrence of an Event
of Default as Agent or its agent may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of such Borrower's rights
and remedies with respect to the collection of the Accounts; (ii) settle,
adjust, compromise, discharge or release any of the Accounts or other Collateral
or any legal proceedings brought to collect any of the Accounts or other
Collateral; (iii) sell or assign any of the Accounts and other Collateral upon
such terms, for such amounts and at such time or times as Agent deems advisable;
(iv) take control, in any manner, of any item of payment or proceeds relating to
any Collateral; (v) prepare, file and sign such 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 such Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of such Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lenders on
account of the Obligations; (viii) endorse the name of such Borrower upon any
chattel paper, document, instrument, invoice, freight bill, bill of lading or
similar document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use such Borrower's stationery and sign the name of such
Borrower to verifications of the 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 any other Collateral and to which such Borrower has access; (xi)
make and adjust claims under policies of insurance; and (xii) do all other acts
and things necessary, in Agent's determination, to fulfill such Borrower's
obligations under this Agreement.
13.2. INDEMNITY. EACH BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND
SHALL DEFEND AGENT, LENDERS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS,
COUNSEL AND EMPLOYEES ("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL
LOSSES, LIABILITIES, DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS
EVER SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE
OF SUCH INDEMNIFIED PERSON, BUT NOT INCLUDING ANY LOSSES CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON, AND EACH BORROWER
SHALL REIMBURSE THE AGENT, LENDERS AND EACH OTHER INDEMNIFIED PERSON FOR ANY
EXPENSES (INCLUDING IN CONNECTION WITH THE INVESTIGATION OF, PREPARATION FOR OR
DEFENSE OF ANY ACTUAL OR THREATENED CLAIM, ACTION OR PROCEEDING ARISING
THEREFROM, INCLUDING ANY SUCH COSTS OF RESPONDING TO DISCOVERY REQUESTS OR
SUBPOENAS, REGARDLESS OF WHETHER AGENT, SUCH LENDER OR SUCH OTHER INDEMNIFIED
PERSON IS A PARTY THERETO). WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS ASSERTED AGAINST AGENT, ANY LENDER OR
ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER ANY ENVIRONMENTAL LAWS OR
SIMILAR LAWS BY REASON OF BORROWERS' OR ANY OTHER PERSON'S FAILURE TO COMPLY
WITH LAWS APPLICABLE TO SOLID OR HAZARDOUS WASTE MATERIALS OR OTHER TOXIC
SUBSTANCES. EACH INDEMNIFIED PERSON MAY SELECT ITS OWN COUNSEL WITH RESPECT TO
ANY LOSSES, IN ADDITION TO BORROWERS' COUNSEL, AND SHALL BE INDEMNIFIED THEREFOR
HEREUNDER. NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT, THE
OBLIGATION OF EACH BORROWER UNDER THIS SECTION 13.2 SHALL SURVIVE THE PAYMENT IN
FULL OF THE OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
13.3. MODIFICATION OF AGREEMENT. All modifications, consents, amendments
or waivers of any provision of any DIP Financing Document, or consent to any
departure by any Borrower therefrom, shall be effective only if the same shall
be in writing and concurred in by Lenders, and then shall be effective only in
the specific instance and for the purpose for which given.
13.4. REIMBURSEMENT OF EXPENSES. Without limiting Borrowers' obligations
for payment of expenses as provided elsewhere in this Agreement or in any other
DIP Financing Document, if, at any time or times prior or subsequent to the date
hereof, regardless of whether or not an Event of Default then exists or any of
the transactions contemplated hereunder are concluded, Agent or any Lender
employs counsel for advice or other representation, or incurs reasonable legal
expenses or other reasonable costs or out-of-pocket expenses in connection with:
(A) the negotiation and preparation of this Agreement or any of the other DIP
Financing Documents or any amendment of or modification of this Agreement or any
of the other DIP Financing Documents; or (B) the administration of this
Agreement or any of the other DIP Financing Documents and the transactions
contemplated hereby and thereby; (C) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Agent, any Lender, any Borrower or
any other Person) in any way relating to the Collateral, this Agreement or any
of the other DIP Financing Documents, or any Borrower's affairs; (D) any attempt
to enforce any rights of Agent or any Lender against any Borrower or any other
Person which may be obligated to Agent or any Lender by virtue of this Agreement
or any of the other DIP Financing Documents, including, without limitation, the
Account Debtors; or (E) the exercise or enforcement of any rights, remedies or
privileges of Agent or any Lender under the DIP Financing Documents or
applicable law; (F) the
analysis of information received in connection with any of the DIP Financing
Documents; (G) the audit of any Collateral or any Borrower's books and records;
(H) the granting of any consents or waivers requested in connection with the DIP
Financing Documents; (I) the collection of any Obligation; or (J) any attempt to
inspect, verify, protect, preserve, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then, in any such event,
the reasonable attorneys' fees arising from such services and all expenses,
costs, charges and other fees of such counsel or of Agent or any Lender or
relating to any of the events or actions described in this SECTION 13.4 shall be
payable, on demand and upon presentation of an itemized statement, by Borrowers
to Agent or such Lender, as the case may be, and shall be additional Obligations
hereunder secured by the Collateral. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include appraisal fees;
audit fees; accountants' fees, costs and expenses; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial overtime charges; consulting fees, costs and expenses; and expenses
for travel, lodging and food paid or incurred in connection with the performance
of such legal or other services, and Agent or such Lender shall not be obligated
to give Borrowers any notice prior to incurring any such expenses. Additionally,
if any taxes (excluding taxes imposed upon or measured by the net income of
Agent or any Lender) shall be payable on account of the execution or delivery of
this Agreement, or the execution, delivery, issuance or recording of any of the
other DIP Financing Documents, or the creation of any of the Obligations
hereunder, by reason of any existing or hereafter enacted federal or state
statute, Borrowers will pay all such taxes, including, but not limited to, any
interest and penalties thereon, and will indemnify and hold Agent or such Lender
harmless from and against liability in connection therewith. Notwithstanding
anything to the contrary contained in this Agreement, any payment to Agent and
Lenders as reimbursement for attorney's fees and other legal expenses shall (to
the extent required by applicable law or Court procedure) be subject to prior
approval of the Court as to the reasonableness of the amount of such fees and
expenses.
13.5. INDULGENCES NOT WAIVERS. Agent's and/or Lenders' failure, at any
time or times hereafter, to require strict performance by Borrowers of any
provision of this Agreement shall not waive, affect or diminish any right of
Agent or any Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Agent or any Lender of an Event of
Default under this Agreement or any of the other DIP Financing Documents shall
not suspend, waive or affect any other Event of Default under this Agreement or
any of the other DIP Financing Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations contained in
this Agreement or any of the other DIP Financing Documents and no Event of
Default under this Agreement or any of the other DIP Financing Documents shall
be deemed to have been suspended or waived by Agent and/or Lenders, 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 Borrowers.
13.6. 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.
13.7. SUCCESSORS AND ASSIGNS; PARTICIPATIONS BY LENDER. This Agreement and
the other DIP Financing Documents shall be binding upon and inure to the benefit
of the successors and assigns of Borrowers, Agent and Lenders; PROVIDED,
HOWEVER, that Borrowers may not sell, assign or transfer any interest in this
Agreement or any other DIP Financing Document, or any portion thereof,
including, without limitation, Borrowers' rights, title, interests, remedies,
powers and duties hereunder or thereunder. Any purported assignment by any
Borrower in violation of this SECTION 13.7 shall be void, without Lenders' prior
written consent. Borrowers hereby consent to Agent's and/or any Lender's
participation, sale, assignment, transfer or of the disposition, at any time or
times hereafter, of this Agreement, any other DIP Financing Document, or any
other Obligations, or of any portion hereof or thereof, including, without
limitation, Agent's and Lenders' rights, title, interests, remedies, powers, and
duties hereunder or thereunder. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would have if it were the original "Agent" or "Lender" (as the
case may be) hereunder, Agent or Lender (as the case may be) shall be relieved
of all obligations hereunder upon any such assignment. In the case of a
participation, (i) each participating lender shall be entitled to receive all
information received by Agent regarding the creditworthiness of Borrowers,
including, without limitation, information required to be disclosed to a
participant pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by
the Comptroller of the Currency (whether such participating lender is subject to
the circular or not), (ii) Borrowers shall execute new Notes in favor of each
Lender and (iii) each Lender's pro rata share of the Loans shall be adjusted
accordingly.
13.8. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the other
DIP Financing Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in SECTION 3.3 of this Agreement and
except as otherwise provided in any of the other DIP Financing 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 DIP Financing Documents,
the provision contained in this Agreement shall govern and control.
13.9. 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.
13.10. NOTICE. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto shall be in writing and shall be sent by
hand delivery or by overnight courier or by facsimile transmission and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered when hand delivered or, in the case of delivery to an
overnight courier, upon receipt by the receiving party, or, in the case of
facsimile transmission notice, when sent, answerback received, addressed as
follows:
(A) If to Agent: Fleet Capital Corporation
2711 North Haskell, Suite 2100
Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile: (214) 828-6530
with a courtesy
copy to: Patton Boggs LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Clifton R. Jessup, Esq.
Facsimile: (214) 871-2688
(B) If to Borrowers Brazos Sportswear, L.L.C.
Morning Sun, Inc.
4101 Founders Boulevard
Batavia, Ohio 45103-2553
Attention: President
Facsimile: (513) 752-8508
with a courtesy
copy to: Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attention: William W. Wiggins, Jr., Esq.
Facsimile: (713) 228-4935
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
Attention: Mark S. Chehi, Esq.
Facsimile: (302) 652-3001
(C) If to Lenders: Fleet Capital Corporation 2711
North Haskell, Suite 2100 Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile: (214) 828-6530
BankBoston, N.A.
115 Perimeter Center Place, N.E., Suite 500
Atlanta, Georgia 30346
Attention: Norris C. Locke
Facsimile: (770) 393-4166
with a courtesy
copy to: Patton Boggs LLP
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Clifton R. Jessup, Jr., Esq.
Facsimile: (214) 871-2688
BankBoston, N.A.
100 Federal Street
Mailstop 01-26-01
Boston, Massachusetts 02110
Attention: Mark I. Fogel, Esq.
Facsimile: (617) 434-7980
or to such other address as each party may designate for itself by like notice
given in accordance with this SECTION 13.10; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Agent or any Lender pursuant to SECTIONS 2.3 or 3.3
shall not be effective until received by Agent or such Lender. Any written
notice 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.
13.11. AGENT'S OR LENDERS' CONSENT. Whenever Agent's or Lenders' consent
is required to be obtained under this Agreement, any of the other DIP Financing
Documents as a condition to any action, inaction, condition or event, Agent or
Lenders shall be authorized to give or withhold such consent in its sole and
absolute discretion (unless otherwise specifically provided herein) and to
condition its consent upon the giving of additional collateral security for the
Obligations, the payment of money or any other matter.
13.12. DEMAND OBLIGATIONS. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Agent's and/or Lenders' requiring payment of such Obligations.
13.13. TIME OF ESSENCE. Time is of the essence of the DIP Financing
Documents.
13.14. ENTIRE AGREEMENT. This Agreement and the other DIP Financing
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.
13.15. 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, drafted or
dictated such provision.
13.16. NONAPPLICABILITY OF CHAPTER 346 OF TEXAS FINANCE CODE. Borrower and
Lenders hereby agree that, except for SECTION 346.004 thereof, the provisions of
Chapter 346 of the Texas Finance Code (regulating certain revolving credit loans
and revolving tri-party accounts) shall not apply to this Agreement or any of
the other DIP Financing Documents.
13.17. NO PRESERVATION OR MARSHALING. Borrowers agree that neither Agent
nor any Lender shall have any obligation to preserve rights to the Collateral
against prior parties or to marshal any Collateral for the benefit of any
Person.
13.18. GOVERNING LAW. THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND
DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN DALLAS, TEXAS. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S LIEN,
FOR THE BENEFIT OF LENDERS, UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S
OR ANY LENDER'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 TEXAS.
13.19. WAIVERS BY BORROWERS. EACH BORROWER WAIVES (A) THE RIGHT TO TRIAL
BY JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
DIP FINANCING DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (B) PRESENTMENT,
DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT,
INTENT TO ACCELERATE, ACCELERATION, 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
AND LENDERS ON WHICH SUCH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES
AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD; (C) SUBJECT TO
THE FIVE (5) BUSINESS DAYS
NOTICE PROVIDED FOR IN SECTION 11.3 HEREOF, 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 OR ANY LENDER TO EXERCISE ANY OF AGENT'S OR ANY
LENDER'S REMEDIES; (D) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; (E) ANY RIGHT ANY BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE
OBLIGATIONS TO REQUIRE AGENT AND/OR ANY LENDER TO TERMINATE ITS SECURITY
INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF SUCH BORROWER UNTIL
TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS AND THE EXECUTION BY
SUCH BORROWER, AND BY ANY PERSON WHOSE LOANS TO SUCH BORROWER IS USED IN WHOLE
OR IN PART TO SATISFY THE OBLIGATIONS, OF AN AGREEMENT INDEMNIFYING AGENT AND
LENDERS FROM ANY LOSS OR DAMAGE AGENT AND EACH LENDER MAY INCUR AS THE RESULT OF
DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY AGENT OR ANY LENDER FROM
SUCH BORROWER OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS; AND (F)
NOTICE OF ACCEPTANCE HEREOF. EACH 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 ARE RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH 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.
13.20. RELEASE. EACH BORROWER HEREBY AGREES AND ACKNOWLEDGES THAT (A) IT
HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY
KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY
PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF
OR DAMAGES OF ANY KIND OR NATURE FROM AGENT OR ANY LENDER, OR (B) IF IT HAS ANY
SUCH DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND, IN
CONSIDERATION OF AGENT'S AND LENDERS' EXECUTION AND DELIVERY OF THIS AGREEMENT
AND THE LOANS MADE IN CONNECTION HEREWITH, EACH BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND EACH LENDER, EACH OF THEIR
RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS,
DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES
WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR
UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING
IN WHOLE OR IN PART ON
OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH SUCH BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST AGENT, ANY LENDER, EACH OF THEIR RESPECTIVE AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST
IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND
REMEDIES UNDER THIS AGREEMENT OR THE OTHER DIP FINANCING DOCUMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT. THE PARTIES HERETO AGREE AND
ACKNOWLEDGE THAT THE ABOVE PROVISIONS OF THIS SECTION 13.20 ARE AGREEMENTS OF
THE BORROWERS AND DO NOT LIMIT THE RIGHTS OF THIRD PARTIES IN THE CHAPTER 11
CASES.
13.21. WAIVER OF CONSUMER RIGHTS. EACH BORROWER HEREBY WAIVES ITS RIGHTS
UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET
SEQ., BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF SUCH BORROWER'S OWN
SELECTION, EACH BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. EACH BORROWER
EXPRESSLY WARRANTS AND REPRESENTS THAT SUCH BORROWER (A) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO AGENT AND/OR LENDERS,
AND (B) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH BORROWER HAS READ AND UNDERSTANDS SECTION 13.21: ______(INITIALS)
13.22. ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER DIP
FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE
SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement has been duly executed and effective as
of the day and year specified at the beginning hereof.
"BORROWERS"
BRAZOS SPORTSWEAR, L.L.C.
By: /S/ F. CLAYTON CHAMBERS
F. Clayton Chambers
Vice President
MORNING SUN, INC.
By: /S/ F. CLAYTON CHAMBERS
F. Clayton Chambers
Vice President
BRAZOS EMBROIDERY, INC.
By: /S/ F. CLAYTON CHAMBERS
F. Clayton Chambers
Vice President
"AGENT"
FLEET CAPITAL CORPORATION
as Agent
By: /S/
Name:
Title:
"LENDERS"
FLEET CAPITAL CORPORATION,
in its individual capacity
By: /S/
Name:
Title:
BANKBOSTON, N.A.
By: /S/
Name:
Title: