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CREDIT AGREEMENT
Dated as of June 5, 1995 and as
Amended and Restated as of November 13, 1998
Among
DONNKENNY APPAREL, INC.,
BELDOCH INDUSTRIES CORPORATION,
MEGAKNITS, INC.
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
AS ADMINISTRATIVE AGENT
and
THE CHASE MANHATTAN BANK, AS AGENT
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TABLE OF CONTENTS
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I. DEFINITIONS..............................................................................................2
SECTION 1.01 Certain Defined Terms.................................................2
SECTION 1.02 Accounting Terms.....................................................16
II. THE LOANS...............................................................................................17
SECTION 2.01 Term Loan Commitments and Revolving Credit Commitments...............17
SECTION 2.02 Loans 18
SECTION 2.03 Notice of Loans......................................................18
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SECTION 2.04 Notes; Repayment of Loans............................................18
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SECTION 2.05 Interest on Loans....................................................20
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SECTION 2.06 Fees 21
SECTION 2.07 Termination and Reduction of Revolving Credit Commitments and Term
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Loan Commitments............................................21
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SECTION 2.08 Interest Upon Events of Default......................................22
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SECTION 2.09 Prepayment of Loans..................................................22
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SECTION 2.10 Reserve Requirements; Change in Circumstances........................25
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SECTION 2.11 Intentionally Omitted................................................27
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SECTION 2.12 Indemnity............................................................27
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SECTION 2.13 Pro Rata Treatment; Funding and Settlement Procedures................27
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SECTION 2.14 Sharing of Setoffs...................................................30
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SECTION 2.15 Taxes 31
SECTION 2.16 Payments and Computations............................................33
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SECTION 2.17 Letter of Credit Guaranty............................................34
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SECTION 2.18 Participations.......................................................37
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SECTION 2.19 Request for Issuance.................................................39
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SECTION 2.20 Letter of Credit Fees................................................39
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III. COLLATERAL SECURITY.....................................................................................39
SECTION 3.01 Security Documents...................................................39
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SECTION 3.02 Filing and Recording.................................................40
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SECTION 3.03 Confirmation of Security Interest....................................40
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IV. REPRESENTATIONS AND WARRANTIES..........................................................................40
SECTION 4.01 Organization; Legal Existence........................................40
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SECTION 4.02 Authorization........................................................40
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SECTION 4.03 Governmental Approvals...............................................41
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SECTION 4.04 Binding Effect.......................................................41
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SECTION 4.05 Material Adverse Change..............................................41
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SECTION 4.06 Litigation; Compliance with Laws; etc................................41
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SECTION 4.07 Financial Statements.................................................42
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SECTION 4.08 Federal Reserve Regulations..........................................42
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SECTION 4.09 Taxes 42
SECTION 4.10 Employee Benefit Plans...............................................43
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SECTION 4.11 No Material Misstatements............................................44
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SECTION 4.12 Investment Company Act; Public Utility Holding Company Act...........44
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SECTION 4.13 Security Interest....................................................45
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SECTION 4.14 Use of Proceeds......................................................45
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SECTION 4.15 Subsidiaries.........................................................45
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SECTION 4.16 Title to Properties; Possession Under Leases; Trademarks.............45
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SECTION 4.17 Solvency 46
SECTION 4.18 Permits, etc.........................................................46
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SECTION 4.19 Compliance with Environmental Laws...................................47
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SECTION 4.20 No Change in Credit Criteria or Collection Policies..................47
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SECTION 4.21 Intentionally Omitted................................................47
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SECTION 4.22 Inventory............................................................47
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SECTION 4.23 Year 2000............................................................48
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V. CONDITIONS OF CREDIT EVENTS.............................................................................48
SECTION 5.01 All Credit Events....................................................48
SECTION 5.02 First Borrowing......................................................48
VI. AFFIRMATIVE COVENANTS...................................................................................50
SECTION 6.01 Legal Existence......................................................51
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SECTION 6.02 Businesses and Properties............................................51
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SECTION 6.03 Insurance............................................................51
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SECTION 6.04 Taxes 52
SECTION 6.05 Financial Statements, Reports, etc...................................52
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SECTION 6.06 Litigation and Other Notices.........................................54
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SECTION 6.07 ERISA 55
SECTION 6.08 Maintaining Records; Access to Properties and Inspections; Right to
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Audit.......................................................56
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SECTION 6.09 Use of Proceeds......................................................56
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SECTION 6.10 Fiscal Year-End......................................................56
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SECTION 6.11 Further Assurances...................................................56
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SECTION 6.12 Additional Grantors and Guarantors...................................56
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SECTION 6.13 Environmental Laws...................................................57
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SECTION 6.14 Pay Obligations to Lenders and Perform Other Covenants...............59
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SECTION 6.15 Intentionally Omitted.................................................59
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SECTION 6.16 Year 2000............................................................59
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VII. NEGATIVE COVENANTS......................................................................................59
SECTION 7.01 Liens................................................................59
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SECTION 7.02 Sale and Lease-Back Transactions.....................................61
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SECTION 7.03 Indebtedness.........................................................61
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SECTION 7.04 Dividends, Distributions and Payments................................61
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SECTION 7.05 Consolidations, Mergers and
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Sales of Assets.............................................61
SECTION 7.06 Investments..........................................................62
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SECTION 7.07 Capital Expenditures.................................................62
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SECTION 7.08 Intentionally Omitted................................................62
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SECTION 7.09 Intentionally Omitted................................................62
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SECTION 7.10 Intentionally Omitted................................................62
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SECTION 7.11 EBITDA. 62
SECTION 7.12 Tangible Net Worth...................................................63
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SECTION 7.13 Business 63
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SECTION 7.14 Sales of Receivables.................................................63
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SECTION 7.15 Use of Proceeds......................................................63
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SECTION 7.16 ERISA 63
SECTION 7.17 Accounting Changes...................................................63
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SECTION 7.18 Prepayment or Modification of Indebtedness; Modification of Certain
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Documents...................................................63
SECTION 7.19 Transactions with Affiliates.........................................64
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SECTION 7.20 Negative Pledges, Etc................................................64
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SECTION 7.21 Application of Tax Attributes........................................64
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VIII. EVENTS OF DEFAULT.......................................................................................64
IX. AGENTS..................................................................................................68
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL..................................72
SECTION 10.01 Collection of Receivables; Management of Collateral..................72
SECTION 10.02 Collateral Custodian.................................................74
XI. MISCELLANEOUS...........................................................................................75
SECTION 11.01 Notices 75
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SECTION 11.02 Survival of Agreement................................................75
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SECTION 11.03 Successors and Assigns; Participations...............................76
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SECTION 11.04 Expenses; Indemnity..................................................79
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SECTION 11.05 Applicable Law.......................................................80
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SECTION 11.06 Right of Setoff......................................................80
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SECTION 11.07 Payments on Business Days............................................81
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SECTION 11.08 Waivers; Amendments..................................................81
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SECTION 11.09 Severability.........................................................82
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SECTION 11.10 Entire Agreement; Waiver of
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Jury Trial, etc.............................................82
SECTION 11.11 Confidentiality......................................................83
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SECTION 11.12 Submission to Jurisdiction...........................................84
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SECTION 11.13 Counterparts; Facsimile Signature....................................84
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SECTION 11.14 Headings 84
XII. GUARANTEES..............................................................................................85
XIII. WAIVER..................................................................................................86
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EXHIBITS
EXHIBIT A Form of Term Note
EXHIBIT B Form of Revolving Credit Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Security Agreement
EXHIBIT E Form of Assignment and Acceptance
EXHIBIT F Form of Security Agreement and Mortgage -
Trademarks
SCHEDULES
SCHEDULE 2.01(a) Term Loan Commitments
SCHEDULE 2.01(b) Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.17(a) Letters of Credit Existing on Amendment Date
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.09 Taxes
SCHEDULE 4.10 ERISA
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 5.01 Asset Purchase Conditions Precedent
SCHEDULE 6.05(i) Real Property
SCHEDULE 6.13 Hazardous Materials
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.04 Permitted Stock Purchases and Distributions
SCHEDULE 7.05 Permitted Mergers and Acquisitions
SCHEDULE 7.06 Permitted Investments
SCHEDULE 7.14 Sales of Receivables
CREDIT AGREEMENT, dated as of June 5, 1995, as
amended and restated as of November 13, 1998 (as further
amended, restated, modified or supplemented from time to
time, this "Agreement"), among Donnkenny Apparel, Inc., a
Delaware corporation ("DKA"), Beldoch Industries
Corporation, a Delaware corporation ("BIC"), MegaKnits,
Inc., a New York corporation ("Megaknits"; Megaknits,
together with DKA and BIC are herein referred to jointly
and severally and collectively as the "Borrowers"), the
Guarantors named herein and signatories hereto, the lenders
named in Schedules 2.01(a) and 2.01(b) annexed hereto
(collectively, the "Lenders"), THE CIT GROUP/COMMERCIAL
SERVICES, INC., as administrative agent for the Lenders and
THE CHASE MANHATTAN BANK (formerly known as Chemical Bank),
as agent for the Lenders (in such capacity, the "Agent").
The Lenders have made Loans and Letters of Credit (such terms
and all other capitalized terms used in this paragraph having the respective
meanings ascribed to such terms above or hereinafter) available to the
Borrowers up to an aggregate original principal amount of $110,000,000 in the
form of (a) a Term Loan to the Borrowers in an aggregate principal amount of
$25,000,000 and (b) Revolving Credit Loans and Letters of Credit to or for the
benefit of the Borrowers in an aggregate principal amount not in excess of
$85,000,000 at any time outstanding. The proceeds of the Term Loan were used to
repay loans made under the February 1995 Credit Agreement, the proceeds of
which were used to finance the purchase pursuant to the Acquisition Agreement,
refinance Indebtedness to The Chase Manhattan Bank (formerly known as Chemical
Bank) and for general working capital purposes. The proceeds of the Revolving
Credit Loans made on the Original Closing Date were also used to refinance
other Indebtedness to The Chase Manhattan Bank (formerly known as Chemical
Bank), and to finance the consideration required under the Asset Purchase
Agreement.
The parties hereto desire to amend and restate the Original
Credit Agreement to provide for, among other things, a decrease in the Total
Revolving Credit Agreement to $75,000,000. The proceeds of Revolving Credit
Loans made on and after the Closing Date shall be used for general working
capital purposes. The Grantors will continue to provide Collateral in
accordance with the provisions of this Agreement and the Security Documents.
The Lenders are severally, and not jointly, willing to extend such Loans to the
Borrowers subject to the terms and conditions hereinafter set forth.
Accordingly, the Borrowers, the Guarantors, the Lenders, the
Administrative Agent and the Agent hereby agree as follows:
1. DEFINITIONS
SECTION 1.1. Certain Defined Terms. For purposes hereof, the
following terms shall have the meanings specified below:
"Acquisition Agreement" shall mean the Stock Purchase
Agreement made May 26, 1995 among DKA and the shareholders of Beldoch
Industries Corporation.
"Administrative Agent" shall mean The CIT Group/Commercial
Services, Inc.
"Affiliate" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common control
with such person and, without limiting the generality of the foregoing,
includes (i) any person which beneficially owns or holds 15% or more of any
class of voting securities of such person or 15% or more of the equity interest
in such person, (ii) any person of which such person beneficially owns or holds
15% or more of any class of voting securities or in which such person
beneficially owns or holds 15% or more of the equity interest in such person
and (iii) any director or executive officer of such person. For the purposes of
this definition, the term "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as used with respect to
any person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
"Agent" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Agreement" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated May 23, 1995 among DKA and Oak Hill Sportswear Corp.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the Agent,
in substantially the form of Exhibit E annexed hereto.
"Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Revolving Credit Commitment and (y) the Borrowing Base
minus (ii) the sum at such time of (x) the unpaid principal balance of, and
accrued interest and fees on, the Revolving Credit Loans, together with all
reserves established pursuant to the Loan Documents and (y) the Letter of
Credit Usage.
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"BIC" shall have the meaning assigned to that term in the
preamble to this Agreement.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrowers" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Borrowing Base" shall have the meaning assigned to such term
in Section 2.01(b) hereof.
"Business Day" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capitalized Lease Obligation" shall mean an obligation to
pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real and/or personal property which obligation is required to
be classified and accounted for as a capital lease on a balance sheet prepared
in accordance with GAAP, and for purposes hereof the amount of such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.
"Change of Control" shall mean (i) the Parent shall cease to
own 100% of all classes of stock of DKA or (ii) DKA shall cease to own 100% of
all classes of stock of Beldoch Industries Corporation.
"CIT" shall mean The CIT Group/Commercial Services, Inc.
"Closing Date" shall mean the date of the first borrowing
under this Agreement, but in no event later than November 13, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all collateral and security as
described in the Security Documents.
"Commitment" shall mean, with respect to each Lender, the sum
of the Term Loan Commitment of such Lender as set forth in Schedule 2.01(a),
and the Revolving Credit Commitment of such Lender as set forth in Schedule
2.01(b), as each may be adjusted from time to time pursuant to Section 2.07.
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"Consolidated" shall mean, in respect of any person, as
applied to any financial or accounting term, such term determined on a
consolidated basis in accordance with GAAP (except as otherwise required
herein) for the person and all consolidated Subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all
those substances which are regulated by or form the basis of liability under
Federal, state or local environmental, health and safety statutes or
regulations including, without limitation, asbestos, polychlorinated biphenyls
("PCBs"), and radioactive substances, or any other material or substance which
constitutes a material health, safety or environmental hazard to any person or
property.
"Credit Event" shall mean each borrowing and each issuance of
a Letter of Credit hereunder.
"Customer" shall mean and include the account debtor or
obligor with respect to any Receivable.
"Default" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"DKA" shall have the meaning assigned to such term in the
preamble to this Agreement.
"dollars" or the symbol "$" shall mean dollars in lawful
currency of the United States of America.
"Domestic Lending Office" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name in Schedule 2.02 annexed hereto, or such other office of such
Lender as such Lender may from time to time specify to the Borrowers and the
Agent.
"EBITDA" shall mean with respect to any person for any period
the sum of (i) Net Income, (ii) Interest Expense, (iii) depreciation and
amortization of and other non-cash items properly deducted in determining Net
Income and (iv) federal, state and local income taxes, in each case of such
person for such period, computed and calculated in accordance with GAAP.
"Eligible Inventory" shall mean inventory of the Borrowers
comprised solely of raw materials and finished goods which is lawfully owned by
any of the Borrowers and which is, in the opinion of the Administrative Agent,
not obsolete, slow-moving or unmerchantable and is and at all times shall
continue to be acceptable to the Administrative Agent in all respects;
provided, however, that Eligible Inventory shall in no event include inventory
which (i) is not located at one of the addresses for locations of Collateral
set forth on Schedule I to the Security Agreement and with
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respect to which the Agent has not been granted a valid, first priority, fully
perfected security interest, (ii) has been returned or rejected by a Customer,
or (iii) does not conform to the representations and warranties contained
herein and in the other Loan Documents. Standards of eligibility may be fixed
and revised from time to time solely by the Administrative Agent in the
Administrative Agent's exclusive judgment. In determining eligibility, the
Administrative Agent may, but need not, rely on reports and schedules furnished
by the Borrowers, but reliance by the Administrative Agent thereon from time to
time shall not be deemed to limit the right of the Administrative Agent to
revise standards of eligibility at any time as to both present and future
inventory of the Borrowers.
"Eligible Receivables" shall mean (i) Receivables created by
the Borrowers (other than MegaKnits) in the ordinary course of business arising
out of the sale or lease of goods or rendition of services by the Borrowers
(other than MegaKnits), which (A) are subject to a valid, first priority, fully
perfected security interest in favor of the Agent and which conform to the
representations and warranties contained herein and in the other Loan
Documents, and (B) at all times shall continue to be acceptable to the
Administrative Agent in all respects and (ii) any and all sums which CIT is
obligated to or may pay from time to time to the Borrowers (other than
MegaKnits) pursuant to Notification Factoring Agreements, each dated April 28,
1997. Standards of eligibility may be fixed and revised from time to time
solely by the Administrative Agent in the Administrative Agent's exclusive
judgment.
"Environmental Claim" shall mean any written notice of
violation, claim, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or deed or use restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any substance, chemical, material,
pollutant, contaminant, odor or audible noise or other release or emission in,
into or onto the environment (including, without limitation, the air, ground,
water or any surface) at, in, by or from any of the properties of the Borrowers
or their Subsidiaries, (ii) the environmental aspects of the transportation,
storage, treatment or disposal of materials in connection with the operation of
any of the properties of the Borrowers or their Subsidiaries or (iii) the
violation, or alleged violation by Borrowers or any of their Subsidiaries, of
any statutes, ordinances, orders, rules, regulations, Permits or licenses of or
from any governmental authority, agency or court relating to environmental
matters connected with any of the properties of the Borrowers or their
Subsidiaries, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and
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Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water Pollution Control
Act (33 U.S.C. ss. 1251 et seq.), the Oil Pollution Act of 1990 (P.L. 101-380),
the Safe Drinking Water Act (42 U.S.C. ss. 300(f), et seq.), the Clear Air Act
(42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. ss. 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. ss. 651 et seq.), as such laws have been and hereafter may be amended or
supplemented, and any related or analogous present or future Federal, state or
local, statutes, rules, regulations, ordinances, licenses, permits and
interpretations and orders of regulatory and administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations promulgated thereunder,
as in effect from time to time.
"ERISA Affiliate" shall mean any trade or business (whether
or not incorporated) which together with any of the Borrowers or any Subsidiary
of any thereof would be treated as a single employer under the provisions of
Title I or Title IV of ERISA.
"Event of Default" shall have the meaning assigned to such
term in Article VIII hereof.
"February 1995 Credit Agreement" shall mean the Credit
Agreement dated as of February 2, 1995 among DKA, The Chase Manhattan Bank
(formerly known as Chemical Bank), as sole lender, and The Chase Manhattan Bank
(formerly known as Chemical Bank), as Agent, as amended to the Original Closing
Date.
"Final Maturity Date" shall mean March 31, 2000.
"Financial Officer" shall mean, with respect to any person,
the chief financial officer of such person.
"FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended from time to time.
"Fiscal Year" shall mean the fiscal year of each of the
Borrowers for accounting purposes which in each case is December 31 of each
year.
"GAAP" shall have the meaning assigned to such term in
Section 1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such
terms are defined in any of the Security Documents.
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"Guarantee" shall mean any obligation, contingent or
otherwise, of any person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or obligation of any other person in any manner,
whether directly or indirectly, and shall include, without limitation, any
obligation of such person, direct or indirect, to (i) purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness or obligation, (ii) purchase
property, securities or services for the purpose of assuring the owner of such
Indebtedness or obligation of the payment of such Indebtedness or obligation,
or (iii) maintain working capital, equity capital, available cash or other
financial condition of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or obligation; provided, however, that the term
Guarantee shall not include endorsements for collection or collections for
deposit, in either case in the ordinary course of business.
"Guarantor" shall mean, collectively, the Parent, the
Borrowers and each Subsidiary thereof and any person which becomes a Subsidiary
after the date hereof.
"Hazardous Material" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude oil
or any fraction), any radioactive substance and any polychlorinated biphenyls;
provided, in the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment; and provided, further, to
the extent that the applicable laws of any state establish a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste"
or "toxic substance" which is broader than that specified in any Environmental
Law, such broader meaning shall apply.
"Indebtedness" shall mean, with respect to any person, (a)
all obligations of such person for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
person for the deferred purchase price of property or services, except current
accounts payable arising in the ordinary course of business and not overdue
beyond such period as is commercially reasonable for such person's business,
(d) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (e) all
payment obligations of such person with respect to interest rate or currency
protection agreements, (f) all obligations of such person as an account party
under any letter of credit or in respect of bankers' acceptances, (g) all
obligations of any third party secured by property or assets of such person
(regardless of whether or not such person is liable for repayment of such
obligations), (h) all Guarantees of such person and (i) the redemption price of
all redeemable preferred stock of such person, but only to the
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extent that such stock is redeemable at the option of the holder or requires
sinking fund or similar payments at any time prior to the Final Maturity Date.
"Indemnitees" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"Information" shall have the meaning assigned to such term in
Section 11.11 hereof.
"Interest Expense" shall mean, with respect to any person for
any period, the interest expense of such person during such period determined
on a Consolidated basis in accordance with GAAP, and shall in any event
include, without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all fixed
and all calculable dividend payments on preferred stock, and (v) payments of
interest expense in kind.
"Interest Payment Date" shall mean the first Business Day of
each month commencing December 1, 1998.
"Inventory Amount" shall mean, during any month, the amount
set forth below as corresponds to such month:
Month Inventory Amount
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October 1998 $13,000,000
November 1998 13,000,000
December 1998 16,000,000
January 1999 14,000,000
February 1999 14,000,000
March 1999 14,000,000
April 1999 14,000,000
May 1999 15,000,000
June 1999 14,000,000
; provided, however, that, if the Borrowers and the Lenders
have not agreed on Inventory Amounts for July 1999 and
thereafter, the Inventory Amount for July 1999 and thereafter
shall be zero dollars ($0).
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"Lenders" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned to such
term in Section 2.17 hereof, together with the letters of credit and
indemnities referred to in the definition of Letter of Credit Usage.
"Letter of Credit Application" shall have the meaning
assigned to such term in Section 2.17 hereof.
"Letter of Credit Guaranty" shall mean the guaranty delivered
by the Administrative Agent on behalf of the Lenders to the Letter of Credit
Issuer of the Borrowers' reimbursement obligation under the Letter of Credit
Issuer's reimbursement agreement, the Letter of Credit Application with respect
thereto or any other like document.
"Letter of Credit Issuer" shall mean the issuer of a Letter
of Credit, which, if not The Chase Manhattan Bank, shall be a commercial bank
satisfactory to the Administrative Agent. The Administrative Agent hereby
agrees to notify the Borrowers of the identity of any Letter of Credit Issuer
if other than The Chase Manhattan Bank.
"Letter of Credit Usage" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(ii) the unreimbursed amount of all payments made by the Administrative Agent
under all related Letter of Credit Guaranties.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other right
of or arrangement with any creditor to have such creditor's claim satisfied out
of such assets, or the proceeds therefrom, prior to the general creditors of
the owner thereof.
"Loan" shall mean the Term Loan or any Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to the
Obligations, the Notes and each other document, instrument, or agreement now or
hereafter delivered to the Agent or any Lender in connection herewith or
therewith.
"Loan Party" shall mean each Borrower, the Parent, each
Grantor, each Guarantor, and each Subsidiary thereof.
9
"Margin Stock" shall have the meaning assigned to such term
in Regulation U.
"Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, operations or financial or other condition
of any person or its Subsidiaries, (ii) the ability of any Loan Party (to the
extent obligated) to perform or pay the Obligations in accordance with the
terms hereof or of any other Loan Document or (iii) the Agent's Lien on any
material portion of the Collateral or the priority of such Lien; provided,
however, that no Material Adverse Effect shall exist with respect to the Parent
solely by reason of advances heretofore or hereafter made by the Borrowers to
the Parent as permitted pursuant to this Agreement and provided, further, that
so long as the representations and warranties contained in Section 4.15 with
respect to Christiansburg Garment Co., Inc. shall remain true and correct, a
material adverse effect on such Subsidiary shall not be deemed a Material
Adverse Effect unless constituting a material adverse effect on the Borrowers
and such Subsidiary, taken as a whole.
"MegaKnits" shall have the meaning assigned to that term in
the preamble to this Agreement.
"Mortgages" shall mean the real property mortgages for each
item of real property listed on Schedule 6.05(i) hereto, duly executed in favor
of the Agent, for its own benefit and for the benefit of the Lenders, each as
amended, modified or supplemented from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any time,
the aggregate value, computed at the lower of cost (on a FIFO basis) and
current market value, of Eligible Inventory of the Borrowers less reserves for
(i) special order goods; (ii) market value declines; (iii) bill and hold
(deferred shipment) or consignment sales; and (iv) other reserves required by
the Administrative Agent in the exercise of its reasonable business judgment.
"Net Amount of Eligible Receivables" shall mean and include
at any time, without duplication, the gross amount of Eligible Receivables at
such time less the sum of (i) sales, excise or similar taxes, (ii) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed, and (iii) such reserves as
determined by the Administrative Agent in its sole judgment for (A) sales to
the United States of America or to any agency, department or division thereof;
(B) foreign sales other than sales secured by stand-by letters of credit (in
form and substance satisfactory to the Administrative Agent) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America and payable in
10
United States currency; (C) Receivables that remain unpaid more than ninety
(90) days from the invoice date; (D) contras; (E) sales to the Borrowers'
Affiliates; (F) bill and hold (deferred shipment) or consignment sales; (G)
sales to any Customer which is (w) insolvent, (x) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, (y) negotiating or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts, or (z)
financially unacceptable to the Administrative Agent or has a credit rating
unacceptable to the Administrative Agent; (H) all sales to any Customer if
fifty percent (50%) or more of either (x) all outstanding invoices of such
Customer, or (y) the aggregate dollar amount of all outstanding invoices of
such Customer, are unpaid more than ninety (90) days from the invoice date; (I)
any other reasons deemed necessary by the Administrative Agent in its sole
judgment; and (J) an amount representing, historically, returns, discounts,
claims, credits and allowances.
"Net Income" shall mean, with respect to any person for any
period, the aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items of income for
such person less the aggregate for such person of any and all items that are
treated as expenses under GAAP, and less Federal, state and local income taxes,
but excluding any extraordinary gains or losses or any gains or losses from the
sale or disposition of assets other than in the ordinary course of business,
all computed and calculated in accordance with GAAP.
"Notes" shall mean the Term Notes and the Revolving Credit
Notes.
"Original Closing Date" shall mean June 5, 1995.
"Original Credit Agreement" shall mean the Credit Agreement,
dated as of June 5, 1995, as amended through the Closing Date, among the
Borrowers, the guarantors named therein, the lenders named therein, the
Administrative Agent and the Agent.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of the Borrowers to the Lenders, the Administrative Agent and the
Agent, whether now existing or hereafter created, direct or indirect, due or
not, whether created directly or acquired by assignment, participation or
otherwise, including without limitation all obligations, liabilities and
Indebtedness of the Borrowers with respect to the Security Documents and other
Loan Documents, the principal of and interest on the Revolving Credit Loans,
the Term Loans and the payment or performance of all other obligations,
liabilities, and Indebtedness of the Borrowers to the Lenders, the
Administrative Agent and the Agent hereunder, under the Letters of Credit, the
Letter of Credit Guaranty or under any one or more of the other Loan Documents,
including without limitation all fees, costs, expenses and indemnity
obligations hereunder and thereunder, but excluding any Indebtedness set forth
on either Schedule 7.01 or 7.03.
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"Other Taxes" shall have the meaning assigned to such term in
Section 2.15(b) hereof.
"Overadvance Amount" shall mean, during any End of Month
Period and Intramonth Period, the amounts set forth below as correspond to the
End of Month Period and the Intramonth Period during the months set forth
below:
Month Overadvance Overadvance
----- Amount during the Amount
End of Month Period during the
------------------- Intramonth Period
-----------------
October 1998 $5,700,000 $8,000,000
November 1998 2,300,000 9,700,000
December 1998 1,200,000 6,300,000
January 1999 2,800,000 5,200,000
February 1999 1,500,000 6,800,000
March 1999 1,700,000 5,500,000
April 1999 4,600,000 5,700,000
May 1999 6,800,000 8,600,000
June 1999 8,600,000 10,800,000
;provided, however, that, if following receipt of a March
31, 2000 monthly operating plan by January 31, 1999, the
Borrowers and the Lenders have not agreed on Overadvance
Amounts for July 1999 and thereafter, the Overadvance Amount
during the End of Month Period and during the Intramonth
Period for July 1999 and thereafter shall be zero dollars
($0); provided, further, that each of the foregoing amounts
shall be reduced by the aggregate amount of cash proceeds
received by the Parent and/or any of its Subsidiaries (i) as
tax refunds and (ii) as proceeds (net of taxes due and any
reasonable expenses of sale) from the sale or other
disposition of any assets of the Parent and/or any of its
Subsidiaries (excluding sales of inventory in the ordinary
course of business consistent with past practices). The
foregoing shall not be deemed to be a consent by the Agent,
the Administrative Agent or any Lender to any sale of assets.
For purposes of this paragraph, (i) the term "End of Month
Period" shall mean the period commencing on the last Business
Day of a month and ending on the fifth day of the immediately
following month and (ii) the term "Intramonth Period" shall
mean the period commencing on the sixth day of a month and
ending on the day immediately preceding the last Business Day
of the same month.
"Parent" shall mean Donnkenny, Inc., a Delaware corporation.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any Plan which is subject to the
provisions of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term in
Section 4.18 hereof.
"Person" shall mean any natural person, corporation, business
trust, association, company, joint venture, partnership or government or any
agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA and which is maintained (in whole or in part)
for employees of the Borrowers, any Subsidiary or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement dated as
of April 28, 1997, between the Grantor(s) and the Agent, for its own benefit
and for the benefit of the Lenders, as amended, modified or supplemented from
time to time.
"Prime Rate" shall mean, for any day, the rate of interest
per annum publicly announced from time to time by the Agent at its principal
office in New York City as its prime rate in effect at such time. The Prime
Rate is not intended to be the lowest rate of interest charged by the Agent to
its borrowers.
"Receivables" shall mean and include all of the Borrowers'
accounts, instruments, documents, chattel paper and general intangibles,
whether secured or unsecured, whether now existing or hereafter created or
arising, and whether or not specifically assigned to the Agent for the ratable
benefit of the Lenders.
"Register" shall have the meaning assigned to such term in
Section 11.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as the
same is from time to time in effect, and all official rulings and
interpretations thereunder.
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"Release" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping, in each case as defined in
Environmental Law, and shall include any "Threatened Release," as defined in
Environmental Law.
"Remedial Work" shall mean any investigation, site
monitoring, containment, cleanup, removal, restoration or other remedial work
of any kind or nature with respect to any property of the Borrowers or their
Subsidiaries (whether such property is owned, leased, subleased or used),
including, without limitation, with respect to Contaminants and the Release
thereof.
"Reportable Event" shall mean a Reportable Event as defined
in Section 4043(b) of ERISA.
"Required Lenders" shall mean Lenders having 60% of the Total
Commitment; provided, however, that if at any time any one Lender holds more
than 60% of the Total Commitment, "Required Lenders" shall mean such Lender and
any other Lender.
"Responsible Officer" shall mean, with respect to any person,
any vice president or president, or the chief financial officer or controller,
of such person.
"Revolving Credit Commitment" shall mean, with respect to any
Lender, the Revolving Credit Commitment of such Lender as set forth in Schedule
2.01(b) annexed hereto, as the same may be reduced from time to time pursuant
to Section 2.07 hereof.
"Revolving Credit Commitment Fee" shall have the meaning set
forth in Section 2.06(a) hereof.
"Revolving Credit Loan" shall mean a Revolving Credit Loan
made pursuant to Sections 2.01 and 2.02 hereof.
"Revolving Credit Notes" shall mean the Revolving Credit
Notes of the Borrowers, executed and delivered as provided in Section 2.04
hereof, in substantially the form of Exhibit B annexed hereto, as amended,
modified or supplemented from time to time.
"Revolving Credit Termination Date" shall mean the earlier to
occur of (i) the Final Maturity Date and (ii) such date as the Revolving Credit
Loans shall otherwise be payable in full and the Revolving Credit Commitment
shall terminate, expire or be canceled in accordance with the terms of this
Agreement.
"Security Agreement" shall mean the Security Agreement dated
as of the Original Closing Date, between the Grantor(s) and the Agent, for its
own benefit and for
14
the benefit of the Lenders, substantially in the form of Exhibit D annexed
hereto, as amended, modified or supplemented from time to time.
"Security Agreement - Trademarks" shall mean the Security
Agreement and Mortgage - Trademarks, dated as of the Original Closing Date,
between the Debtor(s), as such term is defined therein, and the Agent, for its
own benefit and for the benefit of the Lenders, substantially in the form of
Exhibit F annexed hereto, as amended, modified or supplemented from time to
time.
"Security Documents" shall mean the Security Agreement, the
Security Agreement - Trademarks, the Pledge Agreement, the Mortgages and each
other agreement now existing or hereafter created providing collateral security
for the payment or performance of any Obligations.
"Settlement Period" shall have the meaning assigned to such
term in Section 2.13(c)(i) hereof.
"Subordinated Indebtedness" shall mean, with respect to any
of the Borrowers, Indebtedness subordinated in right of payment to such
person's monetary obligations under this Agreement upon terms satisfactory to
and approved in writing by the Agent, to the extent it does not by its terms
mature or become subject to any mandatory prepayment or amortization of
principal prior to the Final Maturity Date.
"Subsidiary" shall mean, with respect to any person, the
parent of such person, any corporation, association or other business entity of
which securities or other ownership interests representing more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled, directly or indirectly, by the parent or one or more
Subsidiaries of the parent.
"Tangible Net Worth" shall mean, with respect to any person
at any time, (i) the sum of such person's capital stock, capital in excess of
par or stated value of shares of its capital stock, retained earnings and any
other account which, in accordance with GAAP, constitutes stockholders' equity,
less (ii) treasury stock and any minority interest in Subsidiaries, less (iii)
the amount of any write-up subsequent to the Closing Date in the value of any
asset above the cost or depreciated cost thereof to such person and less (iv)
the amount of all assets reflected as goodwill, patents, trademarks, research
and development and all other assets required to be classified as intangibles
in accordance with GAAP.
"Taxes" shall have the meaning assigned to such term in
Section 2.15(a) hereof.
"Term Loan" shall mean the Term Loan made pursuant to
Sections 2.01 and 2.02.
15
"Term Loan Commitment" shall mean, with respect to any
Lender, the Term Loan Commitment of such Lender as set forth in Schedule
2.01(a).
"Term Notes" shall mean the Term Notes of the Borrowers,
executed and delivered as provided in Section 2.04, in substantially the form
of Exhibit A hereto, as amended, modified or supplemented from time to time.
"Total Commitment" shall mean the sum of the Lenders' Total
Term Loan Commitment and Total Revolving Credit Commitment, as the same may be
reduced from time to time pursuant to Section 2.07 hereof.
"Total Revolving Credit Commitment" shall mean the sum of the
Lenders' Revolving Credit Commitments, as the same may be reduced from time to
time pursuant to Section 2.07.
"Total Term Loan Commitment" shall mean the sum of the
Lenders' Term Loan Commitments, as the same may be reduced from time to time
pursuant to Section 2.07.
"Transactions" shall have the meaning assigned to such term
in Section 4.02 hereof.
SECTION 1.2. Accounting Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time
in the United States applied on a basis consistent with those used in preparing
the financial statements referred to in Section 6.05 hereof ("GAAP"); provided,
however, that each reference in Article VII hereof, or in the definition of any
term used in Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof. Notwithstanding the foregoing, Borrowers confirm that the
financial covenants in Article VII calculated for the Parent and its
Subsidiaries on a Consolidated basis were prepared based on the representation
as to the Parent set forth in Section 4.15. Borrowers agree that if in the
opinion of the Agent a material change has occurred with respect to such
representation, then at the request of the Agent the Borrowers shall negotiate
in good faith appropriate modifications of such financial covenants to provide
the Lenders the same measure of protection afforded by such covenants prior to
such material change, including, without limitation, the preparation of
separate financial statements for the Borrowers and their Subsidiaries.
2. THE LOANS
SECTION 2.1. Term Loan Commitments and Revolving Credit
Commitments. (1) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly,
16
agrees to continue the Term Loan made to the Borrowers on the Original Closing
Date, in an aggregate principal amount not to exceed the amount of such
Lender's Term Loan Commitment set forth opposite its name in Schedule 2.01(a)
hereto.
(1) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Revolving Credit Loans to, and through the
Administrative Agent open Letters of Credit for the benefit of, the Borrowers,
at any time and from time to time from the date hereof to the Revolving Credit
Termination Date, in an aggregate principal amount at any time outstanding not
to exceed the amount of such Lender's Revolving Credit Commitment set forth
opposite its name in Schedule 2.01(b) annexed hereto, as such Revolving Credit
Commitment may be reduced from time to time in accordance with the provisions
of this Agreement. Notwithstanding the foregoing, the aggregate principal
amount of Revolving Credit Loans outstanding at any time to the Borrowers shall
not exceed (1) the lesser of (A) the Total Revolving Credit Commitment (as such
amount may be reduced pursuant to Section 2.07 hereof) and (B) an amount equal
to the total of (i) up to eighty-five percent (85)% of the Net Amount of
Eligible Receivables plus (ii) the lesser of (a) the Inventory Amount as of the
date of determination and (b) up to sixty percent (60%) of the Net Amount of
Eligible Inventory plus (iii) up to sixty percent (60%) of the undrawn amount
of all outstanding Letters of Credit for the importation of finished goods
inventory consigned to the Agent as of the date of determination plus (iv) the
Overadvance Amount as of the date of determination (this clause (B) referred to
herein as the "Borrowing Base"), minus (2) the Letter of Credit Usage at such
time (not to exceed $35,000,000 at any time); provided, however, that in no
event shall the aggregate principal amount of Revolving Credit Loans
outstanding at any time to the Borrowers exceed $55,000,000. The Borrowing Base
will be computed daily and a compliance certificate from a Responsible Officer
of the Borrowers presenting its computation will be delivered to the
Administrative Agent in accordance with Section 6.05 hereof.
Subject to the foregoing and within the foregoing limits, the
Borrowers may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Revolving Credit Loans, on and after the date
hereof and prior to the Revolving Credit Termination Date, subject to the
terms, provisions and limitations set forth herein, including, without
limitation, the requirement that no Revolving Credit Loan shall be made
hereunder if the amount thereof exceeds the Availability outstanding at such
time.
SECTION 2.2. Loans. (1) The Revolving Credit Loans made by
the Lenders on any date shall be in a minimum aggregate principal amount of
$500,000 or in integral multiples of $100,000 in excess thereof.
(1) Loans shall be made ratably by the Lenders in accordance
with their respective Term Loan Commitments or Revolving Credit Commitments, as
the case may be; provided, however, that the failure of any Lender to make any
Loan shall
17
not in itself relieve any other Lender of its obligation to lend hereunder. The
Term Loan was made by the Lenders on the Original Closing Date against delivery
of Term Notes, payable to the order of the Lenders, as referred to in Section
2.04. The initial Revolving Credit Loans were made by the Lenders against
delivery of Revolving Credit Notes, payable to the order of the Lenders, as
referred to in Section 2.04 hereof.
(2) Each Lender may fulfill its obligations under this
Agreement by causing its Domestic Lending Office to make such Loan; provided,
however, that the exercise of such option shall not affect the obligation of
the Borrowers to repay such Loan in accordance with the term of the applicable
Note.
(3) Subject to the provisions of paragraph (e) below, each
Lender shall make its Term Loan and Revolving Credit Loans on the proposed
dates thereof by paying the amount required to the Administrative Agent in New
York, New York in immediately available funds not later than 12:00 noon, New
York City time, and the Administrative Agent shall as soon as practicable, but
in no event later than 3:00 p.m., New York City time, credit the amounts so
received to the general deposit account of the Borrowers with the
Administrative Agent in immediately available funds or, if Loans are not to be
made on such date because any condition precedent to a borrowing herein
specified is not met, return the amounts so received to the respective Lenders.
SECTION 2.3. Notice of Loans. The Borrowers shall, through a
Responsible Officer of any of the Borrowers, give the Administrative Agent
irrevocable written, telex or facsimile notice of each borrowing not later than
11:00 A.M., New York City time, one (1) Business Day before a proposed
borrowing. Such notice shall specify the date of such borrowing (which shall be
a Business Day) and amount thereof. The Administrative Agent shall promptly
advise the Lenders of any notice given pursuant to this Section 2.03 and of
each Lender's portion of the requested borrowing.
SECTION 2.4. Notes; Repayment of Loans. (1) The Term Loan
made by a Lender shall be evidenced by a single Term Note, duly executed on
behalf of the Borrowers, dated the Original Closing Date, in substantially the
form of Exhibit A annexed hereto, delivered and payable to such Lender in a
principal amount equal to its Term Loan Commitment on such date. All Revolving
Credit Loans made by a Lender to the Borrowers shall be evidenced by a single
Revolving Credit Note, duly executed on behalf of the Borrowers, dated the
Original Closing Date, in substantially the form of Exhibit B annexed hereto,
delivered and payable to such Lender in a principal amount equal to its
Revolving Credit Commitment in respect of the Borrowers on the Closing Date.
The outstanding balance of each Revolving Credit Loan, as evidenced by any such
Revolving Credit Note, shall mature and be due and payable on the Revolving
Credit Termination Date.
(1) Each Revolving Credit Note shall bear interest from its
date on the outstanding principal balance thereof, as provided in Section 2.05
hereof.
18
(2) The entire aggregate principal amount of the Term Loan
outstanding on the Closing Date (plus all accrued and unpaid interest thereon),
as evidenced by the Term Notes, shall be payable on December 31, 1998, and such
payment shall be distributed ratably among the Lenders in accordance with their
respective Term Loan Commitments. Each Term Note shall bear interest from its
date on the outstanding principal balance thereof, as provided in Section 2.05.
All principal payments in respect of the Term Loan shall be accompanied by
accrued interest on the principal amount being repaid to the date of payment.
No scheduled payment of principal in respect of the Term Loan shall be made to
the extent that a lesser principal payment would result in the payment in full
of the outstanding amount of the Term Loan, and such lesser amount is paid.
(3) Each Lender, or the Administrative Agent on its behalf,
shall, and is hereby authorized by the Borrowers to, endorse on the schedule
attached to the Term Note or Revolving Credit Note, as applicable, of such
Lender (or on a continuation of such schedule attached to such Note and made a
part thereof) an appropriate notation evidencing the date and amount of each
Loan to the Borrowers from such Lender, as well as the date and amount of each
payment and prepayment with respect thereto; provided, however, that the
failure of any person to make such a notation on a Note shall not affect any
obligations of the Borrowers under such Note. Any such notation shall be
conclusive and binding as to the date and amount of such Loan or portion
thereof, or payment or prepayment of principal or interest thereon, absent
manifest error.
(4) Each of the Borrowers shall be jointly and severally
liable with the other Borrower(s) for the Obligations, and each of the
Obligations shall be secured by all of the Collateral. Each of the Borrowers
acknowledges that it is a co-borrower hereunder and is jointly and severally
liable under this Agreement and the other Loan Documents. All financial
accommodations extended to any of the Borrowers or requested by any of the
Borrowers shall be deemed to be financial accommodations extended for each of
the Borrowers, and each of the Borrowers hereby authorizes each other of the
Borrowers to effectuate borrowings and issuances of Letters of Credit on its
behalf. Notwithstanding anything to the contrary contained in this Agreement or
any of the other Loan Documents, the Agent, the Administrative Agent and the
Lenders shall be entitled to rely upon any request, notice or other
communication received by them from any of the Borrowers on behalf of all
Borrowers, and shall be entitled to treat their giving of any notice hereunder
to any of the Borrowers as notice to each and all Borrowers.
Each of the Borrowers agrees that the joint and several
liability of the Borrowers provided for in this subsection (e) shall not be
impaired or affected by any modification, supplement, extension or amendment or
any contract or agreement to which the other Borrower(s) may hereafter agree
(other than an agreement signed by the Agent, the Administrative Agent and the
Lenders specifically releasing such liability), nor by any delay, extension of
time, renewal, compromise or other indulgence
19
granted by the Agent, the Administrative Agent or any Lender with respect to
any of the Obligations, nor by any other agreements or arrangements whatsoever
with the other Borrower(s) or with any other person, each of the Borrowers
hereby waiving all notice of such delay, extension, release, substitution,
renewal, compromise or other indulgence, and hereby consenting to be bound
thereby as fully and effectually as if it had expressly agreed thereto in
advance. The liability of each of the Borrowers is direct and unconditional as
to all of the Obligations, and may be enforced without requiring the Agent, the
Administrative Agent or any Lender first to resort to any other right, remedy
or security. Each of the Borrowers hereby expressly waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations, the Notes, this Agreement or any other Loan Document and any
requirement that the Agent, the Administrative Agent or any Lender protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against any of the Borrowers or any other person
or any Collateral.
Each of the Borrowers hereby irrevocably waives and releases
each other of the Borrowers from all "claims" (as defined in Section 101(5) of
the Bankruptcy Code) to which such Borrowers are or would be entitled by virtue
of the provisions of the first paragraph of this subsection (e) or the
performance of such Borrower's obligations thereunder including, without
limitation, any right of subrogation (whether contractual, under Section 509 of
the Bankruptcy Code or otherwise), reimbursement, contribution, exoneration or
similar right, or indemnity, or any right of recourse to security for any of
the Obligations.
SECTION 2.5. Interest on Loans. (1) Subject to the provisions
of Section 2.05(b), Section 2.08 and 2.09(c) hereof, each Loan shall bear
interest at a rate per annum equal to the Prime Rate plus 1-1/2%. In the event
of any change in the Prime Rate, the rate of interest hereunder shall change as
of the first day of the month following any change, so as to remain one and
one-half percent (1-1/2%) above the Prime Rate.
(1) Interest on each Loan shall be payable in arrears on each
applicable Interest Payment Date and on the Final Maturity Date. Interest on
each Loan shall be computed based on the number of days elapsed in a year of
360 days. The Administrative Agent shall determine each interest rate
applicable to the Loans and shall promptly advise the Borrowers and the Lenders
of the interest rate so determined.
SECTION 2.6. Fees. (1) The Borrowers shall pay each Lender,
through the Administrative Agent, (i) on the first Business Day of each
January, April, July and October commencing January 4, 1999, and (ii) on the
Revolving Credit Termination Date, in immediately available funds, a commitment
fee (the "Revolving Credit Commitment Fee") of two-fifths of one percent (2/5
of 1%) per annum on the average daily unused amount of the Revolving Credit
Commitment of such Lender, during the quarter (or shorter period commencing
with the date hereof or ending with the Revolving Credit Termination Date)
ending on such date; provided, however, that
20
with respect to the period from October 1, 1998 to the Closing Date, the
Borrowers shall pay to each Lender through the Administrative Agent, on January
4, 1999, the "Revolving Credit Commitment Fee" under the Original Credit
Agreement on the average daily unused amount of such Lender's "Revolving Credit
Commitment" thereunder during such period. The Revolving Credit Commitment Fee
due to each Lender under this Section 2.06 shall commence to accrue on the date
hereof and cease to accrue on the earlier of (i) the Revolving Credit
Termination Date and (ii) the termination of the Revolving Credit Commitment of
such Lender pursuant to Section 2.07 hereof. The Revolving Credit Commitment
Fee shall be calculated on the basis of the actual number of days elapsed in a
year of 360 days.
(1) On the Closing Date, the Borrowers shall pay to each
Lender, through the Agent, such Lender's pro rata portion of the amendment fee
of $100,000 (based on such Lender's Revolving Credit Commitment).
(2) Until such time as all Obligations (excluding indemnity
obligations surviving the payment in full of the Notes and the termination of
the Total Commitment) shall have been paid in full and all Commitments to lend
hereunder shall have terminated, the Borrowers shall pay to the Administrative
Agent, for the Administrative Agent's own account, a fee of $6,000 per month
payable on the first day of each calendar month commencing December 1, 1998.
SECTION 2.7. Termination and Reduction of Revolving Credit
Commitments and Term Loan Commitments. (1) Upon at least three (3) Business
Days' prior irrevocable written, telex or facsimile notice to the
Administrative Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total Revolving
Credit Commitment, ratably among the Lenders in accordance with the amounts of
their Revolving Credit Commitments; provided, however, that the Total Revolving
Credit Commitment shall not be reduced at any time to an amount less than the
Revolving Credit Loans outstanding under the Revolving Credit Commitments and
the Letter of Credit Usage at such time. Each partial reduction of the Total
Revolving Credit Commitment shall be in a minimum of $1,000,000 or an integral
multiple of $1,000,000. Any reduction in the Total Revolving Credit Commitment
to below $70,000,000 shall cause a concurrent dollar-for-dollar reduction in
the aggregate sublimit for Revolving Credit Loans ratably among the Lenders in
accordance with the amount of their Revolving Credit Commitments.
(1) Simultaneously with any termination or reduction of the
Total Revolving Credit Commitment pursuant to paragraph (a) of this Section
2.07, the Borrowers shall pay to each Lender, through the Administrative Agent,
the Revolving Credit Commitment Fee due and owing through and including the
date of such termination or reduction on the amount of the Revolving Credit
Commitment of such Lender so terminated or reduced.
21
(2) The Revolving Credit Commitment of each Lender shall
automatically and permanently terminate on the Revolving Credit Termination
Date, and all Revolving Credit Loans still outstanding on such date shall be
due and payable in full together with accrued interest thereon and any
outstanding Letters of Credit shall be fully collateralized with cash.
(3) The Total Term Loan Commitment shall be permanently
reduced by the amount of any repayment or prepayment of the outstanding
principal amount of the Term Loans on the date of any such repayment or
prepayment. In any event, all amounts due and owing under the Total Term Loan
Commitment shall be due and payable on December 31, 1998.
SECTION 2.8. Interest Upon Events of Default. Upon the
occurrence and during the continuance of an Event of Default, the Borrowers
shall on demand pay interest, to the extent permitted by law, on the unpaid
Obligations at a rate per annum equal to two percent (2.0%) in excess of the
applicable rates for such Obligations regardless of the rates otherwise
applicable to such Obligations.
SECTION 2.9. Prepayment of Loans. (1) Subject to the terms
and conditions contained in this Section 2.09 and elsewhere in this Agreement,
the Borrowers shall have the right to prepay any Loan at any time in whole or
from time to time in part without penalty (except as otherwise provided for
herein); provided, however, that each such partial prepayment of a Loan shall
be in a minimum aggregate principal amount of $500,000 or in integral multiples
of $100,000.
(1) On the date of any termination or reduction of the Total
Revolving Credit Commitment pursuant to Section 2.07(a) or (b) hereof or
elsewhere in this Agreement, the Borrowers shall pay or prepay so much of the
Revolving Credit Loans as shall be necessary in order that the Availability
equals or exceeds zero following such termination or reduction.
(2) The Borrowers shall make prepayments of the Revolving
Credit Loans from time to time such that the Availability equals or exceeds
zero at all times. Notwithstanding the provisions of Section 2.08(a) hereof and
without waiving any Event of Default which has occurred thereby, if at any time
Availability is less than zero and the Borrowers do not make a prepayment of
the Revolving Credit Loans as required by this Section 2.09(c), all Revolving
Credit Loans shall bear interest at a rate per annum equal to the Prime Rate
plus three and one-half percent (3-1/2%).
(3) Intentionally Omitted.
(4) (10 Except as provided in clause (ii) below, not later
than the fifth day following the receipt by the Administrative Agent or any
Borrower or any Subsidiary of any Borrower (x) of any net proceeds of any
insurance required to be maintained pursuant to Section 6.03 hereof on account
of each separate loss, damage
22
or injury in excess of $100,000 (or, if there shall be continuing a Default or
an Event of Default, of any amount of net proceeds) to any asset of such
Borrower or such Subsidiary (including, without limitation, any Collateral), or
(y) of any net proceeds of any business interruption insurance required to be
maintained pursuant to Section 6.03 hereof in excess of $100,000 (or, if there
shall be continuing a Default or Event of Default, the full amount of net
proceeds), such Borrower or Subsidiary shall notify the Administrative Agent of
such receipt in writing or by telephone promptly confirmed in writing, and not
later than the day following receipt by the Administrative Agent or such
Borrower or Subsidiary of any such proceeds, there shall become due and payable
a prepayment of the Loans in an amount equal to 100% of such proceeds.
Prepayments from such net proceeds shall be applied as set forth in paragraph
(f) below.
(1) In the case of the receipt of net proceeds described in
clause (i) above with respect to the loss, damage or injury to any asset of a
Borrower or any Subsidiary of a Borrower (other than net proceeds of any
business interruption insurance), the Borrowers may elect, by written notice
delivered to the Administrative Agent not later than the day on which a
prepayment would otherwise be required under clause (i), to apply all or a
portion of such net proceeds for the purpose of replacing, repairing, restoring
or rebuilding the relevant tangible property, and, in such event, any required
prepayment under clause (i) above shall be reduced dollar for dollar by the
amount of such election. An election under this clause (ii) shall not be
effective unless: (x) at the time of such election there is continuing no
Default or Event of Default; (y) the Borrowers shall have certified to the
Administrative Agent that: (1) the net proceeds of the insurance adjustment for
such loss, damage or injury, together with other funds available to the
Borrowers shall be sufficient to complete such replacement, repair, restoration
or rebuilding in accordance with all applicable laws, regulations and
ordinances; and (2) to the best knowledge of the Borrowers, no Default or Event
of Default has arisen or will arise as a result of such loss, damage, injury,
replacement, repair or rebuilding; and (z) if the amount of net proceeds in
question exceeds $500,000, the Borrowers shall have obtained the written
consent of the Required Lenders to such election.
(2) In the event of an election under clause (ii) above,
pending application of the net proceeds to the required replacement, repairs,
restoration or rebuilding, the Borrowers shall not later than the time at which
prepayment would have been, in the absence of such election, required under
clause (i) above, apply such net proceeds to the prepayment of the outstanding
principal balance, if any, of the Revolving Credit Loans (not in permanent
reduction of the Revolving Credit Commitment), and deposit (the "Special
Deposit") with the Administrative Agent, the balance, if any, of such net
proceeds remaining after such application, pursuant to agreements in form,
scope and substance reasonably satisfactory to the Administrative Agent. The
Special Deposit, together with all earnings on such Special Deposit, shall be
available to the Borrowers solely for the replacement, repair, rebuilding or
restoration of the tangible property suffering the injury, loss or damage in
respect of which such prepayment and Special Deposit were made or to such other
purpose as to which the
23
Required Lenders may consent in writing; provided, however, that at such time
as a Default or Event of Default shall occur, the balance of the Special
Deposit and earnings thereon may be applied by Administrative Agent to repay
the Obligations in such order as the Administrative Agent shall elect. The
Administrative Agent shall be entitled to require proof, as a condition to the
making of any withdrawal from the Special Deposit, that the proceeds of such
withdrawal are being applied for the purposes permitted hereunder.
(5) When making a prepayment, whether mandatory or otherwise,
pursuant to paragraph (a), (b), (c) or (e) above, the Borrowers shall furnish
to the Administrative Agent, not later than 11:00 a.m. (New York City time) one
(1) Business Day prior to the date of such prepayment, written, telex or
facsimile notice of prepayment which shall specify the prepayment date and the
principal amount of each Loan (or portion thereof) to be prepaid, which notice
shall be irrevocable and shall commit the Borrowers to prepay such Loan by the
amount stated therein on the date stated therein. Prepayments made pursuant to
paragraph (d) or (e) above shall be applied as follows: (A) first, to
outstanding Term Loans up to the full amount thereof and (B) solely with
respect to prepayments made under paragraph (e) above, second, to outstanding
Revolving Credit Loans which are Prime Rate Loans up to the full amount
thereof; provided, however, that if at the time of the making of any prepayment
in accordance with clause (B), there are undrawn Letters of Credit outstanding,
then in the discretion of the Administrative Agent, all or a portion of any
such prepayment (not to exceed an amount equal to the aggregate undrawn amount
of all such outstanding Letters of Credit) shall be deposited by the Borrowers
in a cash collateral account to be held by the Administrative Agent for the
benefit of the Lenders for application by the Administrative Agent to the
payment of any drawing made under any such Letters of Credit.
(6) All prepayments under this Section 2.09 shall be subject
to Section 2.12 hereof.
(7) Except as otherwise expressly provided in this Section
2.09, payments with respect to any paragraph of this Section 2.09 are in
addition to payments made or required to be made under any other paragraph of
this Section 2.09.
(8) The amount of the Term Loan prepaid may not be
reborrowed.
SECTION 2.10. Reserve Requirements; Change in Circumstances.
(10 Notwithstanding any other provision herein, if after the date of this
Agreement (or in the case of any assignee of any Lender, the date of
assignment) any change in applicable law or regulation or in the interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), or any change in GAAP or regulatory accounting principles applicable to
the Administrative Agent or any Lender, shall: (i) subject the Administrative
Agent or any Lender (which shall for the purpose of this
24
Section 2.10 include any assignee or lending office of the Administrative Agent
or any Lender) to any charge, fee deduction or withholding of any kind or to
any tax with respect to any amount paid or to be paid by either the
Administrative Agent or any Lender with respect to the obligations of any
Lender under Sections 2.17 through 2.20 hereof or under any Letter of Credit
(other than taxes imposed on the overall net income of the Administrative Agent
or such Lender); (ii) change the basis of taxation of payments to any Lender or
the Administrative Agent or any fees or amounts payable with respect to any
Letter of Credit or otherwise hereunder (other than taxes imposed on the
overall net income of such Lender or the Administrative Agent by the
jurisdiction in which such Lender or the Administrative Agent has its principal
office or by any political subdivision or taxing authority therein); (iii)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or loans or
loan commitments extended by, or Letters of Credit issued and maintained by
such Lender; or (iv) impose on any Lender any other condition affecting this
Agreement or Letters of Credit issued and maintained by such Lender; and the
result of any of the foregoing shall be to increase the cost to any such Lender
of making or maintaining any Letter of Credit, or to reduce the amount of any
payment (whether of principal, interest, fee, compensation or otherwise)
receivable by such Lender or to require such Lender to make any payment in
respect of any Letter of Credit, then the Borrowers shall pay to such Lender or
the Administrative Agent, as the case may be, upon such Lender's or the
Administrative Agent's demand, such additional amount or amounts as will
compensate such Lender or the Administrative Agent for such additional costs or
reduction. The Administrative Agent and each Lender agree to give notice to the
Borrowers of any such change in law, regulation, interpretation or
administration with reasonable promptness after becoming actually aware thereof
and of the applicability thereof to the Transactions. Notwithstanding anything
contained herein to the contrary, nothing in clause (i) or (ii) of this Section
2.10(a) shall be deemed to (x) permit the Administrative Agent or any Lender to
recover any amount thereunder which would not be recoverable under Section 2.15
hereof or (y) require the Borrowers to make any payment of any amount to the
extent that such payment would duplicate any payment made by the Borrowers
pursuant to Section 2.15 hereof.
(1) If at any time and from time to time after the date of
this Agreement, any Lender shall determine that the adoption of any applicable
law, rule, regulation or guideline regarding capital adequacy, or any change in
any applicable law, rule, regulation or guideline regarding capital adequacy,
including, without limitation, the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or any change in the
interpretation or administration of any thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its lending office)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or will have the effect of reducing the rate of return on such Lender's capital
or on the capital
25
of such Lender's holding company, if any, as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrowers shall pay to such
Lender such additional amount or amounts as will compensate such Lender for
such reduction. Each Lender agrees to give notice to the Borrowers of any
adoption of, change in, or change in interpretation or administration of, any
such law, rule, regulation or guideline with reasonable promptness after
becoming actually aware thereof and of the applicability thereof to the
Transactions.
(2) A statement of any Lender or the Administrative Agent
setting forth such amount or amounts, supported by calculations in reasonable
detail, as shall be necessary to compensate such Lender (or the Administrative
Agent) as specified in paragraphs (a) and (b) above shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall
pay each Lender or the Administrative Agent the amount shown as due on any such
statement within twenty (20) days after its receipt of the same.
(3) Failure on the part of any Lender or the Administrative
Agent to demand compensation for any increased costs, reduction in amounts
received or receivable with respect to any Letter of Credit or reduction in the
rate of return earned on such Lender's capital, shall not constitute a waiver
of such Lender's or the Administrative Agent's rights to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in rate of return with respect to such Letter of Credit. The
protection under this Section 2.10 shall be available to each Lender and the
Administrative Agent regardless of any possible contention of the invalidity or
inapplicability of any law, regulation or other condition which shall give rise
to any demand by such Lender or the Administrative Agent for compensation;
provided, however, that if any such law, regulation or other condition which
gave rise to a demand and payment of compensation by the Borrowers is
subsequently determined by final adjudication to be invalid, then, upon a
request by Borrowers, such Lender shall refund promptly such compensation
(without interest). Borrowers' obligation to pay such compensation and a
Lender's obligation of refund shall survive the termination of this Agreement.
(4) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different Domestic Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. Intentionally Omitted
26
SECTION 2.12. Indemnity. The Borrowers shall indemnify the
Administrative Agent and each Lender against any loss or reasonable expense
(including, but not limited to, any loss or reasonable expense sustained or
incurred or to be sustained or incurred by reason of or in connection with the
execution and delivery or assignment of, or payment under, any Letter of
Credit), which the Administrative Agent or such Lender may sustain or incur as
a consequence of the following events (regardless of whether such events occur
as a result of the occurrence of an Event of Default or the exercise of any
right or remedy of the Administrative Agent or the Lenders under this Agreement
or any other agreement, or at law); any failure of the Borrowers to fulfill on
the date of any borrowing hereunder the applicable conditions set forth in
Article V hereof applicable to it; any failure of the Borrowers to borrow
hereunder after irrevocable notice of borrowing pursuant to Section 2.03 hereof
has been given; any default in payment or prepayment of the principal amount of
any Loan or any part thereof or interest accrued thereon, or with respect to
any Letter of Credit, in each case as and when due and payable (at the due date
thereof, by irrevocable notice of prepayment or otherwise); or the occurrence
of an Event of Default. Such loss or reasonable expense shall include, without
limitation, an amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the principal or other amount so paid,
prepaid or not borrowed, at the applicable rate of interest for such Loan
provided for herein over (ii) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in reemploying the funds
so paid, prepaid or converted or not borrowed in United States Treasury
obligations with comparable maturities for comparable periods. Any such Lender
shall provide to the Borrowers a statement, signed by an officer of such
Lender, explaining any loss or expense and setting forth, if applicable, the
computation pursuant to the preceding sentence, and such statement shall be
conclusive absent manifest error. The Borrowers shall pay such Lender the
amount shown as due on any such statement within twenty (20) days after the
receipt of the same. The indemnities contained herein shall survive the
expiration or termination of this Agreement and of the Letters of Credit.
SECTION 2.13. Pro Rata Treatment; Funding and Settlement
Procedures. (1) Except as permitted under Sections 2.10 and 2.11 hereof, each
payment or prepayment of principal of the Notes, each payment of interest on
the Notes, each payment of any fee or other amount payable hereunder and each
reduction of the Total Revolving Credit Commitment and Total Term Loan
Commitment shall be made pro rata among the Lenders in the proportions that
their Revolving Credit Commitments bear to the Total Revolving Credit
Commitment or that their Term Loan Commitments bear to the Total Term Loan
Commitment, as the case may be.
(1) (10 Except as otherwise provided in subsection (b) of
this Section 2.13, all Loans under this Agreement shall be made by the Lenders
simultaneously and shall be made pro rata among the Lenders in the proportions
that their Revolving Credit Commitment bear to the Total Revolving Credit
Commitment or that their Term Loan Commitments bear to the Total Term Loan
Commitment, as the case may be.
27
(1) Notwithstanding any other provision of this
Agreement, in order to reduce the number of fund transfers
among the Borrowers, the Lenders and the Administrative
Agent, the Borrowers, the Lenders and the Administrative
Agent agree that the Administrative Agent may, but shall not
be obligated to, and the Borrowers and the Lenders hereby
irrevocably authorize the Administrative Agent to, fund, on
behalf of the Lenders, Revolving Credit Loans pursuant to
Sections 2.02 and 2.03, subject to the procedures for
settlement set forth in subsection (c) of this Section 2.13;
provided, however, that (A) the Administrative Agent shall in
no event fund such Revolving Credit Loan or request that any
Lender so fund if the Administrative Agent shall have
received written notice from the Required Lenders on the
Business Day prior to the date of the proposed Revolving
Credit Loan that one or more of the conditions precedent
contained in Section 5.01 hereof will not be satisfied on the
date of the proposed Revolving Credit Loan and (B) the
Administrative Agent shall not otherwise be required to
determine that, or take notice whether, the conditions
precedent in Section 5.01 have been satisfied. If the
Administrative Agent elects not to fund a requested Revolving
Credit Loan on behalf of the Lenders, promptly after receipt
of a notice of a Loan pursuant to Section 2.03 hereof, the
Administrative Agent shall so notify each Lender. If the
Administrative Agent notifies the Lenders that it will not
fund a requested Revolving Credit Loan on behalf of the
Lenders, each Lender shall make its pro rata share of the
Loan available to the Administrative Agent, in immediately
available funds, at the Administrative Agent's payment office
(as described in Section 2.16 hereof) no later than 2:00 p.m.
(New York City time) on the date of the proposed Loan. The
Administrative Agent will make the proceeds of such Loans
available to the Borrowers on the day of the proposed Loan by
causing an amount, in immediately available funds, equal to
the proceeds of all such Loans received by the Administrative
Agent at the Administrative Agent's payment office or the
amount funded by the Administrative Agent on behalf of the
Lenders to be deposited in an account designated by the
Borrowers.
(2) If the Administrative Agent has notified the
Lenders that the Administrative Agent will not fund a
particular Loan pursuant to subsection (b)(ii) of this
Section 2.13 on behalf of the Lenders, the Administrative
Agent may assume that such Lender has made such amount
available to the Administrative Agent on such day and the
Administrative Agent, in its sole and absolute discretion,
may, but shall not be obligated to, cause a corresponding
amount to be made available to the Borrowers on such day. If,
in such case, the Administrative Agent makes such
corresponding amount available to the Borrowers and such
corresponding amount is not in fact made available to the
Administrative Agent by such Lender, such
28
Lender and each of the Borrowers agrees to repay to the
Administrative Agent forthwith on demand such corresponding
amount together with interest thereon for each day from the
date such amount is made available to the Borrowers to and
including the date such amount is repaid to the
Administrative Agent, at (x) in the case of the Borrowers,
a rate per annum equal to the higher of the Federal funds
rate during such period as quoted by the Administrative
Agent and the interest rate applicable thereto pursuant to
Section 2.05 and (ii) in the case of such Lender, at the
Federal funds rate during such period as quoted by the
Administrative Agent for three Business Days and thereafter
at the Prime Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Lender's pro rata share of
such Revolving Credit Loan.
(3) Nothing in this Section 2.13(b) shall be deemed
to relieve any Lender from its obligation to fulfill its
Revolving Credit Commitment hereunder or to prejudice any
rights that the Administrative Agent or a Borrower may have
against any Lender as a result of any default by such Lender
hereunder.
(2) (10 With respect to all periods for which the
Administrative Agent, on behalf of the Lenders, has funded Revolving Credit
Loans pursuant to subsection (b) of this Section 2.13, on the first Business
Day after the last day of each week, or such shorter period as the
Administrative Agent may from time to time select (any such week or shorter
period being herein called a "Settlement Period"), the Administrative Agent
shall notify each Lender of the unpaid principal amount of the Revolving Credit
Loans outstanding at the close of business on the last Business Day of such
Settlement Period. In the event that such amount is greater than the unpaid
principal amount of the Revolving Credit Loans outstanding at the close of
business on the last Business Day of the Settlement Period immediately
preceding such Settlement Period (or, if there has been no preceding Settlement
Period, the amount of the Revolving Credit Loans made on the date of such
Lender's initial funding), each Lender shall promptly make available to the
Administrative Agent such Lender's pro rata share of the difference in
immediately available funds. In the event that such amount is less than such
unpaid principal amount, the Administrative Agent shall promptly pay over to
each other Lender such Lender's pro rata share of the difference in immediately
available funds. In addition, if the Administrative Agent shall so request at
any time when a Default or an Event of Default shall have occurred and be
continuing, or any other event shall have occurred as a result of which the
Administrative Agent shall determine that it is desirable to present claims
against the Borrowers for repayment, each Lender shall promptly remit to the
Administrative Agent or, as the case may be, the Administrative Agent shall
promptly remit to each Lender, sufficient funds to adjust the interests of the
Lenders in the then outstanding Revolving Credit Loans to such an extent that,
after giving effect to such adjustment, each Lender's interest in the then
outstanding Revolving Credit Loans will be equal to its pro rata share thereof.
The
29
obligations of the Administrative Agent and each Lender under this subsection
2.13(c) shall be absolute and unconditional. Each Lender shall only be entitled
to receive interest on its pro rata share of the Revolving Credit Loans which
have been funded by such Lender.
(1) In the event that any Lender fails to make any
payment required to be made by it pursuant to subsection
2.13(c)(i), the Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender
together with interest thereon, for each day from the date
such payment was due to and including the date such amount is
paid to the Administrative Agent, at the Federal funds rate
during each period as quoted by the Administrative Agent for
three Business Days and thereafter at the Prime Rate. During
the period in which such Lender has not paid such
corresponding amount to the Administrative Agent,
notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, the amount so advanced
by the Administrative Agent to the Borrowers shall, for all
purposes hereof, be a Loan made by the Administrative Agent
for its own account. Upon any such failure by a Lender to pay
the Administrative Agent, the Administrative Agent shall
promptly thereafter notify the Borrowers of such failure and
the Borrowers shall immediately pay such corresponding amount
to the Administrative Agent for its own account.
SECTION 2.14. 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 Borrowers, 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 a Note held
by it as a result of which the unpaid principal portion of the Notes held by it
shall be proportionately less than the unpaid principal portion of the Notes
held by any other Lender, it shall be deemed to have simultaneously purchased
from such other Lender a participation in the Notes held by such other Lender,
so that the aggregate unpaid principal amount of the Notes and participations
in Notes held by it shall be in the same proportion to the aggregate unpaid
principal amount of all Notes then outstanding as the principal amount of the
Notes held by it prior to such exercise of banker's lien, setoff or
counterclaim was to the principal amount of all Notes outstanding 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 2.14 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. The Borrowers expressly consent to the foregoing arrangements and
agree that any Lender holding a participation in a Note deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to
30
any and all moneys owing by the Borrowers to such Lender as fully as if such
Lender held a Note in the amount of such participation.
SECTION 2.15. Taxes. (1) Any and all payments by the
Borrowers hereunder shall be made, in accordance with Section 2.16 hereof, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings in any such case imposed
by the United States or any political subdivision thereof, excluding:
(1) in the case of the Administrative Agent and each
Lender, taxes imposed or based on its net income, and
franchise or capital taxes imposed on it, (A) if the
Administrative Agent or such Lender is organized under the
laws of the United States or any political subdivision
thereof and (B) if the Administrative Agent or such Lender is
not organized under the laws of the United States or any
political subdivision thereof, and its principal office or
Domestic Lending Office is located in the United States, and
in the case of both (A) and (B), withholding taxes payable
with respect to payments to the Administrative Agent or such
Lender at its principal office or Domestic Lending Office
under laws (including, without limitation, any treaty,
ruling, determination or regulation) in effect on the date
hereof, but not any increase in withholding tax resulting
from any subsequent change in such laws (other than
withholding with respect to taxes imposed or based on its net
income or with respect to franchise or capital taxes), and
(2) taxes (including withholding taxes) imposed by
reason of the failure of the Administrative Agent or any
Lender, in either case that is organized outside the United
States, to comply with Section 2.15(f) hereof (or the
inaccuracy at any time of the certificates, documents and
other evidence delivered thereunder)
(all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Administrative Agent, (x) the sum
payable shall be increased by the amount necessary so that after making all
required deductions (including without limitation deductions applicable to
additional sums payable under this Section 2.15) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (y) the Borrowers
shall make such deductions and (z) the Borrowers shall pay the full amount
deducted to the relevant tax authority or other authority in accordance with
applicable law.
(2) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies
31
which arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement (hereinafter
referred to as "Other Taxes").
(3) The Borrowers will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction
(except as specified in clauses (a)(i) and (ii)) on amounts payable under this
Section 2.15) paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Administrative Agent (as the case may be)
makes written demand therefor. If any Lender receives a refund in respect of
any Taxes or Other Taxes for which such Lender has received payment from the
Borrowers hereunder, such Lender shall promptly notify the Borrowers of such
refund and such Lender shall, within 30 days of receipt of a request by the
Borrowers, repay such refund to the Borrowers, provided that the Borrowers,
upon the request of such Lender, agrees to return such refund (plus any
penalties, interest or other charges) to such Lender in the event such Lender
is required to repay such refund.
(4) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrowers in respect of any payment to any Lender,
the Borrowers will furnish to the Administrative Agent, at its address referred
to in Section 11.01 hereof, such certificates, receipts and other documents as
may be reasonably required to evidence payment thereof.
(5) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.15 shall
survive the payment in full of principal and interest hereunder.
(6) Each Lender that is organized outside of the United
States shall deliver to the Borrowers on the date hereof (or, in the case of an
assignee, on the date of the assignment) and from time to time as required for
renewal under applicable law duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 (or any successor or additional forms), as
appropriate, indicating in each case that such Lender is entitled to receive
payments under this Agreement without any deduction or withholding of any
United States federal income taxes. The Administrative Agent (if the
Administrative Agent is an entity organized outside the United States) and each
Lender that is organized outside the United States shall promptly notify the
Borrowers and the Administrative Agent of any change in its Domestic Lending
Office and upon written request of the Borrowers such Lender shall, prior to
the immediately following due date of any payment by the Borrowers or any
Guarantor hereunder or under any other Loan Document, deliver to the Borrowers
or such Guarantor, as the case may be (with copies to the Administrative
Agent), such certificates, documents or other evidence, as required by the Code
or Treasury Regulations issued pursuant thereto, including without limitation
Internal Revenue Service Form 4224, Form 1001 and any other certifi-
32
cate or statement of exemption required by Treasury Regulation Section
1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly
completed and duly executed by such Lender establishing that such payment is
(i) not subject to withholding under the Code because such payment is
effectively connected with the conduct by such Lender of a trade or business in
the United States or (ii) totally exempt from United States tax under a
provision of an applicable tax treaty. The Borrowers shall be entitled to rely
on such forms in their possession until receipt of any revised or successor
form pursuant to this Section 2.15(f). If the Administrative Agent or a Lender
fails to provide a certificate, document or other evidence required pursuant to
this Section 2.15(f), then (i) the Borrowers shall be entitled to deduct or
withhold on payments to the Administrative Agent or such Lender as a result of
such failure, as required by law, and (ii) the Borrowers shall not be required
to make payments of additional amounts with respect to such withheld Taxes
pursuant to clause (x) of Section 2.15(a) to the extent such withholding is
required solely by reason of the failure of the Administrative Agent or such
Lender to provide the necessary certificate, document or other evidence.
(7) Each Lender and the Administrative Agent shall use
reasonable efforts to avoid or minimize any amounts which might otherwise be
payable pursuant to this subsection 2.15 (including seeking refunds of any
amounts that are reasonably believed not to have been correctly or legally
asserted); provided, however, that such efforts shall not include the taking of
any actions by such Lender or the Administrative Agent that would result in any
tax, costs or other expense to such Lender or the Administrative Agent (other
than a tax, cost or other expense for which such Lender or the Administrative
Agent shall have been reimbursed or indemnified by the Borrowers pursuant to
this Agreement or otherwise) or any action which would or might in the
reasonable opinion of such Lender or the Administrative Agent have an adverse
effect upon its business, operations or financial condition or otherwise be
disadvantageous to such Lender or the Administrative Agent.
SECTION 2.16. Payments and Computations. The Borrowers shall
make each payment hereunder and under any instrument delivered hereunder no
later than 1:00 p.m. (New York City time) on the day when due in lawful money
of the United States to the Administrative Agent at the Administrative Agent's
account maintained at The Chase Manhattan Bank, 55 Water Street, New York, New
York (account no. 144-0-75212) for the account of the Lenders, in immediately
available funds without setoff, counterclaim or other deduction of any nature.
The Administrative Agent may charge, when due and payable, the Borrowers'
account with the Administrative Agent for all interest, principal and fees
owing to the Administrative Agent or the Lenders on or with respect to this
Agreement and/or the Loans and other Loan Documents. If at any time there is
not sufficient availability to cover any of the payments referred to in the
prior sentence, and in any event upon the occurrence of any Default, the
Borrowers shall make any such payments upon demand.
SECTION 2.17. Letter of Credit Guaranty. (1) In order to
assist the Borrowers in establishing or opening documentary letters of credit
with the Letter of
33
Credit Issuer, which shall not have expiration dates that exceed 180 days from
the date of issuance thereof or that exceed 30 days prior to the Revolving
Credit Termination Date (the "Letters of Credit"), and with respect to the
Letters of Credit described in Section 2.17(j) hereof, the Borrowers have
requested that the Administrative Agent join in the applications for such
Letters of Credit, and/or guarantee payment or performance of such Letters of
Credit and any drafts thereunder through the issuance of a Letter of Credit
Guaranty, thereby lending the Administrative Agent's credit to that of the
Borrowers, and the Administrative Agent has agreed to do so. These arrangements
shall be handled by the Administrative Agent subject to the terms and
conditions set forth below. The Administrative Agent shall not be required to
be the issuer of any Letter of Credit. The Borrowers will be, jointly and
severally, the account party for any application for a Letter of Credit, which
application shall be substantially in the form of Exhibit G hereto or such
other form as may from time to time be approved by the Letter of Credit Issuer
and the Administrative Agent and which shall be duly completed in a manner
reasonably acceptable to the Administrative Agent (such application, together
with such other certificates, documents and other papers and information as the
Letter of Credit Issuer or the Administrative Agent may reasonably request,
collectively the "Letter of Credit Application"). The Letters of Credit shall
be issued with respect to transactions occurring in the ordinary course of the
business of the Borrowers.
(1) Notwithstanding anything to the contrary contained
herein, the Letter of Credit Usage shall not exceed $35,000,000 at any time,
and no Letter of Credit Guaranty shall be issued hereunder if, after giving
effect thereto, Availability would be less than zero.
(2) The Administrative Agent shall have the right, without
notice to the Borrowers, to charge the Borrowers' account with the
Administrative Agent with the amount of any and all indebtedness, liabilities
and obligations of any kind (including indemnification for breakage costs,
capital adequacy and reserve requirement charges) incurred by the
Administrative Agent or the Lenders under the Letter of Credit Guaranty or
incurred by a Letter of Credit Issuer with respect to a Letter of Credit at the
earlier of (A) payment by the Administrative Agent or the Lenders under the
Letter of Credit Guaranty or (B) the occurrence of an Event of Default. Any
amount so charged to the Borrowers' account with the Administrative Agent shall
be deemed a Revolving Credit Loan hereunder made by the Lenders to the
Borrowers, funded by the Administrative Agent on behalf of the Lenders and
subject to Section 2.05 and Section 2.09(c) of this Agreement and subject
further to the requirement that the Borrowers immediately prepay outstanding
Revolving Credit Loans so that the outstanding principal balance of all
Revolving Credit Loans will not exceed $55,000,000. Any charges, fees,
commissions, costs and expenses charged to the Administrative Agent for the
Borrowers' account by the Letter of Credit Issuer in connection with or arising
out of Letters of Credit or transactions relating thereto will be charged to
the Borrowers' account with the Administrative Agent in full when charged to or
paid by the Administrative Agent and, when charged, shall be conclusive on the
Borrowers absent manifest error. Each of the Lenders and the Borrowers agrees
that the Administrative
34
Agent shall have the right to make such charges regardless of whether any Event
of Default or Default shall have occurred and be continuing or whether any of
the conditions precedent in Section 5.01 have been satisfied.
(3) The Borrowers unconditionally indemnify the
Administrative Agent and each Lender and hold the Administrative Agent and each
Lender harmless from any and all loss, claim or liability (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by the
Administrative Agent or any Lender arising from any transactions or occurrences
relating to Letters of Credit, any drafts or acceptances thereunder, the
collateral relating thereto, and all Obligations in respect thereof, including
any such loss or claim due to any action taken by the Letter of Credit Issuer,
other than to the extent that any such loss, claim or liability directly
results from the gross negligence or willful misconduct of the Administrative
Agent or any Lender, respectively, as determined by a final judgment of a court
of competent jurisdiction. The Borrowers further agree to jointly and severally
hold the Administrative Agent and each Lender harmless from any errors or
omission, negligence, unlawful conduct or misconduct by the Letter of Credit
Issuer. The Borrowers' unconditional, joint and several obligations to the
Administrative Agent and each Lender with respect to the Letters of Credit
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever. Each Borrower and each Guarantor agrees that any charges incurred
by the Administrative Agent or the Letter of Credit Issuer for the Borrowers'
account hereunder may be charged to the Borrowers' account with the
Administrative Agent.
(4) None of the Administrative Agent, the Lenders and the
Letter of Credit Issuer shall be responsible for the existence, character,
quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; any difference or variation in
the character, quality, condition, packing, value or delivery of the goods from
that expressed in the documents; the validity, sufficiency or genuineness of
any documents or of any endorsements thereof even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; the time, place, manner or order in which shipment is made; partial or
incomplete shipments, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions, delay, default, or fraud by the shipper and/or anyone else in
connection with the collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and the Borrowers. Furthermore, without
limiting any of the foregoing, neither the Administrative Agent nor the Lenders
shall be responsible for any act or omission with respect to or in connection
with any goods covered by any Letter of Credit.
(5) The Borrowers jointly and severally agree that any action
taken by the Administrative Agent or any Lender, or any action taken by the
Letter of Credit Issuer, under or in connection with the Letters of Credit, the
drafts or acceptances, the guarantees or the collateral, shall be binding on
the Borrowers and shall not put the Administrative Agent, or the Lenders in any
resulting liability to the Borrowers. In
35
furtherance of the foregoing, the Administrative Agent shall have the full
right and authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of any
documents or goods; to execute any and all steamship or airways guaranties (and
applications therefor), indemnities or delivery orders; to grant any extensions
of the maturity of, time of payment for, or time of presentation of, any
drafts, acceptances or documents; and to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or
acceptances, all in the Administrative Agent's sole name, and the Letter of
Credit Issuer shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from the Administrative
Agent, all without any notice to or any consent from the Borrowers. The
Administrative Agent shall use reasonable efforts to consult with the Borrowers
before taking any action pursuant to this Section 2.17(f).
(6) Without the Administrative Agent's express consent, the
Borrowers jointly and severally agree: (x) not to execute any and all
applications for steamship or airway guaranties, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances or documents; or to agree to
any amendments, renewals, extensions, modification, changes or cancellations of
any of the terms or conditions of any of the applications, Letters of Credit,
drafts or acceptances; and (y) after the occurrence of any Event of Default
which is not cured within any applicable grace period, if any, or waived as
provided under Section 11.08 hereof, not to (A) clear and resolve any questions
of non-compliance of documents, or (B) give any instructions as to acceptances
or rejection of any documents or goods.
(7) The Borrowers jointly and severally agree that any
necessary and material import, export or other license or certificate for the
import or handling of inventory will have been promptly procured; all foreign
and domestic governmental laws and regulations in regard to the shipment and
importation of inventory or the financing thereof will have been promptly and
fully complied with and any certificates in that regard that the Administrative
Agent may at any time reasonably request will be promptly furnished. In this
connection, the Borrowers warrant and represent that all shipments made under
any Letters of Credit are in accordance with the laws and regulations of the
countries in which the shipments originate and terminate, and are not
prohibited by any such laws and regulations. As between the Borrowers, on the
one hand, and the Administrative Agent, the Lenders and the Letter of Credit
Issuer, on the other hand, the Borrowers jointly and severally assume all risk,
liability and responsibility for, and agree to pay and discharge, all present
and future local, state, federal or foreign taxes, duties or levies. As between
the Borrowers, on the one hand, and the Administrative Agent, the Lenders and
the Letter of Credit Issuer, on the other hand, any embargo, restriction, laws,
customs or regulations of any country, state, city or other political
subdivision, where such inventory is or may be located, or wherein
36
payments are to be made, or wherein drafts may be drawn, negotiated, accepted
or paid, shall be solely the Borrowers' joint and several risk, liability and
responsibility.
(8) Upon any payments to the Letter of Credit Issuer under a
Letter of Credit Guaranty, the Administrative Agent or the Lenders, as the case
may be, shall, without prejudice to its or their respective rights under this
Agreement (including that such unreimbursed amounts shall constitute Revolving
Credit Loans hereunder in accordance with subsection (c) of this Section 2.17),
acquire by subrogation, any rights, remedies, duties or obligations granted or
undertaken by the Borrowers in favor of the Letter of Credit Issuer in any
application for Letters of Credit, any standing agreement relating to Letters
of Credit or otherwise, all of which shall be deemed to have been granted to
the Administrative Agent and the Lenders and apply in all respects to the
Administrative Agent and the Lenders and shall be in addition to any rights,
remedies, duties or obligations contained herein.
(9) Schedule 2.17(j) annexed hereto contains a description of
(i) all letters of credit issued for the benefit of the Borrowers with respect
to which The Chase Manhattan Bank is the Letter of Credit Issuer outstanding on
the Closing Date and (ii) the $200,000 stand-by letter of credit issued to
support insurance premiums on the Borrowers' workers' compensation policy. Each
such letter of credit, including any extension or renewal thereof, shall
constitute a "Letter of Credit" for all purposes of this Agreement, issued on
the Closing Date.
SECTION 2.18. Participations
(1) Purchase of Participations. Immediately upon issuance by
the Letter of Credit Issuer of any Letter of Credit pursuant to this Agreement,
each Lender (other than the Administrative Agent) shall be deemed to have
irrevocably and unconditionally purchased and received from the Administrative
Agent, without recourse or warranty, an undivided interest and participation
(which participation shall be without recourse to the Administrative Agent),
equal to such Lender's pro rata (based upon its Revolving Credit Commitment)
share of each such Letter of Credit, in all obligations and rights of the
Administrative Agent in such Letter of Credit (including, without limitation,
all reimbursement obligations of the Borrowers with respect thereto pursuant to
the Letter of Credit Guaranty or otherwise).
(2) Sharing of Payments. In the event that the Administrative
Agent makes any payment in respect of the Letter of Credit Guaranty and the
Borrowers shall not have repaid such amount to the Administrative Agent, the
Administrative Agent shall charge the Borrowers' account with the
Administrative Agent in the amount of the reimbursement obligation, in
accordance with Section 2.17(c).
(3) Obligations Irrevocable. The obligations of a Lender to
make payments to the Administrative Agent for the account of the Administrative
Agent with respect to a Letter of Credit Guarantee or the Letter of Credit
Issuer with respect to a
37
Letter of Credit (and of the Borrowers to reimburse the Lenders for such
payments) shall be irrevocable, without any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any of
the following circumstances:
(1) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(2) the existence of any claim, setoff, defense or
other right which a Borrower may have at any time against a
beneficiary named in such Letter of Credit or any transferee
of such Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, the
Letter of Credit Issuer, any Lender, or any other Person,
whether in connection with this Agreement, such Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between
either Borrower or any other party and the beneficiary named
in such Letter of Credit);
(3) any draft, certificate or any other document
presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(4) the surrender or impairment of any security for
the performance or observance of any of the terms of any of
the Loan Documents;
(5) any failure by the Administrative Agent to
provide any notices required pursuant to this Agreement
relating to such Letter of Credit;
(6) any payment by the Letter of Credit Issuer under
any of the Letters of Credit against presentation of a draft
or certificate which does not comply with the terms of such
Letter of Credit; or
(7) the occurrence of any Default or Event of
Default.
SECTION 2.19. Request for Issuance. Any Borrower may from
time to time, upon notice not later than 12:00 noon, New York City time, at
least three Business Days in advance, request the Administrative Agent to
assist the Borrowers in establishing or opening a Letter of Credit by
delivering to the Administrative Agent, with a copy to the Letter of Credit
Issuer, a Letter of Credit Application, together with any necessary related
documents. The Administrative Agent shall not provide support, pursuant to the
Letter of Credit Guaranty, if the Administrative Agent shall have received
written notice from the Required Lenders on the Business Day immediately
38
preceding the proposed issuance date for such Letter of Credit that one or more
of the conditions precedent in Section 5.01 will not have been satisfied on
such date, and the Administrative Agent shall not otherwise be required to
determine that, or take notice whether, the conditions precedent set forth in
Section 5.01 have been satisfied.
SECTION 2.20. Letter of Credit Fees. The Borrowers shall pay
to the Administrative Agent with respect to any Letter of Credit, (i) a letter
of credit fee equal to one-eighth of one percent (_ of 1%) of the face amount
of each Letter of Credit requested and issued hereunder payable to the
Administrative Agent at its Domestic Lending Office on the date of issuance of
such Letter of Credit in immediately available funds, plus (ii) a monthly
letter of credit fee equal to one-eighth of one percent (_ of 1%) of the
average monthly face amount of all Letters of Credit arranged for under or in
connection with this Agreement (plus customary bank charges at the rate
customarily made available to the Administrative Agent by the applicable Letter
of Credit Issuers for letters of credit of similar amounts and terms), payable
to the Administrative Agent at its Domestic Lending Office on the first
Business Day of each month in arrears in immediately available funds. The
Borrowers hereby authorize the Administrative Agent to, and the Administrative
Agent may, from time to time, charge the Borrowers' account with the
Administrative Agent, pursuant to Section 2.17(c) of this Agreement, with the
amount of any letter of credit fees or charges due under this Section 2.20. The
Administrative Agent shall disburse to each Lender such Lender's pro rata share
of any payment of fees referred to in clauses (i) and (ii) above in immediately
available funds within two (2) Business Days of the Administrative Agent's
receipt of such payment.
3. COLLATERAL SECURITY
SECTION 3.1. Security Documents. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. The Grantors shall duly execute and deliver the
Security Documents, all consents of third parties necessary to permit the
effective granting of the Liens created in such agreements, financing
statements pursuant to the Uniform Commercial Code and other documents, all in
form and substance satisfactory to the Agent, as may be reasonably required by
the Agent to grant to the Lenders a valid, perfected and enforceable first
priority Lien on and security interest in (subject only to the Liens permitted
under Section 7.01 hereof) the Collateral.
SECTION 3.2. Filing and Recording. The Borrowers shall, at
their sole cost and expense, cause all instruments and documents given as
evidence of security pursuant to this Agreement to be duly recorded and/or
filed or otherwise perfected in all places necessary, in the opinion of the
Agent, and take such other actions as the Agent may reasonably request, in
order to perfect and protect the Liens of the Agent and Lenders in the
Collateral. The Grantors, to the extent permitted by law, hereby authorize the
Agent to file any financing statement in respect of any Lien created pursuant
to the Security Documents which may at any time be required or
39
which, in the opinion of the Agent, may at any time be desirable although the
same may have been executed only by the Agent or, at the option of the Agent,
to sign such financing statement on behalf of the Grantors and file the same,
and the Grantors hereby irrevocably designate the Agent, its agents,
representatives and designees as its agent and attorney-in-fact for this
purpose. In the event that any re-recording or refiling thereof (or the filing
of any statements of continuation or assignment of any financing statement) is
required to protect and preserve such Lien, the Borrowers shall, at the
Borrowers' cost and expense, cause the same to be recorded and/or refiled at
the time and in the manner requested by the Agent.
SECTION 3.3. Confirmation of Security Interest. Each of the
Borrowers and the Guarantors hereby ratifies and confirms the grant of a
security interest in the Collateral contained in the Security Documents to
which it is a party, which security interests shall continue in full force and
effect without interruption.
4. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers jointly and severally represents and
warrants to each of the Lenders that both before and after giving effect to the
consummation of the Transactions:
SECTION 4.1. Each of the Parent and its Subsidiaries is a
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has the requisite power and
authority to own its property and assets and to carry on its business as now
conducted and as currently proposed to be conducted and is qualified to do
business in every jurisdiction where such qualification is required (all such
jurisdictions being listed in Schedule 4.01 annexed hereto). Each of the
Borrowers and the Grantors has the corporate power to execute, deliver and
perform its obligations under this Agreement and the other Loan Documents to
which it is a party, and to borrow hereunder and to execute and deliver the
Notes.
SECTION 4.2. Authorization. The execution, delivery and
performance by each of the Loan Parties to this Agreement and each of the other
Loan Documents to which it is a party, the borrowings hereunder by the
Borrowers, the execution and delivery by the Borrowers of the Notes, the grant
of security interests in the Collateral created by the Security Documents and
the transactions contemplated to occur hereunder (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate and,
if required, stockholder action and (b) will not (i) violate (A) any provision
of law, statute, rule or regulation or the certificate or articles of
incorporation or other applicable constitutive documents or the by-laws of the
Loan Parties, or their respective Subsidiaries, as the case may be, (B) any
order of any court, or any rule, regulation or order of any other agency of
government binding upon the Loan Parties, or their respective
40
Subsidiaries, or (C) any provisions of any material indenture, agreement or
other instrument to which the Loan Parties, or their respective Subsidiaries,
or any of their respective properties or assets are or may be bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any material indenture, agreement or
other instrument referred to in (b)(i)(C) above or (iii) result in the creation
or imposition of any Lien of any nature whatsoever (other than in favor of the
Agent, for the benefit of the Lenders, as contemplated by this Agreement and
the Security Documents) upon any property or assets of the Loan Parties, or
their respective Subsidiaries.
SECTION 4.3. Governmental Approvals. No registration or
filing (other than the filings necessary to perfect the Liens created by the
Security Documents) with consent or approval of, or other action by, any
Federal, state or other governmental agency, authority or regulatory body is or
will be required in connection with the Transactions, other than any which have
been made or obtained.
SECTION 4.4. Binding Effect. This Agreement and each of the
other Loan Documents to which it is a party constitutes, and, with respect to
the Borrowers, each of the Notes when duly executed and delivered will
constitute, a legal, valid and binding obligation of the Loan Parties
enforceable in accordance with its terms.
SECTION 4.5. Material Adverse Change. There has been no
material adverse change in the business, assets, operations or financial
condition of the Parent or any of its Subsidiaries since June 30, 1998.
SECTION 4.6. Litigation; Compliance with Laws; etc. (1)
Except as set forth in Schedule 4.06(a) annexed hereto (or as after the date
hereof may be communicated in writing to the Agent), there are not any actions,
suits or proceedings at law or in equity or by or before any governmental
instrumentality or other agency or regulatory authority now pending or, to the
knowledge of any Responsible Officer of any Borrower, threatened against or
affecting the Parent or any of its Subsidiaries or the businesses, assets or
rights of the Parent or any of its Subsidiaries (i) which involve any of the
Transactions or (ii) as to which it is probable (within the meaning of
Statement of Financial Accounting Standards No. 5) that there will be an
adverse determination and which, if adversely determined, would, individually
or in the aggregate, materially impair the ability of the Parent or any of its
Subsidiaries to conduct business substantially as now conducted, or have a
Material Adverse Effect.
(1) Except as set forth in Schedule 4.06(b) annexed hereto,
neither the Parent nor any of its Subsidiaries is in violation of any law, or
in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or governmental agency or instrumentality, which would
have a Material Adverse Effect.
SECTION 4.7. Financial Statements. (1) The Borrowers have
heretofore furnished to the Agent and the Administrative Agent the Financial
Statements required to be delivered pursuant to Section 6.05(a) and (b) of the
Original Credit Agreement.
41
(1) The financial statements referred to in this Section 4.07
have been prepared in accordance with GAAP.
SECTION 4.8. Federal Reserve Regulations. (1) Neither the
Parent nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(1) No part of the proceeds of the Loans will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock or to extend credit to others
for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose, or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including, without limitation, Regulation T, U or
X thereof. If requested by any Lender, the Borrowers or any Subsidiary of any
thereof shall furnish to such Lender a statement on Federal Reserve Form U-1
referred to in said Regulation U.
SECTION 4.9. Taxes. The Parent and each of its Subsidiaries
has filed or caused to be filed all Federal, state, local and foreign tax
returns which are required to be filed by it, on or prior to the date hereof,
other than tax returns in respect of taxes that (x) are not franchise, capital
or income taxes, (y) in the aggregate are not material and (z) would not, if
unpaid, result in the imposition of any material Lien on any property or assets
of the Parent or any of its Subsidiaries. The Parent and its Subsidiaries have
paid or caused to be paid all taxes shown to be due and payable on such filed
returns or on any assessments received by them, other than (i) any taxes or
assessments the validity of which the Parent or such Subsidiary is contesting
in good faith by appropriate proceedings, and with respect to which the Parent
or such Subsidiary shall, to the extent required by GAAP have set aside on its
books adequate reserves and (ii) taxes other than income, capital or franchise
taxes that in the aggregate are not material and which would not, if unpaid,
result in the imposition of any material Lien on any property or assets of the
Parent or any of its Subsidiaries. Except as set forth in Schedule 4.09 annexed
hereto (or as after the date hereof may be communicated in writing to the
Agent), no Federal income tax returns of the Parent or any of its Subsidiaries
are currently being audited by the United States Internal Revenue Service and
neither the Parent nor any of its Subsidiaries has as of the date hereof
requested or been granted any extension of time to file any Federal, state,
local or foreign tax return with respect to a tax return that as of the date
hereof has not been filed. Neither the Parent nor any of its Subsidiaries are
party to or have any obligation under any tax sharing agreement.
SECTION 4.10. Employee Benefit Plans. With respect to the
provisions of ERISA:
42
(1) No Reportable Event for which 30-day reporting is
required has occurred or is continuing with respect to any Pension Plan.
(2) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) has occurred with respect to any Plan
subject to Part 4 of Subtitle B of Title I of ERISA which has not been
corrected and which has had a Material Adverse Effect.
(3) Except as set forth on Schedule 4.10 annexed hereto,
neither the Parent nor any ERISA Affiliate is now, or has been during the
preceding five years, obligated to contribute to a Pension Plan or a
Multiemployer Plan. Neither the Parent nor any ERISA Affiliate has (A) ceased
operations at a facility so as to become subject to the provisions of Section
4062(e) of ERISA, (B) withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA, (C) ceased making
contributions to any Pension Plan subject to the provisions of Section 4064(a)
of ERISA to which the Parent, any Subsidiary of the Parent or any ERISA
Affiliate made contributions, (D) incurred or caused to occur a "complete
withdrawal" (within the meaning of Section 4203 of ERISA) or a "partial
withdrawal" (within the meaning of Section 4205 of ERISA) from a Multiemployer
Plan that is a Pension Plan so as to incur withdrawal liability under Section
4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under Section 4207 or 4208 of ERISA), or (E) been a party to any
transaction or agreement under which the provisions of Section 4204 of ERISA
were applicable.
(4) Except as set forth in Schedule 4.10 annexed hereto, no
notice of intent to terminate a Pension Plan has been filed, nor has any Plan
been terminated pursuant to the provisions of Section 4041(e) of ERISA.
(5) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of a trustee to
administer) any such Plan.
(6) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are not less than the present
value of the greater of (i) accrued benefits (both vested and non-vested) under
such Plan, or (ii) "benefit liabilities" (within the meaning of Section
4001(a)(16) of ERISA) under such Plan, in each case as of the latest actuarial
valuation date for such Plan (determined in accordance with the same actuarial
assumptions and methods as those used by the Plan's actuary in its valuation of
such Plan as of such valuation date) by an amount which has a Material Adverse
Effect on the Loan Parties and the ERISA Affiliates, taken as a whole. No such
Pension Plan
43
has incurred any "accumulated funding deficiency" (as defined in Section 412 of
the Code), whether or not waived.
(7) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Borrowers or any ERISA
Affiliate, which could reasonably be expected to be asserted, against any Plan
or the assets of any such Plan. No civil or criminal action brought pursuant to
the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or threatened
against any fiduciary or any Plan. Except as set forth on Schedule 4.10 annexed
hereto, none of the Plans or any fiduciary thereof (in its capacity as such)
has been the direct or indirect subject of any audit, investigation or
examination by any governmental or quasi-governmental agency.
(8) Except as set forth in Schedule 4.10 annexed hereto, all
of the Plans comply currently, in all material respects, both as to form and
operation, with their terms and with the provisions of ERISA and the Code, and
all other applicable laws, rules and regulations; all necessary governmental
approvals for the Plans have been obtained and a favorable determination as to
the qualification under Section 401(a) of the Code of each of the Plans which
is intended to be qualified under Section 4.01(a) of the Code has been made by
the Internal Revenue Service and a recognition of exemption from federal income
taxation under Section 501(c)(9) of the Code of each of the funded employee
welfare benefit plans (within the meaning of Section 3(1) of ERISA) has been
made by the Internal Revenue Service (except with respect to the Tax Reform Act
of 1986 in which case a timely application for such favorable determination has
been made), and nothing has occurred since the date of each such determination
or recognition letter that would adversely affect such qualification.
SECTION 4.11. No Material Misstatements. No information,
report, financial statement, exhibit or schedule prepared or furnished by or on
behalf of the Loan Parties to the Agent or any Lender in connection with any of
the Transactions or this Agreement, the Security Documents, the Notes or any
other Loan Documents or included therein contained or contains any material
misstatement of fact or omitted or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act. Neither the Parent nor any of its Subsidiaries is an "investment
company" as defined in, or is otherwise subject to regulation under, the
Investment Company Act of 1940. Neither the Parent nor any of its Subsidiaries
is a "holding company" as that term is defined in or is otherwise subject to
regulation under, the Public Utility Holding Company Act of 1935.
SECTION 4.13 . Each of the Security Documents creates and
grants to the Agent, for the benefit of the Lenders, a legal, valid and
perfected first (except as permitted pursuant to Section 7.01 hereof) priority
security
44
interest in the collateral identified therein. Such collateral or property is
not subject to any other Liens whatsoever, except Liens permitted by Section
7.01 hereof.
SECTION 4.14. Use of Proceeds. All proceeds of each borrowing
under the Revolving Credit Commitment after the Closing Date shall be used to
provide for working capital requirements of the Borrowers.
SECTION 4.15. Subsidiaries. As of the Closing Date, Schedule
4.15 annexed hereto sets forth each Subsidiary and Affiliate of DKA. The Parent
(exclusive of its investment in the stock of DKA) has total assets with a fair
market value of less than $100,000 and has a Tangible Net Worth greater than
zero (exclusive of inter-company Indebtedness permitted pursuant to Section
7.06(g) herein). Christiansburg Garment Co., Inc. is a non-operating Subsidiary
with total assets having a fair market value of less than $100,000 and a
Tangible Net Worth greater than zero.
SECTION 4.16. Title to Properties; Possession Under Leases;
Trademarks. (1) The Parent and each of its Subsidiaries has good and marketable
title to, or valid leasehold interest in, all of its respective properties and
assets (except to the extent permitted pursuant to Section 4.15 hereof) shown
on the most recent balance sheet referred to in Section 4.07(a) hereof and all
assets (except to the extent permitted pursuant to Section 4.15 hereof) and
properties acquired since the date of such balance sheet, except for such
properties owned by a Subsidiary hereafter created with the consent of the
Lenders (as to which such Subsidiary has good and marketable title to such
properties), except for such properties as are no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary course of
business, and except for minor defects in title that do not interfere with the
ability of any Borrower or any Subsidiary thereof to conduct its business as
now conducted and (after the date hereof) except as permitted pursuant to
Section 7.05 hereof. All such assets and properties are free and clear of all
Liens other than those permitted by Section 7.01 hereof.
(1) The Parent and each of its Subsidiaries has complied with
all material obligations under all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect and
each Borrower and each of its Subsidiaries enjoys peaceful and undisturbed
possession under all such leases.
(2) The Parent and each of its respective Subsidiaries owns
or controls all material trademarks, trademark rights, trade names, trade name
rights, copyrights, patents, patent rights and licenses which are necessary for
the conduct of the business of such Borrower and such Subsidiary. No Borrower
or Subsidiary thereof is, to their knowledge, infringing upon or otherwise
acting adversely to any of such trademarks, trademark rights, trade names,
trade name rights, copyrights, patent rights or licenses owned by any other
person or persons. There is no claim or action by any such other person
pending, or to the knowledge of any Responsible Officer of any Borrower or any
Subsidiary thereof, threatened, against any Borrower or any Subsidiary thereof
with
45
respect to any of the rights or property referred to in this Section 4.16(c),
except as after the date hereof, may be communicated in writing to the Agent.
SECTION 4.17. Solvency. (1)The fair salable value of the
assets of each Borrower and its Consolidated Subsidiaries is not less than the
amount that will be required to be paid on or in respect of the probable
liability on the existing debts and other liabilities (including contingent
liabilities) of such Borrower and its Consolidated Subsidiaries, as they become
absolute and mature.
(1) The assets of each Borrower and its Consolidated
Subsidiaries do not constitute unreasonably small capital for such Borrower and
its Consolidated Subsidiaries to carry out their business as now conducted and
as proposed to be conducted including the capital needs of such Borrower and
its Consolidated Subsidiaries, taking into account the particular capital
requirements of the business conducted by such Borrower and its Consolidated
Subsidiaries and projected capital requirements and capital availability
thereof.
(2) No Borrower or any Subsidiary thereof intends to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be received by such Borrower and such
Subsidiary, and of amounts to be payable on or in respect of debt of such
Borrower and such Subsidiary).
(3) No Borrower or any Subsidiary thereof believes that final
judgments against it in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, it will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum reasonable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered). The
cash flow of such Borrower and its Consolidated Subsidiaries, after taking into
account all other anticipated uses of the cash of such Borrower and its
Consolidated Subsidiaries (including the payments on or in respect of debt
referred to in paragraph (c) of this Section), will at all times be sufficient
to pay all such judgments promptly in accordance with their terms.
SECTION 4.18. Permits, etc. The Parent and each of its
Subsidiaries possess all licenses, permits, approvals and consents, including,
without limitation, all environmental, health and safety licenses, permits,
approvals and consents (collectively, "Permits") of all Federal, state and
local governmental authorities as required to conduct properly its business,
each such Permit is and will be in full force and effect, the Parent and each
Subsidiary is in compliance in all material respects with all such Permits, and
no event (including, without limitation, any violation of any law, rule or
regulation) has occurred which allows the revocation or termination of any such
Permit or any restriction thereon.
SECTION 4.19. Compliance with Environmental Laws. Except as
disclosed in Schedule 4.19 hereto (or as after the date hereof may be
communicated in
46
writing to the Agent): (i) the operations of the Parent and its Subsidiaries
comply in all material respects with all applicable Environmental Laws; (ii)
the Parent and its Subsidiaries and all of their present facilities or
operations, as well as to the knowledge of the Parent and its Subsidiaries
their past facilities or operations, are not subject to any judicial proceeding
or administrative proceeding or any outstanding written order or agreement with
any governmental authority or private party respecting (a) any Environmental
Law, (b) any Remedial Work, or (c) any Environmental Claims arising from the
Release of a Contaminant into the environment; (iii) to the best of the
knowledge of the Parent and its Subsidiaries, none of their operations is the
subject of any Federal or state investigation evaluating whether any Remedial
Work is needed to respond to a Release of any Contaminant into the environment;
(iv) neither the Parent nor any of its Subsidiaries nor any predecessor of the
Parent or any of its Subsidiaries has filed any notice under any Environmental
Law indicating past or present treatment, storage, or disposal of a Hazardous
Material or reporting a spill or Release of a Contaminant into the environment;
(v) to the best of the knowledge of the Borrowers, neither the Parent nor any
of its Subsidiaries has any contingent liability in connection with any Release
of any Contaminant into the environment; (vi) none of the operations of the
Parent nor any of its Subsidiaries involve the generation, transportation,
treatment or disposal of Hazardous Materials; (vii) neither the Parent nor any
of its Subsidiaries have disposed of any Contaminant by placing it in or on the
ground or waters of any premises owned, leased or used by any of them and to
the knowledge of the Borrowers neither has any lessee, prior owner, or other
person; (viii) no underground storage tanks (except heating oil tanks) or
surface impoundments are on any property of the Parent and its Subsidiaries;
and (ix) no Lien in favor of any governmental authority for (A) any liability
under any Environmental Law or regulations, or (B) damages arising from or
costs incurred by such governmental authority in response to a Release of a
Contaminant into the environment, has been filed or attached to the property of
the Parent and its Subsidiaries.
SECTION 4.20. No Change in Credit Criteria or Collection
Policies. There has been no material change in credit criteria or collection
policies concerning account receivables of DKA since March 4, 1995.
SECTION 4.21. Intentionally Omitted
SECTION 4.22. Inventory. All Eligible Inventory is of good
and merchantable quality, free from defects, and is not obsolete or
slow-moving. All Eligible inventory is located only at the locations identified
on Schedule I to the Security Agreement. The Borrowers keep accurate records of
their inventories and the costs thereof.
SECTION 4.23. Year 2000. The cost to the Borrowers of
reprogramming and testing of the Borrowers' computer systems and related
equipment to permit proper functioning in and following the year 2000 and of
the reasonably foreseeable consequences of year 2000 to the Borrowers
(including, without limitation,
47
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or have a Material Adverse Effect.
5. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other
Credits hereunder shall be subject to the following conditions precedent:
SECTION 5.1. All Credit Events. On each date on which a
Credit Event is to occur:
(1) The Administrative Agent shall have received a
notice of borrowing or request to assist in the issuance of a
Letter of Credit as required by Section 2.03 or 2.19 hereof.
(2) The representations and warranties set forth in
Article IV hereof and in any documents delivered herewith,
including, without limitation, the Loan Documents, shall be
true and correct in all material respects with the same
effect as though made on and as of such date (except insofar
as such representations and warranties relate expressly to an
earlier date).
(3) Each Borrower shall be in compliance with all the
terms and provisions contained herein on its part to be
observed or performed, and at the time of and immediately
after such Credit Event no Default or Event of Default shall
have occurred and be continuing.
(4) Each borrowing and request to assist in the
issuance of a Letter of Credit shall be deemed a
recertification by each Borrower as to its compliance with
(b) and (c) above and a certification that after giving
effect to each Revolving Credit Loan and each Letter of
Credit, Availability is zero or greater.
SECTION 5.2. First Borrowing. The obligations of the Lenders
in respect of the first Credit Event hereunder is subject to the following
additional conditions precedent:
(1) The Lenders shall have received the favorable
written opinion of counsel for the Borrowers and each of the
Guarantors and Grantors, substantially in the form of Exhibit
C hereto, dated the Closing Date, addressed to the Lenders
and satisfactory to the Agent.
(2) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation or constitutive
documents, in each case as amended to date, of each of the
Borrowers, the Grantors and the Guarantors, certified as of a
recent date by the Secretary of State or other appropriate
official of the state of its organization, and a certificate
as to the good standing of each from such
48
Secretary of State or other official, in each case dated as
of a recent date; (ii) a certificate of the Secretary of
each Borrower, Grantor and Guarantor, dated the Closing
Date and certifying (A) that attached thereto is a true and
complete copy of such person's By-laws as in effect on the
date of such certificate and at all times since a date
prior to the date of the resolution described in item (B)
below, (B) that attached thereto is a true and complete
copy of a resolution adopted by such person's Board of
Directors authorizing the execution, delivery and
performance of this Agreement, the other Loan Documents and
the Credit Events hereunder, as applicable, and that such
resolution has not been modified, rescinded or amended and
is in full force and effect, (C) that such person's
certificate or articles of incorporation or constitutive
documents has not been amended since the date of the last
amendment thereto shown on the certificate of good standing
furnished pursuant to (i) above, and (D) as to the
incumbency and specimen signature of each of such person's
officers executing this Agreement or any other Loan
Document delivered in connection herewith or therewith, as
applicable; (iii) a certificate of another of such person's
officers as to incumbency and signature of its Secretary;
and (iv) such other documents as the Agent or any Lender
may reasonably request.
(3) The Agent shall have received a certificate,
dated the Closing Date and signed by the Financial Officer of
each Borrower, confirming compliance with the conditions
precedent set forth in paragraphs (b) and (c) of Section 5.01
hereof and the conditions set forth in this Section 5.02.
(4) The Lenders and the Agent shall have received and
determined to be in form and substance satisfactory to them:
(1) evidence of the compliance by the Borrowers
with Section 6.03 hereof;
(2) the financial statements described in Section
4.07 hereof;
(3) evidence that the Transactions are in
compliance with all applicable laws and regulations
(including, without limitation, all applicable
environmental regulations);
(4) evidence of the extension by CIT of the term
of each of the Notification Factoring Agreements,
each dated April 28, 1998, from March 31, 1999 to
March 31, 2000;
(5) evidence of payment of all fees owed to the
Agent and the Lenders by the Borrowers under this
Agreement or otherwise;
(6) evidence that all requisite third party
consents (including, without limitation, consents
with respect to each of the Borrowers and
49
each of the Grantors and Guarantors) to the
Transactions have been received;
(7) evidence that there has been no material
adverse change in the business, assets, operations or
financial condition of the Parent and its
Subsidiaries since June 30, 1998; and
(8) evidence that there are no actions, suits or
proceedings at law or in equity or by or before any
governmental instrumentality or other agency or
regulatory authority now pending or threatened
against or affecting the Parent or any of its
Subsidiaries or any of their respective businesses,
assets or rights which involve any of the
Transactions.
(5) Each of Messrs. Kaye, Scholer, Fierman, Hays &
Handler, LLP, counsel to the Agent, and Messrs. Fried, Frank,
Harris, Shriver & Jacobson, counsel to the Administrative
Agent, shall have received payment in full for all reasonable
legal fees charged, and all reasonable costs and expenses
incurred, by such counsel through the Closing Date in
connection with the transactions contemplated under this
Agreement and the other Loan Documents and instruments in
connection herewith and therewith.
(6) The Agent and the Lenders shall have:
(7) All legal matters in connection with the
Transactions shall be satisfactory to the Agent, the Lenders
and their respective counsel in their sole discretion.
(8) The Agent shall have received such other
documents as the Lenders or the Agent or Agent's counsel
shall reasonably deem necessary.
6. AFFIRMATIVE COVENANTS
Each of the Borrowers and the Parent covenants and agrees
with each Lender that, so long as this Agreement shall remain in effect or the
principal of or interest on any Note, any amount under any Letter of Credit or
any fee, expense or other Obligation payable hereunder or in connection with
any of the Transactions shall be unpaid, it will, and will cause each of its
Subsidiaries and, with respect to Section 6.07 hereof, each ERISA Affiliate,
to:
SECTION 6.1. Legal Existence. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence.
SECTION 6.2. Businesses and Properties. At all times, (i) do
or cause to be done all things necessary to preserve, renew and keep in full
force and
50
effect the rights, Permits, franchises, patents, copyrights, trademarks and
trade names and (ii) use its best efforts, to do or cause to be done all things
necessary to preserve, renew and keep in full force and effect, the licenses,
in each case which are material to the conduct of its businesses; maintain and
operate such businesses in the same general manner in which they are presently
conducted and operated; comply with all laws, rules, regulations and
governmental orders (whether Federal, state or local) applicable to the
operation of such businesses whether now in effect or hereafter enacted
(including, without limitation, all applicable laws, rules, regulations and
governmental orders relating to public and employee health and safety and all
Environmental Laws) and with any and all other applicable laws, rules,
regulations and governmental orders, the lack of compliance with which would
have a Material Adverse Effect; take all actions which may be required to
obtain, preserve, renew and extend all Permits and other authorizations which
are material to the operation of such businesses; and at all times maintain,
preserve and protect all property material to the conduct of such businesses
and keep such property in good repair, working order and condition and from
time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
SECTION 6.3. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers,
(b) maintain such other insurance, to such extent and against such risks,
including fire, product liability, business interruption and other risks
insured against by extended coverage, as is customary with companies similarly
situated and in the same or similar businesses, provided, however, that such
insurance shall insure the property of the Borrowers against all risk of
physical damage, including, without limitation, loss by fire, explosion, theft,
fraud and such other casualties as may be reasonably satisfactory to the Agent
and the Administrative Agent, but in no event at any time in an amount less
than the replacement value of the Collateral, and provided, further, that at
all times the Borrowers shall keep in full force and effect the directors and
officers liability insurance presently being maintained, and in the amounts
presently being maintained, (c) maintain in full force and effect public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by any Borrower or any of its
Subsidiaries, in such amount as the Agent and the Administrative Agent shall
reasonably deem necessary, (d) maintain in full force and effect product
liability insurance against claims for personal injury and (e) maintain such
other insurance as may be required by law or as may be reasonably requested by
the Agent and the Administrative Agent for purposes of assuring compliance with
this Section 6.03. All insurance covering tangible personal property subject to
a Lien in favor of the Agent for the benefit of the Lenders granted pursuant to
the Security Documents shall provide that, in the case of each separate loss
the full amount of insurance proceeds shall be payable in accordance with
Section 2.09(d) and all insurance covering liability of any Borrower or any
Subsidiary thereof shall provide that the Agent is an additional insured
thereunder,
51
and all such insurance shall further provide for at least 30 days' prior
written notice to the Agent and the Administrative Agent of the cancellation or
substantial modification thereof.
SECTION 6.4. Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to Liens
upon such properties or any part thereof, unless being diligently contested in
good faith by appropriate proceedings and for which, if aggregating $100,000 or
more, adequate reserves have been established in accordance with Section
7.01(c).
SECTION 6.5. Financial Statements, Reports, etc. Furnish to
the Administrative Agent, with copies for each of the Lenders:
(1) within 90 days after the end of each Fiscal year, (i) a
Consolidated and consolidating balance sheet and income statement
showing the financial condition of the Parent and it Subsidiaries
as of the close of such Fiscal Year and the results of their
operations during such year, and (ii) a Consolidated and
consolidating statement of shareholders' equity and a Consolidated
and consolidating statement of cash flow, as of the close of such
Fiscal Year, all the foregoing Consolidated financial statements to
be audited by independent public accountants acceptable to the
Administrative Agent (which report shall not contain any
qualification except with respect to new accounting principles
mandated by the Financial Accounting Standards Board) and to be in
form and substance acceptable to the Administrative Agent;
(2) within 45 days after the end of each of the first three
fiscal quarters, (i) an unaudited Consolidated and consolidating
balance sheet and income statement showing the financial condition
and results of operations of the Parent and its Subsidiaries as of
the end of each such quarter and (ii) a Consolidated statement of
cash flow, in each case for the fiscal quarter just ended and for
the period commencing at the end of the immediately proceeding
Fiscal Year and ending with the last day of such fiscal quarter and
prepared and certified by the Financial Officer of the Parent as
presenting fairly the financial condition and results of operations
of the Parent and its Subsidiaries and as having been prepared in
accordance with GAAP, subject to normal year-end audit adjustments;
(3) promptly after the same become publicly available,
copies of such registration statements, annual, periodic and other
reports, and such proxy statements and other information, if any,
as shall be filed by the Parent or any Subsidiaries with the
Securities and Exchange Commission pursuant to the
52
requirements of the Securities Act of 1933 or the Securities
Exchange Act of 1934;
(4) (i) concurrently with any delivery under (a) or (b)
above, a certificate of the firm or person referred to therein
(which certificate furnished by the independent public accountants
referred to in paragraph (a) above may be limited to accounting
matters and disclaim responsibility for legal interpretations)
certifying that to the best of his or her knowledge no Default or
Event of Default has occurred (including calculations demonstrating
compliance, as of the dates of the financial statements being
furnished, with the covenants set forth in Sections 7.07, 7.11, and
7.12) and, if such a Default or Event of Default has occurred,
specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto; provided,
however, that any certificate delivered concurrently with (a) and
(b) above shall be signed by the Financial Officer of the Parent;
(5) concurrently with any delivery under (a) above, if
prepared, a management letter by the independent public accountants
who reported on the financial statements delivered under (a) above,
with respect to the internal audit and financial controls of the
Parent and its Subsidiaries;
(6) within twenty days of the end of each fiscal month, a
certificate executed by the Financial Officers of the Borrowers
demonstrating that as at the end of such fiscal month Availability
was zero or greater;
(7) within 30 days prior to the beginning of each Fiscal
Year, a summary of business plans and financial operation
projections (including, without limitation, with respect to capital
expenditures) for the Parent and its Subsidiaries for such Fiscal
Year (including monthly balance sheets and statements of income)
prepared by management and in form, substance and detail
(including, without limitation, principal assumptions) reasonably
satisfactory to the Administrative Agent (such projections to be
updated by the Borrowers on a quarterly basis thereafter);
provided, however, that the projections for the 1999 Fiscal Year
through March 2000 shall be delivered by no later than January 31,
1999;
(8) as soon as practicable, copies of all reports, forms,
filings, loan documents and financial information submitted to
governmental agencies (except tax returns) and/or its shareholders;
(9) the following information, documents or instruments no
later than the dates indicated without the benefit of any grace
period provided for in subparagraph (d) of Article VIII hereof:
53
(1) Weekly, no later than the second Business Day of
each week, an aging schedule of Receivables and a certificate
executed by the Financial Officer of the Borrowers
calculating the Borrowing Base and demonstrating compliance
with the Availability requirement;
(2) Monthly, no later than the second Business Day of
the first full week of each month, a certificate, which shall
be in the form of Exhibit H hereto and which shall be in
substance acceptable to the Administrative Agent, executed by
a Responsible Officer of the Borrowers, detailing the
locations of the inventory and the total value of such
inventory, the value of such inventory designated as "excess
inventory", and the value of such inventory not designated as
"excess inventory", by division, at each such location;
(3) Weekly, no later than the second Business Day of
each week, a certificate executed by a Responsible Officer of
the Borrowers, detailing the total value of the inventory,
the value of the inventory designated as "excess inventory"
and the value of the inventory not designated as "excess
inventory";
(4) In addition to the foregoing, such other
information (including, without limitation, tax returns)
regarding the operations, business affairs and financial
condition of the Parent and its Subsidiaries as the Agent,
the Administrative Agent or any Lender may reasonably
request; and
(5) By the last day of each month, weekly cash flow
availability forecasts for the eight-week period immediately
following such month.
SECTION 6.6. Litigation and Other Notices. Give the Agent and
the Administrative Agent prompt written notice of the following:
(1) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint
prohibiting, or having the effect of prohibiting, the making of the
Loans or occurrence of other Credit Events, or invalidating, or
having the effect of invalidating, any provision of this Agreement,
the Notes or the other Loan Documents, or the initiation of any
litigation or similar proceeding seeking any such injunction,
order, decision or other restraint;
(2) the filing or commencement of any action, suit or
proceeding against the Parent or any of its Subsidiaries, whether
at law or in equity or by or before any court or any Federal,
state, municipal or other governmental agency or authority, (i)
which is material and is brought by or on behalf of any
governmental agency or authority, or in which injunctive or other
equitable relief is sought or (ii) as to which it is probable
(within the meaning of Statement of
54
Financial Accounting Standards No. 5) that there will be an
adverse determination and which, if adversely determined, would
(A) reasonably be expected to result in liability of one or more
of the Parent or any Subsidiary in an aggregate amount of
$325,000 or more, not reimbursable by insurance, or (B)
materially impair the right of the Parent or any Subsidiary to
perform its obligations under this Agreement, any Note or any
other Loan Document to which it is a party;
(3) any Default or Event of Default, specifying the nature
and extent thereof and the action (if any) which is proposed to be
taken with respect thereto; and
(4) any development in the business or affairs of the
Parent or any of its Subsidiaries which has had or which is likely,
in the reasonable judgment of any Responsible Officer of any
Borrower, to have, a Material Adverse Effect.
SECTION 6.7. ERISA. (1) Pay and discharge promptly any
liability imposed upon it pursuant to the provisions of Title IV of ERISA;
provided, however, that neither the Borrowers nor any ERISA Affiliate shall be
required to pay any such liability if (1) the amount, applicability or validity
thereof shall be diligently contested in good faith by appropriate proceedings,
and (2) such person shall have set aside on its books reserves which, in the
opinion of the independent certified public accountants of such person, are
adequate with respect thereto.
(1) Deliver to the Agent and the Administrative Agent,
promptly, and in any event within 30 days, after (i) the occurrence of any
Reportable Event, a copy of the materials that are filed with the PBGC, subject
to a 30-day reporting requirement, (ii) any Borrower or any ERISA Affiliate or
an administrator of any Pension Plan files with participants, beneficiaries or
the PBGC a notice of intent to terminate any such Plan, a copy of any such
notice, (iii) the receipt of notice by any Borrower or any ERISA Affiliate or
an administrator of any Pension Plan from the PBGC of the PBGC's intention to
terminate any Pension Plan or to appoint a trustee to administer any such Plan,
a copy of such notice, (iv) any Borrower or any ERISA Affiliate knows or has
reason to know of any event or condition which might constitute grounds under
the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan, an explanation of
such event or condition, (v) the receipt by any Borrower or any ERISA Affiliate
of an assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment, (vi) any Borrower or any ERISA
Affiliate knows or has reason to know of any event or condition which might
cause any one of them to incur a liability under Section 4062, 4063, 4064 or
4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such
event or condition, and (vii) any Borrower or any ERISA Affiliate knows or has
reason to know that an application is to be, or has been, made to the Secretary
of the Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code, a copy of such application, and in each
case described in clauses (i) through (vi)
55
together with a statement signed by the Financial Officer setting forth details
as to such Reportable Event, notice, event or condition and the action which
such Borrower or such ERISA Affiliate proposes to take with respect thereto.
SECTION 6.8. Maintaining Records; Access to Properties and
Inspections; Right to Audit. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at reasonable times and as often as any Lender may request, permit
any authorized representative designated by such Lender to visit and inspect
the properties and financial records of the Borrowers and their Subsidiaries
and to make extracts from such financial records at such Lender's expense, and
permit any authorized representative designated by such Lender to discuss the
affairs, finances and condition of the Borrowers and their Subsidiaries with
the appropriate Financial Officer and such other officers as the Borrowers
shall deem appropriate and the Borrowers' independent public accountants, as
applicable. The Administrative Agent shall have the right to audit, up to one
time per fiscal quarter (or as often as it may request, upon the occurrence and
during the continuance of an Event of Default), the existence and condition of
the accounts receivable, inventory, accounts payable, books and records of the
Borrowers and their Subsidiaries and to review their compliance with the terms
and conditions of this Agreement and the other Loan Documents. The Borrowers
shall pay to the Administrative Agent for its own account an audit fee for each
such audit equal to $750 per day per auditor.
SECTION 6.9. Use of Proceeds. Use the proceeds of the Credit
Events only for the purposes set forth in Section 4.14 hereof.
SECTION 6.10. Fiscal Year-End. Cause its Fiscal Year end to
remain unchanged.
SECTION 6.11. Further Assurances. Execute any and all further
documents and take all further actions which may be required under applicable
law, or which the Agent may reasonably request, to grant, preserve, protect and
perfect the first priority security interest created by the Security Documents
in the Collateral.
SECTION 6.12. Additional Grantors and Guarantors. Promptly
inform the Agent and the Administrative Agent of the creation or acquisition of
any direct or indirect Subsidiary (subject to the provisions of Section 7.06
hereof) and cause each direct or indirect Subsidiary not in existence on the
date hereof to enter into a Guarantee in form and substance satisfactory to the
Agent and the Administrative Agent, and to execute the Security Documents, as
applicable, as a Grantor, and cause each such Subsidiary to pledge its accounts
receivable and all other assets pursuant to the Security Agreement.
SECTION 6.13. Environmental Laws. (1) Comply, and cause each
of their Subsidiaries to comply, in all material respects with the provisions
of all
56
Environmental Laws, and shall keep their properties and the properties of their
Subsidiaries free of any Lien imposed pursuant to any Environmental Law. The
Borrowers shall not cause or suffer or permit, and shall not suffer or permit
any of their Subsidiaries to cause or suffer or permit, the property of the
Borrowers or their Subsidiaries to be used for the generation, production,
processing, handling, storage, transporting or disposal of any Hazardous
Material, except for Hazardous Materials used in the ordinary course of
business of the Borrowers and disclosed in Schedule 6.13 hereto, or (after the
date hereof) notified to the Agent and the Administrative Agent, in writing, in
which case such Hazardous Materials shall be used, stored, generated, treated
and disposed of only in compliance with Environmental Law.
(1) Supply to the Agent and the Administrative Agent copies
of all submissions by the Borrowers or any of their Subsidiaries to any
governmental body with respect to Environmental Laws and of the reports of all
environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of
asbestos, soil, or subsurface or other materials or conditions) that may be
conducted or performed (by or on behalf of the Borrowers or any of their
Subsidiaries) on or regarding the properties owned, operated, leased or
occupied by the Borrowers or any of their Subsidiaries or regarding any
conditions that might have been affected by Hazardous Materials on or Released
or removed from such properties. The Borrowers shall also permit and authorize,
and shall cause their Subsidiaries to permit and authorize, the consultants,
attorneys or other persons that prepare such submissions or reports or perform
such audits, tests, studies or assessments to discuss such submissions, reports
or audits with the Agent and the Administrative Agent and the Lenders.
(2) Promptly (and in no event more than ten Business Days
after the Borrowers become aware or are otherwise informed of such event)
provide oral and written notice to the Agent and the Administrative Agent upon
the happening of any of the following:
(1) any Borrower, any Subsidiary of any Borrower, or
any tenant or other occupant of any property of such Borrower
or such Subsidiary receives notice of any claim, complaint,
charge or notice of a violation or potential violation of any
Environmental Law;
(2) there has been a spill or other Release of
Hazardous Materials upon, under or about or affecting any of
the properties owned, operated, leased or occupied by any
Borrower or any Subsidiary of any Borrower, or Hazardous
Materials at levels or in amounts that may have to be
reported, remedied or responded to under Environmental Law
are detected on or in the soil or groundwater;
57
(3) any Borrower or any Subsidiary of any Borrower is
or may be liable for any costs of cleaning up or otherwise
responding to a Release of Hazardous Materials;
(4) any part of the properties owned, operated,
leased or occupied by any Borrower or any Subsidiary of any
Borrower is or may be subject to a Lien under any
Environmental Law; or
(5) any Borrower or any Subsidiary of any Borrower
undertakes any Remedial Work with respect to any Hazardous
Materials.
(3) Timely undertake and complete any Remedial Work required
by any Environmental Law.
(4) Without in any way limiting the scope of Section 11.04(c)
and in addition to any obligations thereunder, each Borrower hereby indemnifies
and agrees to hold the Agent and the Administrative Agent and the Lenders
harmless from and against any liability, loss, damage, suit, action or
proceeding arising out of its business or the business of its Subsidiaries
pertaining to Hazardous Materials, including, but not limited to, claims of any
governmental body or any third person arising under any Environmental Law or
under tort, contract or common law. To the extent laws of the United States or
any applicable state or local law in which property owned, operated, leased or
occupied by any Borrower or any Subsidiary of any Borrower is located provide
that a Lien upon such property of such Borrower or such Subsidiary may be
obtained for the removal of Hazardous Materials which have been or may be
Released, no later than ninety days after notice is given by the Agent and the
Administrative Agent to such Borrower or such Subsidiary, such Borrower or such
Subsidiary shall deliver to the Agent and the Administrative Agent a report
issued by a qualified third party engineer certifying as to the existence of
any Hazardous Materials located upon or beneath the specified property. To the
extent any Hazardous Materials located therein or thereunder either subject the
property to Lien or require removal to safeguard the health of any persons, the
removal thereof shall be an affirmative covenant of the Borrowers hereunder.
(5) In the event that any Remedial Work is required to be
performed by any Borrower or any Subsidiary of any Borrower under any
applicable Environmental Law, any judicial order, or by any governmental
entity, such Borrower or such Subsidiary shall commence all such Remedial Work
at or prior to the time required therefor under such Environmental Law or
applicable judicial orders and thereafter diligently prosecute to completion
all such Remedial Work in accordance with and within the time allowed under
such applicable Environmental Laws or judicial orders.
SECTION 6.14. Pay Obligations to Lenders and Perform Other
Covenants. (a) Make full and timely payment of the Obligations, whether now
existing or hereafter arising, (b) duly comply with all the terms and covenants
contained in this
58
Agreement (including, without limitation, the borrowing limitations and
mandatory prepayments in accordance with Article II hereof) in each of the
other Loan Documents, all at the times and places and in the manner set forth
therein, and (c) except for the filing of continuation statements and the
making of other filings by the Agent as secured party or assignee, at all times
take all actions necessary to maintain the Liens and security interests
provided for under or pursuant to this Agreement and the Security Documents as
valid and perfected first Liens on the property intended to be covered thereby
(subject only to Liens expressly permitted hereunder) and supply all
information to the Agent necessary for such maintenance.
SECTION 6.15. Intentionally Omitted
SECTION 6.16. Year 2000. Take all actions necessary to
complete by January 1, 1999 any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) the Borrowers' computer
systems and (ii) equipment containing embedded microchips (including systems
and equipment supplied by others or with which Borrowers' systems interface)
and the testing of all such systems and equipment, as so programmed.
7. NEGATIVE COVENANTS
Each of the Borrowers and the Parent covenants and agrees
with each Lender that, so long as this Agreement shall remain in effect or the
principal of or interest on any Note, any amount under any Letter of Credit, or
any fee, expense or other amount payable hereunder or in connection with any of
the Transactions shall be unpaid, it will not and will not cause or permit any
of its Subsidiaries and, in the case of Section 7.18 hereof, any ERISA
Affiliate to, either directly or indirectly:
SECTION 7.1. Liens. Incur, create, assume or permit to exist
any Lien on any of its property or assets (including the stock of any direct or
indirect Subsidiary), whether owned at the date hereof or hereafter acquired,
or assign or convey any rights to or security interests in any future revenues,
except:
(1) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions and other
social security benefits (not including any lien described in
Section 412(m) of the Code);
(2) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar
liens, incurred in good faith in the ordinary course of business
and securing obligations which are not overdue for a period of more
than thirty days or which are being contested in good faith by
appropriate proceedings as to which any Borrower or any of its
59
Subsidiaries, as the case may be, shall, to the extent required by
GAAP, have set aside on its books adequate reserves;
(3) A Lien or Liens arising from unpaid federal, state or
local taxes (x) which are being contested in good faith by
appropriate proceedings and (y) for which if aggregating $100,000
or more adequate reserves have been established in amounts not less
than the amounts secured by such Liens (or such lesser amounts as
may be consented to by the Agent and the Administrative Agent);
provided, however, that the Borrowers shall pay any such Lien
immediately upon the commencement of any action or proceeding to
foreclose on any property covered by such Lien unless such action
has been stayed or a surety bond, in form, substance and amount
reasonably satisfactory to the Agent and the Administrative Agent
has been delivered to the Agent and the Administrative Agent;
(4) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use
of property or minor irregularities of title (and with respect to
leasehold interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased
property, with or without consent of the lessee) which do not in
the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its
business;
(5) Liens upon any equipment acquired through the purchase or
lease by any Borrower or any of its Subsidiaries which are created
or incurred contemporaneously with such acquisition to secure or
provide for the payment of any part of the purchase price of, or
lease payments on, such equipment (but no other amounts and not in
excess of the purchase price or lease payments); provided, however,
that any such Lien shall not apply to any other property of the
Borrowers or any of their Subsidiaries; and provided, further, that
after giving effect to such purchase or lease, compliance is
maintained with Section 7.07 hereof;
(6) Liens existing on the date of this Agreement and set
forth in Schedule 7.01 annexed hereto but not the extension,
renewal or refunding of the Indebtedness secured thereby;
(7) Liens created in favor of the Agent for the benefit of
the Lenders; or
(8) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money),
statutory obligations, surety, customs and appeal bonds and other
obligations of like nature, incurred as an incident to and in the
ordinary course of business.
60
SECTION 7.2. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby any Borrower or
any of its Subsidiaries shall sell or transfer any property, real or personal,
and used or useful in its business, whether now owned or hereafter acquired,
and thereafter rent or lease such property or other property which such
Borrower or such Subsidiary intends to use for substantially the same purpose
or purposes as the property being sold or transferred.
SECTION 7.3. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness other than (i) Indebtedness secured by Liens permitted
under Section 7.01, (ii) Indebtedness (including, without limitation,
Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed
hereto, but not the extension, renewal or refunding thereof, (iii) Indebtedness
incurred hereunder, (iv) Indebtedness to trade creditors incurred in the
ordinary course of business, (v) Guarantees constituting the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, (vi) Guarantees of the Obligations, (vii) purchase money Indebtedness
not to exceed $1,000,000 at any time outstanding to the extent permitted by
Sections 7.01(e) and 7.07 hereof, (viii) Subordinated Indebtedness, (ix)
Guarantees by one Borrower of another Borrower's Indebtedness to trade
creditors (incurred in the ordinary course of such Borrower's business)
pursuant to agreements in form and substance satisfactory to the Lenders, (x)
Guarantees by a Borrower or a Guarantor of a Borrower's (other than MegaKnits)
factoring arrangements pursuant to agreements in form and substance
satisfactory to the Lenders and (xi) guarantees by DKA and BIC of each other's
normal trade liabilities pursuant to guarantees in form and substance
satisfactory to the Lenders.
SECTION 7.4. Dividends, Distributions and Payments. Declare
or pay, directly and indirectly, any cash dividends or make any other
distribution, whether in cash, property, securities or a combination thereof,
with respect to (whether by reduction of capital or otherwise) any shares of
its capital stock or directly or indirectly redeem, purchase, retire or
otherwise acquire for value (or permit any Subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose, except as set forth on Schedule 7.04 annexed hereto.
SECTION 7.5. Consolidations, Mergers and Sales of Assets.
Consolidate with or merge into any other person, or sell, lease, transfer or
assign to any persons or otherwise dispose of (whether in one transaction or a
series of transactions) any of its assets (whether now owned or hereafter
acquired), or sell any of its inventory other than in the normal course of
business, or permit another person to merge into it, or acquire all or
substantially all the capital stock or assets of any other person, except as
set forth on Schedule 7.05 annexed hereto.
SECTION 7.6. Investments. Own, purchase or acquire any stock,
obligations, assets or securities of, or any interest in, or make any capital
contribution or loan or advance to, any other person, or make any other
investments, except:
61
(1) loans and advances to Affiliates (other than the Parent
and other than the Subsidiaries listed on Schedule 7.06 annexed
hereto) arising in the ordinary course of business not to exceed
$500,000 in the aggregate at any one time outstanding;
(2) loans and advances to the Parent in the ordinary course
of business (i) to pay taxes which are currently due and payable,
(ii) to pay litigation costs and (iii) to fund payroll and overhead
expenses (but not in excess of $500,000) up to an aggregate amount
of $5,000,000 in any Fiscal Year;
(3) investments in the stock of any Subsidiary existing on
the Closing Date, but not any additional investments therein;
(4) as set forth on Schedule 7.06 annexed hereto;
SECTION 7.7. Capital Expenditures. Permit the aggregate
amount of payments made for capital expenditures, including Capitalized Lease
Obligations and Indebtedness secured by Liens permitted under Section 7.01(e)
hereof for the Parent and its Subsidiaries on a consolidated basis to exceed
$3,500,000 in Fiscal Year 1998 or $2,000,000 in each Fiscal Year thereafter.
SECTION 7.8. Itentionally Omitted
SECTION 7.9. Itentionally Omitted
SECTION 7.10. Intentionally Omitted.
SECTION 7.11. EBITDA. Permit EBITDA of the Parent and its
Subsidiaries (in each case computed and calculated in accordance with GAAP) on
a Consolidated basis for each four consecutive fiscal quarter period ending on
the last day of each fiscal quarter to be less than (i) $5,800,000 for the
fiscal quarters ending December 31, 1998, March 31, 1999 and June 30, 1999 and
(ii) $6,700,000 for each fiscal quarter thereafter; provided, however, that the
minimum EBITDA levels set forth herein may be adjusted from time to time to new
levels mutually agreed upon by the Borrowers and the Lenders.
SECTION 7.12. Tangible Net Worth. Permit the Tangible Net
Worth of the Parent and its Subsidiaries on a Consolidated basis to be less
than $19,500,000 at any time.
SECTION 7.13. Business. Alter the nature of its business as
operated on the date of this Agreement in any material respect.
SECTION 7.14. Sales of Receivables. Sell, assign, discount,
transfer, or otherwise dispose of any accounts receivable, promissory notes,
drafts or trade
62
acceptances or other rights to receive payment held by it, with or without
recourse, except (i) for the purpose of collection or settlement in the
ordinary course of business, (ii) the sale of any such accounts to the Agent or
the Administrative Agent, for the ratable benefit of the Lenders, or (iii) as
set forth on Schedule 7.14 annexed hereto.
SECTION 7.15. Use of Proceeds. Permit the proceeds of any
Credit Event to be used for any purpose which entails a violation of, or is
inconsistent with, Regulation T, U or X of the Board, or for any purpose other
than those set forth in Section 4.14 hereof.
SECTION 7.16. ERISA. (1) Engage in any transaction in
connection with which the Borrower or any ERISA Affiliate could be subject to
either a material civil penalty assessed pursuant to the provisions of Section
502 of ERISA or a material tax imposed under the provisions of Section 4975 of
the Code.
(1) Terminate any Pension Plan in a "distress termination"
under Section 4041 of ERISA, or take any other action which could result in a
material liability of the Borrower or any ERISA Affiliate to the PBGC.
(2) Fail to make payment when due of all amounts which, under
the provisions of any Plan, the Borrower or any ERISA Affiliate is required to
pay as contributions thereto, or, with respect to any Pension Plan, permit to
exist any material "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA and Section 412 of the Code), whether or not waived, with
respect thereto.
(3) Adopt an amendment to any Pension Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code.
SECTION 7.17. Accounting Changes. Make, or permit any
Subsidiary to make any change in their accounting treatment or financial
reporting practices except as required or permitted by GAAP or any taxing
authority.
SECTION 7.18. Prepayment or Modification of Indebtedness;
Modification of Certain Documents. (1) Directly or indirectly prepay, redeem,
purchase or retire any Indebtedness, including, without limitation, any
Subordinated Indebtedness, other than Indebtedness incurred hereunder.
(1) Modify, amend or otherwise alter the terms and provisions
of any Subordinated Indebtedness.
(2) Modify, amend or alter their certificates or articles of
incorporation or preferred stock/certificates of designations.
SECTION 7.19. Transactions with Affiliates. Except as
otherwise specifically set forth in this Agreement, directly or indirectly
purchase, acquire or lease
63
any property from, or sell, transfer or lease any property to, or enter into
any other transaction with, any stockholder, Affiliate or agent of the
Borrower, except at prices and on terms not less favorable to it than that
which would have been obtained in an arm's-length transaction with a
non-affiliated third party.
SECTION 7.20. Negative Pledges, Etc. Enter into any agreement
(other than this Agreement or any other Loan Document) which (a) prohibits the
creation or assumption of any Lien upon any of the Collateral, including,
without limitation, any hereafter acquired property, or (b) specifically
prohibits the amendment or other modification of this Agreement or any other
Loan Document.
SECTION 7.21. Application of Tax Attributes. Apply the excess
of any amount paid to satisfy Federal, state, local or foreign tax liability of
the Parent and its Subsidiaries for a particular period over the actual tax
liability of such Persons for such period (including, without limitation,
amounts any such Person is entitled to receive as a refund) to offset the tax
liability of such Persons for any other taxable period (it being understood
that neither the Borrowers nor the Parent nor any Subsidiary thereof shall
elect to receive any tax refunds in a form other than cash).
8. EVENTS OF DEFAULT
In case of the happening of any of the following events
(herein called "Events of Default"):
(1) any representation or warranty made or deemed made in or
in connection with this Agreement, any of the Security Documents,
the Notes or other Loan Documents or any Credit Events hereunder,
shall prove to have been incorrect in any material respect when
made or deemed to be made;
(2) default shall be made in the payment of any principal of
any Note or of any reimbursement obligation with respect to any
Letter of Credit or Letter of Credit Guaranties when and as the
same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(3) default shall be made in the payment of any interest on
any Note, or any fee or any other amount payable hereunder, or
under the Notes, Letters of Credit or Letter of Credit Guaranties,
or any other Loan Document or in connection with any other Credit
Event or the Transactions when and as the same shall become due and
payable and such default shall continue for a period of five days;
(4) default shall be made in the due observance or
performance of any covenant, condition or agreement to be observed
or performed on the part of any
64
Loan Party pursuant to the terms of this Agreement, any of the
Notes, any of the Security Documents or any other Loan Document
and in the case of a default under Sections 6.05, 6.06(a) and
(b), 6.07, 6.11 and 6.13 such default shall continue for a
period of 15 days and in the case of a default under Section
6.02 such default shall continue for a period of 30 days;
(5) any Loan Party shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of
the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, liquidation or similar law, (ii) consent to
the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator or similar official for
any Loan Party or for a substantial part of its property or assets,
(iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take corporate action for the
purpose of effecting any of the foregoing;
(6) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Loan Party, or of
a substantial part of the property or assets of any Loan Party,
under Title 11 of the United States Code or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any Loan Party or for a
substantial part of the property of any Loan Party, or (iii) the
winding-up or liquidation of any Loan Party; and such proceeding or
petition shall continue undismissed for 45 days or an order or
decree approving or ordering any of the foregoing shall continue
unstayed and in effect for 45 days;
(7) default shall be made with respect to any Indebtedness or
obligations under a capitalized lease of any Loan Party (excluding
Indebtedness outstanding hereunder) in an aggregate amount
exceeding $100,000 if the effect of any such default shall be to
accelerate, or to permit the holder or obligee of any such
Indebtedness or obligations under a capitalized lease (or any
trustee on behalf of such holder or obligee) at its option to
accelerate, the maturity of such Indebtedness or obligations under
a capitalized lease;
(8) (i) a Reportable Event the 30-day reporting requirement
for which has not been waived shall have occurred with respect to a
Pension Plan, (ii) the filing by any Loan Party, any ERISA
Affiliate, or an administrator of any Plan of a notice of intent to
terminate such a Plan in a "distress termination" under the
provisions of Section 4041 of ERISA, (iii) the receipt of notice by
any Loan Party, any ERISA Affiliate, or an administrator of a Plan
that the PBGC has instituted
65
proceedings to terminate (or appoint a trustee to administer) such
a Pension Plan, (iv) any other event or condition exists which
might, in the reasonable judgment of the Administrative Agent,
constitute grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee to
administer) any Pension Plan by the PBGC, (v) a Pension Plan shall
fail to maintain the minimum funding standard required by Section
412 of the Code for any plan year or a waiver of such standard is
sought or granted under the provisions of Section 412(d) of the
Code, (vi) any Loan Party or any ERISA Affiliate has incurred, or
is likely to incur, a liability under the provisions of Section
4062, 4063, 4064 or 4201 of ERISA, (vii) any Loan Party or any
ERISA Affiliate fails to pay the full amount of an installment
required under Section 412(m) of the Code, (viii) the occurrence of
any other event or condition with respect to any Plan which would
constitute an event of default under any other agreement entered
into by any Loan Party or any ERISA Affiliate, and in each case in
clauses (i) through (viii) of this subsection (h), such event or
condition, together with all other such events or conditions, if
any, could subject any Loan Party or any ERISA Affiliate to any
taxes, penalties or other liabilities which, in the reasonable
judgment of the Administrative Agent, could have a Material Adverse
Effect on the financial condition of any Loan Party or any ERISA
Affiliate;
(9) any Loan Party or any ERISA Affiliate (i) shall have been
notified by the sponsor of a Multiemployer Plan that it has
incurred any withdrawal liability which has a Material Adverse
Effect on any Loan Party or any ERISA Affiliate to such
Multiemployer Plan, and (ii) does not have reasonable grounds for
contesting such withdrawal liability and is not in fact contesting
such withdrawal liability in a timely and appropriate manner;
(10) (x) a judgment (not reimbursed by insurance policies of
any Loan Party) or decree for the payment of money, a fine or
penalty which when taken together with all other such judgments,
decrees, fines and penalties shall exceed $325,000 shall be
rendered by a court or other tribunal against any Loan Party and
(i) shall remain undischarged or unbonded for a period of 30
consecutive days during which the execution of such judgment,
decree, fine or penalty shall not have been stayed effectively or
(ii) any judgment creditor or other person shall legally commence
actions to collect on or enforce such judgment, decree, fine or
penalty, or (y) Borrowers' directors and officers liability
insurance carriers at any time for any reason shall either (A) deny
liability to pay or (B) fail to pay, in each case, any judgment,
award or settlement amount arising from or in connection with the
shareholders' litigation pending against the Borrowers and certain
Affiliates;
(11) this Agreement, any Note, any of the Security Documents,
any Guarantee or other Loan Documents shall for any reason cease to
be, or shall be asserted by any Loan Party not to be, a legal,
valid and binding obligation of
66
any Loan Party, enforceable in accordance with its terms, or the
security interest or Lien purported to be created by any of the
Security Documents shall for any reason cease to be, or be asserted
by any Loan Party not to be, a valid, first priority perfected
security interest in any Collateral (except to the extent otherwise
permitted under this Agreement or any of the Security Documents);
(12) a Change of Control shall occur; or
(13) a Lien or Liens aggregating $100,000 or more arising
from unpaid federal, state or local taxes shall be filed against
any Borrower's or the Parent's properties or assets unless such
Lien or Liens is (are) being contested in good faith by appropriate
proceedings and unless adequate reserves have been established in
amounts not less than the amounts secured by such Liens (or such
lesser amounts as may be consented to by the Administrative Agent);
or
(14) Harvey Appelle shall cease to be the Chairman of the
Parent, unless a replacement reasonably satisfactory to the
Required Lenders is found within 180 days; or
(15) any Borrower (other than MegaKnits) shall not maintain a
factoring arrangement on terms and conditions acceptable to each of
the Agent and the Administrative Agent, with either CIT or another
financial institution acceptable to the Required Lenders or such
arrangement shall be amended in a manner as to cause a Material
Adverse Effect (it being understood and agreed that, for purposes
hereof, any amendment to such arrangement in respect of, or that
results solely in, a change to any fees, rates or charges
thereunder or customer credits thereunder solely with respect to
any surcharge or split-risk arrangements shall not be deemed to
cause a Material Adverse Effect; it being further understood and
agreed that the foregoing is not intended to be, nor shall the
foregoing be deemed to be, an exclusive list of amendments to a
Borrower's factoring arrangement that shall not be deemed to cause
a Material Adverse Effect) or CIT terminates the factoring
arrangements with the Borrowers (other than MegaKnits) entered into
on April 28, 1998 (as amended through the Closing Date);
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event,
the Administrative Agent may, and upon the written request of the Required
Lenders shall, by written notice (or facsimile notice promptly confirmed in
writing) to the Borrower, take any or all of the following actions at the same
or different times: (i) terminate forthwith all or any portion of the Total
Commitment and the obligations of the Lenders to issue Letters of Credit
hereunder; (ii) demand that the Borrower provide to the Lenders, and the
Borrower upon such demand agree to provide, cash collateral in an amount equal
to the aggregate Letter of Credit Usage then existing, such cash collateral to
be deposited in a special cash collateral account to be held by the Agent for
the benefit of
67
the Lenders; and (iii) declare the Notes and any amounts then owing to the
Lenders on account of drawings under any Letters of Credit to be forthwith due
and payable, whereupon the principal of such Notes, together with accrued
interest and fees thereon and any amounts then owing to the Lenders on account
of drawings under any Letters of Credit and other liabilities of the Borrowers
accrued hereunder, shall become forthwith due and payable both as to principal
and interest, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in the Notes to the contrary notwithstanding; provided,
however, that with respect to a default described in paragraph (e) or (f)
above, the Total Commitment and the obligations of the Lenders to issue or
participate in Letter of Credit Guaranties hereunder shall automatically
terminate and the principal of the Notes, together with accrued interest and
fees thereon and any amounts then owing to the Lenders on account of drawings
under any Letters of Credit and any other liabilities of the Borrower accrued
hereunder shall automatically become due and payable, both as to principal and
interest, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Borrower, anything contained herein
or in the Notes to the contrary notwithstanding.
9. AGENTS
In order to expedite the transactions contemplated by this
Agreement, (a) The Chase Manhattan Bank is hereby appointed to act as Agent on
behalf of the Lenders and (b) The CIT Group/Commercial Services, Inc. is hereby
appointed to act as Administrative Agent on behalf of the Lenders. Each of the
Lenders and each subsequent holder of any Note or Letter of Credit Issuer by
its acceptance thereof, irrevocably authorizes the Agent to take such action on
its behalf and to exercise such powers hereunder and under the Security
Documents and other Loan Documents as are specifically delegated to or required
of the Agent by the terms hereof and the terms thereof together with such
powers as are reasonably incidental thereto. Each of the Lenders and each
subsequent holder of any Note or any Letter of Credit Issuer by its acceptance
thereof, irrevocably authorizes the Administrative Agent to take such action on
its behalf and to exercise such powers hereunder and under the other Loan
Documents as are specifically delegated to or required of the Administrative
Agent by the terms hereof and the terms thereof together with such powers as
are reasonably incidental thereto. Neither the Agent, the Administrative Agent,
nor any of their respective directors, officers, employees or agents shall be
liable as such for any action taken or omitted to be taken by it or them
hereunder or under any of the Security Documents and other Loan Documents or in
connection herewith or therewith (a) at the request or with the approval of the
Required Lenders (or, if otherwise specifically required hereunder or
thereunder, the consent of all the Lenders) or (b) other than to the extent
that such action or omission directly results in a loss, claim or liability
arising out of the gross negligence or willful misconduct of the Agent or
Administrative Agent
68
(as the case may be) or any of their respective directors, officers, employees
or agents, as determined by a final judgment of a court of competent
jurisdiction.
The Administrative Agent is hereby expressly authorized on
behalf of the Lenders, without hereby limiting any implied authority, to
receive on behalf of each of the Lenders any payment of principal of or
interest on the Notes outstanding hereunder and all other amounts accrued
hereunder paid to the Administrative Agent, and promptly to distribute to each
Lender its proper share of all payments so received. Each of the Administrative
Agent and the Agent are hereby expressly authorized on behalf of the Lenders,
without hereby limiting any implied authority, (a) to distribute to each Lender
copies of all notices, agreements and other material as provided for in this
Agreement or in the Security Documents and other Loan Documents as received by
the Agent or the Administrative Agent (as the case may be) and (b) to take all
actions with respect to this Agreement and the Security Documents and other
Loan Documents as are specifically delegated to the Administrative Agent or the
Agent (as the case may be).
In the event that (a) any Borrower fails to pay when due the
principal of or interest on any Note, any amount payable under any Letter of
Credit or Letter of Credit Guaranty, or any fee payable hereunder or (b) the
Administrative Agent receives written notice of the occurrence of a Default or
an Event of Default, the Administrative Agent within a reasonable time shall
give written notice thereof to the Lenders, and the Agent (upon the occurrence
and continuance of an Event of Default) or the Administrative Agent shall take
such action with respect to such Event of Default or other condition or event
as it shall be directed to take by the Required Lenders; provided, however,
that, unless and until the Administrative Agent or the Agent (as the case may
be) shall have received such directions, the Administrative Agent or the Agent
(as the case may be) may take such action or refrain from taking such action
hereunder or under the Security Documents or other Loan Documents with respect
to a Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
Neither the Agent nor the Administrative Agent shall be
responsible in any manner to any of the Lenders for the effectiveness,
enforceability, perfection, value, genuineness, validity or due execution of
this Agreement, the Notes or any of the other Loan Documents or Collateral or
any other agreements or certificates, requests, financial statements, notices
or opinions of counsel or for any recitals, statements, warranties or
representations contained herein or in any such instrument or be under any
obligation to ascertain or inquire as to the performance or observance of any
of the terms, provisions, covenants, conditions, agreements or obligations of
this Agreement or any of the other Loan Documents or any other agreements on
the part of the Borrowers and, without limiting the generality of the
foregoing, each of the Agent and the Administrative Agent shall, in the absence
of knowledge to the contrary, be entitled to accept any certificate furnished
pursuant to this Agreement or any of the other Loan Documents as conclusive
evidence of the facts stated therein and shall be entitled to rely on any note,
notice, consent, certificate, affidavit, letter, telegram, teletype
69
message, statement, order or other document which it believes in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. It is understood and agreed that each of the Agent and the
Administrative Agent may exercise its rights and powers under other agreements
and instruments to which it is or may be a party (including, without
limitation, factoring arrangements), and engage in other transactions with the
Borrowers, as though it were not Agent or Administrative Agent (as the case may
be) of the Lenders hereunder.
Each of the Agent and the Administrative Agent shall promptly
give notice to the Lenders of the receipt or sending of any notice, schedule,
report, projection, financial statement or other document or information
pursuant to this Agreement or any of the other Loan Documents and shall
promptly forward a copy thereof to each Lender.
Neither the Agent, the Administrative Agent, nor any of their
respective directors, officers, employees or agents shall have any
responsibility to the Borrowers on account of the failure or delay in
performance or breach by any Lender other than the Agent or Administrative
Agent (as the case may be) of any of its obligations hereunder or to any Lender
on account of the failure of or delay in performance or breach by any other
Lender or the Borrowers of any of their respective obligations hereunder or in
connection herewith.
Each of the Agent and the Administrative Agent may consult
with legal counsel selected by it in connection with matters arising under this
Agreement or any of the other Loan Documents and any action taken or suffered
in good faith by it in accordance with the opinion of such counsel shall be
full justification and protection to it. Each of the Agent and the
Administrative Agent may exercise any of its powers and rights and perform any
duty under this Agreement or any of the other Loan Documents through agents or
attorneys.
The Administrative Agent and the Borrowers may deem and treat
the payee of any Note as the holder thereof until written notice of transfer
shall have been delivered as provided herein by such payee to the
Administrative Agent and the Borrowers.
With respect to the Loans made hereunder, the Notes issued to
it and any other Credit Event applicable to it, each of the Agent and the
Administrative Agent in its individual capacity and not as an Agent or an
Administrative Agent (as the case may be) shall have the same rights, powers
and duties hereunder and under any other agreement executed in connection
herewith as any other Lender and may exercise the same as though it were not
the Agent or the Administrative Agent (as the case may be), and each of the
Agent and the Administrative Agent and their respective affiliates may accept
deposits from, lend money to and generally engage in any kind of business
(including, without limitation, factoring arrangements) with the Borrowers or
other affiliate thereof as if it were not the Agent or the Administrative Agent
(as the case may be).
70
Each Lender agrees (i) to reimburse the Administrative Agent
and the Agent in the amount of such Lender's pro rata share (based on its Total
Commitment hereunder) of any expenses incurred for the benefit of the Lenders
by the Administrative Agent or the Agent (as the case may be), including
counsel fees and compensation of agents and employees paid for services
rendered on behalf of the Lenders, not reimbursed by the Borrowers and (ii) to
indemnify and hold harmless the Administrative Agent and the Agent and any of
their respective directors, officers, employees or agents, on demand, in the
amount of its pro rata share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including, without
limitation, attorneys fees and disbursements) which may be imposed on, incurred
by or asserted against it in its capacity as the Administrative Agent or the
Agent (as the case may be) or any of them in any way relating to or arising out
of this Agreement or any of the other Loan Documents or any action taken or
omitted by them or any of them under this Agreement or any of the other Loan
Documents, to the extent not reimbursed by the Borrowers; provided, however,
that no Lender shall be liable to the Agent or the Administrative Agent (as the
case may be) for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent that such liabilities, obligations, losses, damages, penalties, actions,
judgment, suits, costs, expenses or disbursements directly resulted from the
gross negligence or willful misconduct of the Agent or the Administrative Agent
(as the case may be) or any of their respective directors, officers, employees
or agents, as determined by a final judgment of a court of competent
jurisdiction.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent, the Administrative Agent or any other Lender
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and any other
Loan Document to which such Lender is party. Each Lender also acknowledges that
it will, independently and without reliance upon the Agent, the Administrative
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished hereunder.
Subject to the appointment and acceptance of a successor
Agent or successor Administrative Agent as provided below, each of the Agent
and the Administrative Agent may resign at any time by notifying the Lenders
and the Borrowers. Upon any such resignation, the Lenders shall have the right
to appoint a successor Agent or successor Administrative Agent (as the case may
be). If no successor Agent or successor Administrative Agent (as the case may
be) shall have been so appointed by such Lenders and shall have accepted such
appointment within 30 days after the retiring Agent or Administrative Agent (as
the case may be) gives notice of its resignation, then the retiring Agent or
Administrative Agent (as the case may be)
71
may, on behalf of the Lenders, appoint a successor Agent or successor
Administrative Agent (as the case may be) which shall be a financial
institution with an office (or an affiliate with an office) in New York, New
York, having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent or Administrative Agent (as the case may
be) hereunder by a successor financial institution, such successor shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent or Administrative Agent (as the case may be)
and the retiring Agent or Administrative Agent (as the case may be) shall be
discharged from its duties and obligations hereunder and under each of the
other Loan Documents. After any Agent's or Administrative Agent's resignation
hereunder, the provisions of this Article shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent or Administrative Agent (as the case may be).
The Lenders hereby acknowledge that neither the Agent nor the
Administrative Agent shall be under any duty to take any discretionary action
permitted to be taken by the Agent or Administrative Agent (as the case may be)
pursuant to the provisions of this Agreement or any of the other Loan Documents
unless it shall be requested in writing to do so by the Required Lenders.
Except for the references to "Agent" in Article X hereof
(which references to "Agent" shall mean only the Agent) and except as expressly
set forth in this Agreement (giving effect to the amendment hereto entered into
on the Amendment Date) all references in this Agreement to the term "Agent"
shall mean both the Agent and the Administrative Agent.
10. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 10.1. Collection of Receivables; Management of
Collateral. (1) At the request of the Agent upon the occurrence and continuance
of an Event of Default, the Borrowers will, at their own cost and expense, (i)
arrange for remittances on Receivables to be made directly to lockboxes
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit all payments received by the Borrowers on account of
Receivables, whether in the form of cash, checks, notes, drafts, bills of
exchange, money orders or otherwise, in one or more accounts designated by the
Agent in precisely the form received (but with any endorsements of the
Borrowers necessary for deposit or collection), subject to withdrawal by the
Agent only, as hereinafter provided, and until such payments are deposited,
such payments shall be deemed to be held in trust by the Borrowers for and as
the Lenders' property and shall not be commingled with the Borrowers' other
funds. All remittances and payments that are deposited in accordance with the
foregoing will, after two Business Days (or three Business Days in the case of
deposits that are made after 1:00 p.m.
72
(New York time), be applied by the Agent to reduce the outstanding balance of
the Revolving Credit Loans, subject to final collection in cash of the item
deposited.
Upon the occurrence and continuance of an Event of Default,
the Agent may send a notice of assignment and/or notice of the Agent's security
interest to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral, and thereafter the Agent shall have the
sole right to collect the Receivables and/or take possession of the Collateral
and the books and records relating thereto.
(1) (1) Each of the Borrowers hereby constitutes the Agent or
the Agent's designee as such Borrower's attorney-in-fact upon the occurrence
and during the continuance of an Event of Default with power to endorse such
Borrower's name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment or Collateral that may come into its possession; to
sign such Borrower's name on any invoice or bill of lading relating to any
Receivables, drafts against Customers, assignments and verifications of
Receivables and notices to Customers; to send verifications of Receivables;
upon the occurrence of an Event of Default, to notify the Postal Service
authorities to change the address for delivery of mail addressed to such
Borrower to such address as the Agent may designate; and to do all other acts
and things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or commission, for any error of judgment
or for any mistake of fact or law, provided that the Agent or its designee
shall not be relieved of liability to the extent it is determined by a final
judicial decision that its act, error or mistake constituted gross negligence
or willful misconduct. This power of attorney being coupled with an interest is
irrevocable until all of the Obligations are paid in full and this Agreement
and the Total Commitment is terminated.
(1) The Agent, without notice to or consent of the Borrowers,
upon the occurrence and during the continuance of an Event of Default, (A) may
sue upon or otherwise collect, extend the time of payment of, or compromise or
settle for cash, credit or otherwise upon any terms, any of the Receivables or
any securities, instruments or insurance applicable thereto and/or release the
obligor thereon; (B) is authorized and empowered to accept the return of the
goods represented by any of the Receivables; and (C) shall have the right to
receive, endorse, assign and/or deliver in its name or the name of any of the
Borrowers any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed.
(2) Nothing herein contained shall be construed to constitute
any Borrower as agent of the Agent for any purpose whatsoever, and the Agent
shall not be responsible or liable for any shortage, discrepancy, damage, loss
or destruction of any part of the Collateral wherever the same may be located
and regardless of the cause thereof (except to the extent it is determined by a
final judicial decision that the Agent's
73
or a Lender's act or omission constituted gross negligence or willful
misconduct). The Agent and the Lenders shall not, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of
any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof or for any damage
resulting therefrom (except to the extent it is determined by a final judicial
decision that the Agent's or such Lender's error, omission or delay constituted
gross negligence or willful misconduct). The Agent and the Lenders do not, by
anything herein or in any assignment or otherwise, assume any of the Borrowers'
obligations under any contract or agreement assigned to the Agent or the
Lenders, and the Agent and the Lenders shall not be responsible in any way for
the performance by the Borrowers of any of the terms and conditions thereof.
(3) If any of the Receivables includes a charge for any tax
payable to any governmental tax authority, the Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the
proper taxing authority for the account of the applicable Borrower and to
charge the Borrowers' account therefor. The Borrowers shall notify the Agent if
any Receivables include any tax due to any such taxing authority and, in the
absence of such notice, the Agent shall have the right to retain the full
proceeds of such Receivables and shall not be liable for any taxes that may be
due from any Borrower by reason of the sale and delivery creating such
Receivables.
SECTION 10.2. Collateral Custodian. Upon the occurrence and
continuance of an Event of Default, the Agent may at any time and from time to
time employ and maintain in the premises of the Borrowers a custodian selected
by the Agent who shall have full authority to do all acts necessary to protect
the Agent's and Lenders' interests and to report to the Agent thereon. The
Borrowers hereby agree to cooperate with any such custodian and to do whatever
the Agent may reasonably request to preserve the Collateral. All costs and
expenses incurred by the Agent by reason of the employment of the custodian
shall be charged to the Borrowers' account and added to the Obligations.
11. MISCELLANEOUS
SECTION 11.1. Notices. Notices, consents and other
communications provided for herein shall be in writing and shall be delivered
or mailed (or in the case of telex or facsimile communication, delivered by
telex, graphic scanning, telecopier or other telecommunications equipment, with
receipt confirmed) addressed,
(1) if to all or any of the Borrowers, Guarantors, or
Grantors, at 1411 Broadway, 10th Floor, New York, New York 10018,
Attention: Beverly Eichel, Executive Vice President, Chief
Financial Officer;
74
(2) if to the Agent, at The Chase Manhattan Bank, 1411
Broadway, 5th Floor, New York, New York 10018, Attention: Joseph F.
Abruzzo, with a copy to Kaye, Scholer, LLP, et al., at 425 Park
Avenue, New York, New York 10022, Attention: Jeffrey M. Epstein,
Esq.;
(3) if to the Administrative Agent, at The CIT
Group/Commercial Services, Inc., 1211 Avenue of the Americas, New
York, New York 10036, Attention: Kenneth Wendler, with a copy to
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, Attention: Lawrence First, Esq; and
(4) if to any Lender, at the address set forth below its name
in Schedule 2.01 annexed hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or over-night courier service or seven
days after being sent by registered or certified mail, postage prepaid, return
receipt requested, if by mail, or upon receipt if by any telex, facsimile or
other telecommunications equipment, in each case addressed to such party as
provided in this Section 11.01 or in accordance with the latest unrevoked
direction from such party.
SECTION 11.2. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Borrower or any
Subsidiary thereof herein and in the certificates or other instruments prepared
or delivered in connection with this Agreement, any of the Security Documents,
any Guarantee or any other Loan Document, shall be considered to have been
relied upon by the Lenders and shall survive the making by the Lenders of the
Loans and the execution and delivery to the Lenders of the Notes and occurrence
of any other Credit Event and shall continue in full force and effect as long
as the principal of or any accrued interest on the Notes or any other fee or
amount payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Commitment has not been
terminated.
SECTION 11.3. Successors and Assigns; Participations. (1)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of any Borrower, any
Guarantor, any Grantor, any ERISA Affiliate, any Subsidiary of any thereof, the
Agent and the Administrative Agent or the Lenders, that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
and assigns. Without limiting the generality of the foregoing, the Borrowers
specifically confirm that any Lender may at any time and from time to time
pledge or otherwise grant a security interest in any Loan or any Note (or any
part thereof) to any Federal Reserve Bank. No Borrower may
75
assign or transfer any of its rights or obligations hereunder without the
written consent of all the Lenders.
(1) Each Lender, without the consent of the Borrowers, but
with notice to the Borrowers, may sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Revolving
Credit Commitment or Term Loan Commitment) and the Loans owing to it and
undrawn Letters of Credit and the Notes held by it); provided, however, that
(i) such Lender's obligations under this Agreement (including, without
limitation, its Revolving Credit Commitment and Term Loan Commitment) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the banks or
other entities buying participations shall be entitled to the cost protection
provisions contained in Sections 2.10(a) (except to the extent that application
of such Section 2.10(a) to such banks and entities would cause the Borrowers to
make duplicate payments thereunder), 2.11 and 2.12 hereof, but only to the
extent any of such Sections would be available to the Lender which sold such
participation, and (iv) the Borrowers, the Agent and the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement; provided, further, however, that each Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrowers, Grantors
and the Guarantors relating to the Loans, including, without limitation, the
right to approve any amendment, modification or waiver of any provision of this
Agreement, other than amendments, modifications or waivers with respect to any
fees payable hereunder or the amount of principal or the rate of interest
payable on, or the dates fixed for any payment of principal of or interest on,
the Loans or the release of all Collateral.
(2) Each Lender may assign by novation, to any one or more
banks or other entities without the prior written consent of the Borrowers but
with the prior written consent of each of the Administrative Agent and the
Agent, all or a portion of its interests, rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Revolving Credit Commitment or Term Loan Commitment and the same
portion of the Loans and undrawn Letters of Credit at the time owing to it and
the Note or Notes held by it), provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement, which shall include the
same percentage interest in the Loans, Letters of Credit and Notes, (ii) the
amount of the Revolving Credit Commitment or Term Loan Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall be in a minimum principal amount
of $5,000,000 in the aggregate for the Revolving Credit Commitment and Term
Loan Commitment of such Lender and (iii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register (as defined below), an Assignment and Acceptance,
together with any Note subject to such
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assignment and a processing and recordation fee of $5,000. Upon such execution,
delivery, acceptance and recording and after receipt of the written consent of
the each of the Administrative Agent and the Agent, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof, (x)
the assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the other Loan Documents and (y) the Lender which is
assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(3) By executing and delivering an Assignment and Acceptance,
the Lender which is assignor thereunder and the assignee thereunder confirm to,
and agree with, each other and the other parties hereto as follows: (i) other
than the representation and warranty that it is the legal and beneficial owner
of the interest being assigned thereunder free and clear of any adverse claim,
such Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, perfection, genuineness, sufficiency or value of this
Agreement, the other Loan Documents or any Collateral with respect thereto or
any other instrument or document furnished pursuant hereto or thereto; (ii)
such Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Borrower, or any Grantor or
Guarantor or the performance or observance by any Borrower, Grantor or the
Guarantor of any of their respective obligations under this Agreement, any
Guarantees or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (iii) such assignee confirms
that it has received a copy of this Agreement, any Guarantees and of the other
Loan Documents, together with copies of financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent and the
Administrative Agent, such Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Agent and the
Administrative Agent to take such action as the Agent and the Administrative
Agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent and the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.
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(4) The Administrative Agent shall maintain at its address
referred to in Section 11.01 hereof a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses
of the Lenders and the Revolving Credit Commitment or Term Loan Commitment, as
the case may be, of, and principal amount of the Loans owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the Agent, the
Administrative Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(5) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee together with any Note or Notes subject
to such assignment and the written consent to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been
completed and is precisely in the form of Exhibit E annexed hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein
in the Register and (iii) give prompt notice thereof to the Lenders and the
Borrowers. Within five (5) Business Days after receipt of such notice, the
Borrowers, at their own expense, shall execute and deliver to the
Administrative Agent in exchange for each surrendered Note or Notes a new Note
or Notes to the order of such assignee in an amount equal to its portion of the
Term Loan Commitment and/or Revolving Credit Commitment, as the case may be,
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained any Term Loan Commitment or Revolving Credit Commitment
hereunder, a new Note or Notes to the order of the assigning Lender in an
amount equal to the Term Loan Commitment and/or Revolving Credit Commitment, as
the case may be, retained by it hereunder. Such new Note or Notes shall be in
an aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, or, with respect to the Term Notes, the principal
amount of the Term Notes outstanding at such time as evidenced by the Term Note
or Notes shall be dated the effective date of such Assignment and Acceptance
and shall otherwise be in substantially the form of Exhibit A or Exhibit B, as
the case may be. Notes surrendered to the Borrowers shall be canceled by the
Borrowers.
(6) Notwithstanding any other provision herein, any Lender
may, in connection with any assignment or participation or proposed assignment
or participation pursuant to this Section 11.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrowers furnished to
such Lender by or on behalf of the Borrowers in connection with this Agreement;
provided, however, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential Information relating to the Borrowers
received from such Lender.
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SECTION 11.4. Expenses; Indemnity. (1) Each Borrower agrees
to pay all reasonable out-of-pocket expenses incurred by each of the Agent, the
Administrative Agent and the Lenders in connection with the preparation of this
Agreement and the other Loan Documents or with any amendments, modifications,
waivers, extensions, renewals, renegotiations or "workouts" of the provisions
hereof or thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Agent, the Administrative Agent or any of the
Lenders in connection with the enforcement or protection of its rights in
connection with this Agreement or any of the other Loan Documents or with the
Loans made or the Notes or Letters of Credit issued hereunder, or in connection
with any pending or threatened action, proceeding, or investigation relating to
the foregoing, including but not limited to the reasonable fees and
disbursements of counsel for each of the Agent and the Administrative Agent and
(without in any way limiting the audit fees payable by the Borrowers to the
Administrative Agent under Section 6.08 hereof) ongoing field examination
expenses and charges, and, in connection with such enforcement or protection,
the reasonable fees and disbursements of counsel for the Lenders. Each Borrower
further indemnifies the Lenders from and agrees to hold them harmless against
any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of this Agreement or the
Notes.
(1) Each Borrower indemnifies each of the Agent and the
Administrative Agent and each Lender and their respective directors, officers,
employees and agents against, and agrees to hold the Agent, the Administrative
Agent, each Lender and each such person harmless from, any and all losses,
claims, damages, liabilities and related expenses, including reasonable counsel
fees and expenses, incurred by or asserted against the Lender or any such
person arising out of, in any way connected with, or as a result of (i) the use
of any of the proceeds of the Loans, (ii) this Agreement, the Guarantees, any
of the Security Documents or the other documents contemplated hereby or
thereby, (iii) the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder (including but not limited to
the making of the Total Commitment) and consummation of the transactions
contemplated hereby and thereby, (iv) breach of any representation or warranty,
or (v) any claim, litigation, investigation or proceedings relating to any of
the foregoing, whether or not the Agent, the Administrative Agent, any Lender
or any such person is a party thereto; provided, however, that such indemnity
shall not, as to the Agent, the Administrative Agent or any Lender, apply to
any such losses, claims, damages, liabilities or related expenses to the extent
that they directly result from the gross negligence or willful misconduct of
the Agent, the Administrative Agent or any Lender as determined by a final
judgment of a court of competent jurisdiction.
(2) Each Borrower indemnifies, and agrees to defend and hold
harmless the Agent, the Administrative Agent and the Lenders and their
respective officers, directors, shareholders, agents and employees
(collectively, the "Indemnitees") from and against any loss, cost, damage,
liability, lien, deficiency, fine, penalty or expense (including, without
limitation, reasonable attorneys' fees and reasonable
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expenses for investigation, removal, cleanup and remedial costs and
modification costs incurred to permit, continue or resume normal operations of
any property or assets or business of the Borrowers or any Subsidiary thereof)
arising from a violation of, or failure to comply with any Environmental Law
and to remove any Lien arising therefrom (except to the extent directly
resulting from the gross negligence or willful misconduct of any Indemnitee, as
determined by a final judgment of a court of competent jurisdiction) which any
of the Indemnitees may incur or which may be claimed or recorded against any of
the Indemnitees by any person.
(3) The provisions of this Section 11.04 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement or the Notes, or any investigation made by
or on behalf of the Agent, the Administrative Agent or any Lender. All amounts
due under this Section 11.04 shall be payable on written demand therefor.
SECTION 11.5. Applicable Law. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 11.6. Right of Setoff. If an Event of Default shall
have occurred and be continuing, upon the request of the Required Lenders each
Lender shall and is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of any Borrower against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement and the Notes held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement or the Notes and although such obligations may be
unmatured. Each Lender agrees to notify promptly the Administrative Agent and
the Borrowers after any such setoff and application made by such Lender, but
the failure to give such notice shall not affect the validity of such setoff
and application. The rights of each Lender under this Section are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which may be available to such Lender.
SECTION 11.7. Payments on Business Days. (1) Should the
principal of or interest on the Notes or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day (except as
otherwise specified in the definition of "Interest Period"), and such extension
of time shall in such case be included in computing interest, if any, in
connection with such payment.
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(1) All payments by any Borrower hereunder and all Loans made
by the Lenders hereunder shall be made in lawful money of the United States of
America in immediately available funds at the office of the Administrative
Agent set forth in Section 11.01 hereof.
SECTION 11.8. Waivers; Amendments. (1) No failure or delay of
any Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lenders hereunder are cumulative
and not exclusive of any rights or remedies which they may otherwise have. No
waiver of any provision of this Agreement or the Notes nor consent to any
departure by any Borrower therefrom shall in any event be effective unless the
same shall be authorized as provided in paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on any Borrower in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances. Each holder of any of the Notes shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not
such Note shall have been marked to indicate such amendment, modification,
waiver or consent.
(1) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Lenders; provided,
however, that no such agreement shall (i) change the principal amount of, or
extend or advance the maturity of or the dates for the payment of principal of
or interest on, any Note or reduce the rate of interest on any Note, (ii)
change the Revolving Credit Commitment or Term Loan Commitment of any Lender or
amend or modify the provisions of this Section, Section 2.06, Section 2.13,
Section 4.14 or Section 11.04 hereof or the definition of "Required Lenders,"
or (iii) release any Guaranty or any material portion of Collateral, in each
case without the prior written consent of each Lender affected thereby and
provided, further, however, that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent or the Administrative Agent
(as the case may be) under this Agreement or the other Loan Documents without
the written consent of the Agent or the Administrative Agent (as the case may
be). Each Lender and holder of any Note shall be bound by any modification or
amendment authorized by this Section regardless of whether its Notes shall be
marked to make reference thereto, and any consent by any Lender or holder of a
Note pursuant to this Section shall bind any person subsequently acquiring a
Note from it, whether or not such Note shall be so marked.
(2) In the event that the Borrowers request, with respect to
this Agreement or any other Loan Document, an amendment, modification or waiver
and such amendment, modification or waiver would require the unanimous consent
of all of the Lenders in accordance with Section 11.08(b) above, and such
amendment,
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modification or waiver is agreed to in writing by the Borrowers and the
Required Lenders but not by all of the Lenders, then notwithstanding anything
to the contrary in Section 11.08(b) above, with the written consent of the
Borrowers and such Required Lenders, the Borrowers and Required Lenders may,
but shall not be obligated to, amend this Agreement without the consent of the
Lender or Lenders who did not agree to the proposed amendment, modification or
waiver (the "Minority Lenders") solely to provide for (i) the termination of
the Revolving Credit Commitment and Term Loan Commitment of each Minority
Lender, (ii) the assignment in accordance with Section 11.03 hereof to one or
more persons of each Minority Lender's interests, rights and obligations under
this Agreement (including, without limitation, all of such Minority Lender's
Revolving Credit Commitment and Term Loan Commitment as well as its portion of
all outstanding Loans and the Note or Notes held by such Minority Lender) and
the other Loan Documents and/or an increase in the Revolving Credit Commitment
and Term Loan Commitment of one or more Required Lenders, in each case so that
after giving effect thereto the Total Revolving Credit Commitment and Total
Term Loan Commitment shall be in the same amounts as prior to the events
described in this paragraph, (iii) the repayment to the Minority Lenders in
full of all Loans outstanding and accrued interest thereon at the time of the
assignment and/or increase in Commitments described in clause (ii) above with
the proceeds of Loans made by such persons who are to become Lenders by
assignment or with the proceeds of Loans made by Required Lenders who have
agreed to increase their Revolving Credit Commitment and/or Term Loan
Commitment, (iv) the payment to the Minority Lenders by the Borrowers of all
fees and other compensation due and owing such Minority Lenders under the terms
of this Agreement and the other Loan Documents and (v) such other modifications
as the Required Lenders and Borrower shall deem necessary in order to effect to
changes specified in clauses (i) through (iv) hereof.
SECTION 11.9. Severability. In the event any one or more of
the provisions contained in this Agreement or in the Notes should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired thereby.
SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc.
(1) This Agreement, the Notes and the other Loan Documents constitute the
entire contract between the parties hereto relative to the subject matter
hereof. Any previous agreement among the parties hereto with respect to the
Transactions is superseded by this Agreement, the Notes and the other Loan
Documents. Except as expressly provided herein or in the Notes or the Loan
Documents (other than this Agreement), nothing in this Agreement, the Notes or
in the other Loan Documents, expressed or implied, is intended to confer upon
any party, other than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, the Notes or the other Loan
Documents.
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(1) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this
Agreement, the Notes, any of the other Loan Documents or the Transactions.
(2) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 11.10 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(3) Each party hereto (i) certifies that no representative,
agent or attorney of any Lender has represented, expressly or otherwise, that
such Lender would not, in the event of litigation, seek to enforce the
foregoing waivers and (ii) acknowledges that it has been induced to enter into
this Agreement, the Notes or the other Loan Documents, as applicable, by, among
other things, the mutual waivers and certifications herein.
SECTION 11.11. Confidentiality. The Agent and the Lenders
agree to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agent or any Lender (the
"Information"). Notwithstanding the foregoing, the Agent and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the Transactions or the
administration of this Agreement or the other Loan Documents; (ii) to the
extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any governmental agency or authority;
(iii) to the extent such Information (A) becomes publicly available other than
as a result of a breach of this Agreement, (B) becomes available to the Agent
or such Lender on a non-confidential basis from a source other than any
Borrower, any Guarantor, any Grantor or any of their respective Subsidiaries or
(C) was available to the Agent or such Lender on a non-confidential basis prior
to its disclosure to the Agent or such Lender by any Borrower, any Guarantor,
any Grantor or any of their respective Subsidiaries; (iv) to the extent any
Borrowers, any Guarantor or any of their respective Subsidiaries shall have
consented to such disclosure in writing; (v) in connection with the sale of any
Collateral pursuant to the provisions of any of the other Loan Documents; or
(vi) pursuant to Section 11.03(g) hereof.
SECTION 11.12. Submission to Jurisdiction. (1) Any legal
action or proceeding with respect to this Agreement or the Notes or any other
Loan Document may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the Borrowers and each of the
Guarantors hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts.
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(1) Each of the Borrowers and each of the Guarantors hereby
irrevocably waive, in connection with any such action or proceeding, any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions.
(2) Each of the Borrowers and each of the Guarantors hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to each such person, as the case
may be, at its address set forth in Section 11.01 hereof.
(3) Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any Borrower or any Guarantor in
any other jurisdiction.
SECTION 11.13. Counterparts; Facsimile Signature. This
Agreement may be executed in counterparts, each of which shall constitute an
original but all of which when taken together shall constitute but one
contract, and shall become effective when copies hereof which, when taken
together, bear the signatures of each of the parties hereto shall be delivered
to the Agent. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
signature page hereto.
SECTION 11.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
12. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary
obligor and not merely as a surety, jointly and severally with each other
Guarantor, the due and punctual payment of the principal of and interest on
each of the Notes, when and as due, whether at maturity, by acceleration, by
notice of prepayment or otherwise, and the due and punctual performance of all
other Obligations. Each Guarantor further agrees that the Obligations may be
extended and renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligations.
Each Guarantor waives presentment to, demand of payment from
and protest to the Borrowers of any of the Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a
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Guarantor hereunder shall not be affected by (a) the failure of any Lender or
the Agent or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against the Borrowers or any other Guarantor under
the provisions of this Agreement, the Notes or any of the other Loan Documents
or otherwise; (b) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Agreement, the Notes, any of the other Loan
Documents, any guarantee or any other agreement; (c) the release of any
security held by the Agent or the Administrative Agent for the Obligations or
any of them; or (d) the failure of any Lender to exercise any right or remedy
against any other Guarantor of the Obligations.
Each Guarantor further agrees that its guarantee constitutes
a guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any security (including,
without limitation, any Collateral) held for payment of the Obligations or to
any balance of any deposit account or credit on the books of any Lender in
favor of any Borrower or any other person.
The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Guarantor
hereunder shall not be discharged or impaired or other-wise affected by the
failure of the Agent or the Administrative Agent or any Lender to assert any
claim or demand or to enforce any remedy under this Agreement, the Notes or
under any other Loan Document, any guarantee or any other agreement, by any
waiver or modification of any provision thereof, by any default, failure or
delay, willful or otherwise, in the performance of the Obligations, or by any
other act or omission which may or might in any manner or to any extent vary
the risk of such Guarantor or otherwise operate as a discharge of such
Guarantor as a matter of law or equity.
Each Guarantor further agrees that its guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation is
rescinded or must otherwise be returned by the Agent or any Lender upon the
bankruptcy or reorganization of any Borrower or otherwise.
Each Guarantor hereby waives and releases all rights of
subrogation against each Borrower and its property and all rights of
indemnification, contribution and reimbursement from each Borrower and its
property, in each case in connection with this guarantee and any payments made
hereunder, and regardless of whether such rights arise by operation of law,
pursuant to contract or otherwise.
13. WAIVER
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By their signature below, each of the Lenders hereby waives
the "Event of Default" existing on the date hereof under the Original Credit
Agreement arising out of the Borrowers' failure to meet the Availability
requirements set forth therein.
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IN WITNESS WHEREOF, the Borrowers, Guarantors, the Agent and
the Administrative Agent and the Lenders have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
DONNKENNY APPAREL, INC. as a Borrower
By: /s/ Harvey A Appelle
----------------------------------------
Name: Harvey A Appelle
Title: Chairman & Chief Executive Officer
BELDOCH INDUSTRIES CORPORATION, as a Borrower
By: /s/ Harvey A Appelle
----------------------------------------
Name: Harvey A Appelle
Title: Chairman & Chief Executive Officer
MEGAKNITS, INC., as a Borrower
By: /s/ Harvey A Appelle
----------------------------------------
Name: Harvey A Appelle
Title: Chairman & Chief Executive Officer
DONNKENNY, INC., as a Guarantor
By: /s/ Harvey A Appelle
----------------------------------------
Name: Harvey A Appelle
Title: Chairman & Chief Executive Officer
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CHRISTIANSBURG GARMENT COMPANY
INCORPORATED, as a Guarantor
By: /s/ Harvey A Appelle
----------------------------------------
Name: Harvey A Appelle
Title: Chairman & Chief Executive Officer
THE CHASE MANHATTAN BANK, as a Lender
By: /s/ Joseph P. Abruzzo
----------------------------------------
Name: JOSEPH P. ABRUZZO
Title: VICE PRESIDENT
THE CHASE MANHATTAN BANK, as Agent
By: /s/ Joseph P. Abruzzo
----------------------------------------
Name: JOSEPH P. ABRUZZO
Title: VICE PRESIDENT
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
as Administrative Agent
By: /s/ Jeffrey Heller
----------------------------------------
Name: Jeffrey Heller
Title: Vice President
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THE CIT GROUP/COMMERCIAL SERVICES, INC.,
as a Lender
By: /s/ Jeffrey Heller
----------------------------------------
Name: Jeffrey Heller
Title: Vice President
THE BANK OF NEW YORK, as a Lender
By: /s/ Russell A. Burr
----------------------------------------
Name: Russell A. Burr
Title: Senior Vice President
FLEET BANK N.A., as a Lender
By: /s/ Steven R. Navarro
----------------------------------------
Name: Steven R. Navarro
Title: Senior Vice President
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