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EXHIBIT 10.10
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SUBORDINATED NOTE
AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 23, 2001
BY AND BETWEEN
CROWN CRAFTS, INC.,
AS ISSUER OF THE NOTE AND A WARRANT
AND
BANK OF AMERICA, N.A.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
WACHOVIA BANK, N.A.,
EACH AS A PURCHASER
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TABLE OF CONTENTS
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Article I. DEFINITIONS............................................................................................1
Section 1.01. Definitions............................................................................1
Section 1.02. Yield-Maintenance Terms...............................................................17
Section 1.03. Accounting Terms......................................................................18
Article II. ISSUANCE AND PURCHASE OF THE NOTE AND WARRANT........................................................19
Section 2.01. Authorization of Issuance of the Notes and Warrants...................................19
Section 2.02. Purchase and Sale of Notes and Warrants...............................................19
Section 2.03. Allocation of Purchase Price..........................................................19
Section 2.04. Interest on the Note..................................................................19
Section 2.05. Maturity of the Note; Prepayments.....................................................20
Section 2.06. Additional Payments...................................................................21
Article III. OTHER PROVISIONS RELATING TO THE NOTE...............................................................21
Section 3.01. Making of Payments....................................................................21
Section 3.02. Increased Costs.......................................................................21
Section 3.03. Capital Adequacy......................................................................22
Section 3.04. Survival..............................................................................22
Section 3.05. Default Rate of Interest..............................................................22
Section 3.06. Calculation of Interest...............................................................22
Section 3.07. Usury.................................................................................22
Article IV. CONDITIONS TO PURCHASE OF THE NOTE AND THE WARRANT...................................................23
Section 4.01. No Injunction, etc....................................................................23
Section 4.02. Documentation.........................................................................23
Section 4.03. Corporate Actions.....................................................................25
Section 4.04. No Material Adverse Effect............................................................25
Section 4.05. No Default, Etc.......................................................................25
Section 4.06. Representations Accurate..............................................................26
Section 4.07. Payment of Fees and Expenses..........................................................26
Article V. REPRESENTATIONS AND WARRANTIES........................................................................26
Section 5.01. Corporate Existence and Power.........................................................26
Section 5.02. Corporate and Governmental Authorization; No Contravention............................26
Section 5.03. Binding Effect........................................................................26
Section 5.04. Financial Information.................................................................27
Section 5.05. Litigation............................................................................27
Section 5.06. Compliance with ERISA.................................................................27
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Section 5.07. Compliance with Laws; Payment of Taxes................................................27
Section 5.08. Investment Company Act................................................................28
Section 5.09. Public Utility Holding Company Act....................................................28
Section 5.10. Ownership of Property; Liens..........................................................28
Section 5.11. No Default............................................................................28
Section 5.12. Environmental Matters.................................................................28
Section 5.13. Capital Stock.........................................................................29
Section 5.14. Margin Stock..........................................................................29
Section 5.15. Insolvency............................................................................29
Section 5.16. Insurance.............................................................................29
Section 5.17. Purchase of Collateral................................................................30
Section 5.18. Possession of Permits.................................................................30
Section 5.19. Labor Disputes........................................................................30
Section 5.20. Surety Obligations....................................................................30
Section 5.21. Restrictions..........................................................................30
Section 5.22. Leases................................................................................30
Section 5.23. Trade Relations.......................................................................30
Section 5.24. Capital Structure.....................................................................31
Section 5.25. Federal Taxpayer Identification Number................................................31
Section 5.26. Bona Fide Accounts....................................................................31
Section 5.27. Good Title to Collateral..............................................................31
Section 5.28. Right to Assign and Grant Security Interest...........................................31
Section 5.29. Trade Styles..........................................................................31
Section 5.30. Account Debtor Capacity and Solvency..................................................32
Section 5.31. Proceedings with Respect to Accounts..................................................32
Section 5.32. Location of Collateral................................................................32
Section 5.33. Material Contracts....................................................................32
Section 5.34. Survival of Representations and Warranties............................................32
Section 5.35. Force Majeure.........................................................................32
Section 5.36. Senior Notes..........................................................................32
Section 5.37. Offering of Note and Warrants.........................................................32
Section 5.38. Registration Rights...................................................................33
Section 5.39. Disclosure............................................................................33
Article VI. AFFIRMATIVE COVENANTS................................................................................33
Section 6.01. Information...........................................................................33
Section 6.02. Inspection of Property, Books and Records.............................................36
Section 6.03. Maintenance of Existence and Management...............................................36
Section 6.04. Use of Proceeds.......................................................................36
Section 6.05. Compliance with Laws; Payment of Taxes................................................37
Section 6.06. Insurance; Net Casualty/Insurance Proceeds............................................37
Section 6.07. Maintenance of Property...............................................................38
Section 6.08. [Reserved]............................................................................38
Section 6.09. Physical Inventories..................................................................38
Section 6.10. [Intentionally Deleted]...............................................................38
Section 6.11. Preservation of Intangibles Collateral................................................38
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Section 6.12. Records Respecting Collateral.........................................................38
Section 6.13. Reports Respecting Collateral.........................................................38
Section 6.14. Collateral Location Waivers...........................................................39
Section 6.15. Mexican Foreign Stock Pledge..........................................................39
Section 6.16. Payment of Taxes On and Use of Collateral.............................................39
Section 6.17. Post-Closing Matters..................................................................40
Article VII. NEGATIVE COVENANTS..................................................................................40
Section 7.01. Dissolution...........................................................................40
Section 7.02. Consolidations, Mergers and Sales of Assets...........................................40
Section 7.03. Change in Fiscal Year.................................................................40
Section 7.04. Environmental Matters.................................................................41
Section 7.05. Environmental Release.................................................................41
Section 7.06. Transactions with Affiliates..........................................................41
Section 7.07. No Additional Subsidiaries............................................................41
Section 7.08. Restricted Payments...................................................................42
Section 7.09. Investments...........................................................................42
Section 7.10. Permitted Liens.......................................................................42
Section 7.11. Restrictions on Ability of the Company and Subsidiaries to Pay Dividends..............43
Section 7.12. Permitted Debt........................................................................43
Section 7.13. Limitation on Issuance and Sale of Capital Stock and
Redeemable Preferred Stock of Subsidiaries............................................44
Section 7.14. Change of Principal Place of Business or Location of Collateral.......................44
Section 7.15. Dispositions of Equipment Collateral..................................................45
Section 7.16. Material Contracts....................................................................45
Section 7.17. Changes to Federal Taxpayer Identification Number.....................................45
Section 7.18. Modification of Certain Documents, Agreements and Instruments.........................45
Article VIII. FINANCIAL COVENANTS................................................................................46
Section 8.01. Financial Covenants...................................................................46
Article IX. EVENTS OF DEFAULT....................................................................................49
Section 9.01. Events of Default.....................................................................49
Section 9.02. Remedies on Default...................................................................52
Article X. SUBORDINATION OF NOTES................................................................................53
Section 10.01. Subordination.........................................................................53
Section 10.02. Obligation of the Company Unconditional...............................................55
Section 10.03. Subrogation...........................................................................56
Section 10.04. Rights of Holders of Senior Debt......................................................56
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Article XI. MISCELLANEOUS........................................................................................56
Section 11.01. Notices...............................................................................56
Section 11.02. No Waiver.............................................................................57
Section 11.03. Expenses..............................................................................57
Section 11.04. Amendments and Waiver.................................................................57
Section 11.05. Successors and Assigns................................................................58
Section 11.06. Governing Law.........................................................................59
Section 11.07. Survival of Representations and Warranties............................................59
Section 11.08. Severability..........................................................................59
Section 11.09. Counterparts..........................................................................59
Section 11.10. Set-Off...............................................................................59
Section 11.11. Termination of Agreement..............................................................59
Section 11.12. Jurisdiction and Venue................................................................59
Section 11.13. Waiver of Jury Trial..................................................................59
Section 11.14. Entire Agreement......................................................................60
EXHIBITS AND SCHEDULES
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Domestic Stock Pledge Agreement
Exhibit E - Form of Foreign Stock Pledge Agreement
Exhibit F - Form of Security Agreement
Schedule 5.01 - Qualification Jurisdictions
Schedule 5.20 - Surety Obligations
Schedule 5.22 - Leases
Schedule 5.24 - Capital Structure
Schedule 5.33 - Material Contracts
Schedule 7.10 - Permitted Encumbrances
Schedule 7.12 - Permitted Debt
Purchaser Schedule
(Schedules to this agreement have been omitted; the Registrant agrees to
furnish supplementally to the Commission, upon request, a copy of these
schedules.)
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SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT
THIS SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT dated as of July
23, 2001 by and between CROWN CRAFTS, INC., a corporation organized under the
laws of the State of Georgia, as issuer of the Subordinated Notes and Warrant
(the "COMPANY"), and BANK OF AMERICA, N.A., THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA and WACHOVIA BANK, N.A. (together with any successor or assign of any of
the foregoing, collectively "PURCHASERS").
WHEREAS, on the date hereof, the Company, Churchill Weavers, Inc.,
Hamco, Inc., and Crown Crafts Infant Products, Inc., as borrowers entered into
that certain Credit Agreement dated as of the date hereof with certain lenders a
party thereto ("SENIOR LENDERS") and Wachovia Bank, N.A., as agent for the
Senior Lenders (as amended, restated, modified and otherwise supplemented in
accordance with the provisions thereof, the "SENIOR CREDIT AGREEMENT");
WHEREAS, the Company has requested that each Purchaser make a
subordinated debt investment in the Company, the proceeds of which will be used
by the Company, among other things, to repay outstanding indebtedness;
WHEREAS, each Purchaser has agreed to make a subordinated debt
investment in the Company on the terms and subject to the conditions set forth
herein, such investment to be evidenced by a subordinated note in such amount
from the Company and certain warrants issued by the Company as more fully
described below;
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 DEFINITIONS. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"ACCOUNT DEBTOR" shall mean the Person who is obligated on any
of the Accounts Receivable Collateral or Factored Accounts or otherwise
is obligated as a purchaser or lessee of any of the Inventory
Collateral.
"ACCOUNTS RECEIVABLE COLLATERAL" shall mean and include all
accounts, instruments, and chattel paper, including, without
limitation, all rights of Obligor to payment for goods sold or leased,
or to be sold or to be leased, or for services rendered or to be
rendered, howsoever evidenced or incurred, and together with all
returned or
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repossessed goods and all books, records, computer tapes, programs and
ledger books arising therefrom or relating thereto, all whether now
owned or hereafter acquired or arising; provided, however, that the
term Accounts Receivable Collateral shall not include Factored
Accounts.
"AFFILIATE" of any relevant Person shall mean (i) any Person
that directly, or indirectly through one or more intermediaries,
controls the relevant Person (a "CONTROLLING PERSON"), (ii) any Person
(other than the relevant Person or a Subsidiary of the relevant Person)
which is controlled by or is under common control with a Controlling
Person, or (iii) any Person (other than a Subsidiary of the relevant
Person) of which the relevant Person owns, directly or indirectly, 10%
or more of the common stock or equivalent equity interests. As used
herein, the term "control" means possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGGREGATE REAL PROPERTIES" shall have the meaning set forth
in Section 5.12(a).
"AGREEMENT" shall mean this Subordinated Note and Warrant
Purchase Agreement, as the same may be amended, restated, supplemented
or modified from time to time in accordance with the terms hereof.
"ANNUAL PERIOD" shall mean each annual period of 12
consecutive months ending on a June 30 Quarterly Payment Date.
"ASSIGNMENT AGREEMENT" shall mean the Assignment Agreement
dated as of the date hereof by and between the Company and the
Collateral Agent, for itself and for the benefit of the Purchasers.
"ASSIGNMENT OF FACTORING CREDIT BALANCES" shall mean an
Assignment of Factoring Credit Balances and Agreement entered into from
time to time by Wachovia, as collateral agent, one or more Obligor and
a Permitted Factor.
"BANKRUPTCY CODE" shall mean Title 11 of the United States
Code, as it may be amended from time to time.
"BLOCKED ACCOUNT AGREEMENT" shall mean a Blocked Account
Agreement, executed and delivered by any depositary institution with
which any Obligor has a demand deposit, operating account or other such
similar depositary relationship.
"CAPITAL STOCK" shall mean any capital stock other than
Redeemable Preferred Stock (or other equivalent equity interest issued
other than in stock) of the Company or any Subsidiary (to the extent
issued to a Person other than any Obligor), whether common, preferred
or otherwise.
"CASH INTEREST" shall mean, for any period, the aggregate
amount of interest payable during such period on the Notes and the
Senior Debt (at the Cash Contract Rate only pursuant to the Senior
Credit Agreement).
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"CERTIFIED PUBLIC ACCOUNTANTS" shall mean the Company's
independent certified public accountants as of the Closing Date and
such other firm or firms of naturally recognized independent certified
public accountants which may be retained by the Company thereafter for
the purpose of auditing its financial statements.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its
implementing regulations and amendments.
"CERCLIS" shall mean the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to
CERCLA.
"CHANGE IN CONTROL" shall mean, except as a result of the
exercise of any of the Warrants, (i) the beneficial ownership or
acquisition in any transaction or series of related transactions of 50%
or more of the combined voting power of all then issued and outstanding
Voting Stock of the Company by any Person (together with any of its
Affiliates) holding 10% or more of the combined voting power of the
issued and outstanding Voting Stock of the Company as of the Closing
Date, acting alone or in concert with one or more Persons, or (ii) any
Person or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 20% or more of the outstanding shares of the voting stock of
the Company; or (iii) as of any date a majority of the Board of
Directors of the Company consists of individuals who were not either
(A) directors of the Company as of the corresponding date of the
previous year, (B) selected or nominated to become directors by the
Board of Directors of the Company of which a majority consisted of
individuals described in clause (A), or (C) selected or nominated to
become directors by the Board of Directors of the Company of which a
majority consisted of individuals described in clause (A) and
individuals described in clause (B), or (iv) the Company or any of its
Subsidiaries shall merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to, any Person except that
(x) any Subsidiary of the Company may merge or consolidate with or
into, or dispose of assets to the Company or any other Wholly-Owned
Subsidiary of the Company or (y) the Company or any Subsidiary may
merge with any other Person so long as the Company or such Subsidiary
is the surviving entity.
"CLOSING DATE" shall mean July 23, 2001.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor Federal tax code.
"COLLATERAL" shall mean (i) the personal property in which the
Collateral Agent, for the benefit of the Purchasers, is granted a
security interest pursuant to the Security Agreement, (ii) the Real
Property conveyed to the Collateral Agent pursuant to the Mortgages,
and (iii) the Domestic Pledged Stock and the Foreign Pledged Stock
pledged
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to the Collateral Agent pursuant to the Domestic Stock Pledge Agreement
and the Foreign Stock Pledge Agreement, respectively.
"COLLATERAL AGENT" shall mean Wachovia Bank, N.A. and any
successor.
"COLLATERAL INFORMATION CERTIFICATES" shall mean, individually
or collectively, as the context shall require, the Collateral
Information Certificates dated as of even date herewith, executed by
each of the Obligors and containing disclosure of information
pertaining to the Collateral.
"COLLATERAL LOCATIONS" shall mean the respective state of
organization of the Company and each other Obligor, chief executive
office of the Company and each other Obligor and those additional
locations, if any, of the Company and each other Obligor set forth and
described in the Collateral Information Certificates.
"COMPANY" has the meaning set forth in the introductory
paragraph hereof and shall include the Company's successors and
assigns.
"CONSOLIDATED AVAILABLE FREE CASH FLOW" shall mean, for each
Annual Period, an amount equal to 70% of Consolidated Free Cash Flow
for such Annual Period.
"CONSOLIDATED DEBT" shall mean, at any date, the Debt of the
Company and its Consolidated Subsidiaries, determined on a consolidated
basis as of such date, but excluding Contingent Interest (as defined in
the Senior Credit Agreement) and amounts payable pursuant to Section
2.06(a) of this Agreement.
"CONSOLIDATED EBITDA" shall mean the sum of the following,
calculated on a consolidated basis in accordance with GAAP for the
Company and its Consolidated Subsidiaries, for the relevant fiscal
period: (i) Consolidated Net Income; plus (ii) depreciation and
amortization expenses; plus (iii) Consolidated Interest Expense; plus
(iv) income tax expense included in Consolidated Net Income.
"CONSOLIDATED FREE CASH FLOW" shall mean, for any period, (i)
Consolidated EBITDA for such Annual Period, minus (ii) capital
expenditures made in such Annual Period, minus (iii) taxes paid in such
Annual Period.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any relevant
fiscal period, interest, whether expensed or capitalized, in respect of
Debt of the Company or any of its Consolidated Subsidiaries outstanding
during such period, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED NET INCOME" shall mean, for any relevant fiscal
period, the Net Income of the Company and its Consolidated Subsidiaries
determined on a consolidated basis, but excluding extraordinary items.
"CONSOLIDATED SUBSIDIARY" shall mean, at any date, any
Subsidiary or other entity the accounts of which, in accordance with
GAAP, would be consolidated with those of the Company in its
consolidated financial statements as of such date.
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"CONTROLLED GROUP" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company and
the other Obligors, are treated as a single employer under Section 414
of the Code.
"DEBT" of any Person shall mean, at any date, without
duplication, (i) all obligations of such Person for borrowed money,
(ii) all payment obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations
of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued expenses arising in
the ordinary course of business, (iv) all obligations of such Person as
lessee under capital leases or leases for which such Person retains tax
ownership of the property subject to a lease, (v) all obligations of
such Person to reimburse any bank or other Person in respect of amounts
payable under a banker's acceptance, (vi) all Redeemable Preferred
Stock of such Person (in the event such Person is a corporation), (vii)
all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or undrawn amounts available to be paid under a
letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person, (ix) all obligations of such Person with
respect to interest rate protection agreements, foreign currency
exchange agreements or other hedging arrangements, other than commodity
hedging agreements entered into by such Person as risk protection
rather than as an investment (each valued as the termination value
thereof computed in accordance with a method approved by the
International Swap Dealers Association and agreed to by such Person in
the applicable agreement, if any), and (x) all Debt of others
Guaranteed by such Person.
"DEBT/EBITDA RATIO" shall mean the ratio of Consolidated Debt
to Consolidated EBITDA.
"DEFAULT" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or
both would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" shall have the meaning set forth in Section
3.05.
"DIRECT FOREIGN SUBSIDIARY" shall mean any Foreign Subsidiary
owned directly by the Company or any other Obligor.
"DOMESTIC BUSINESS DAY" shall mean any day except a Saturday,
Sunday or other day on which commercial banks in Georgia or New York
are authorized by law to close.
"DOMESTIC STOCK PLEDGE AGREEMENT" shall mean the Stock Pledge
Agreement, substantially in the form of Exhibit D, which is an
amendment and restatement of the Original Stock Pledge Agreement, to be
executed by the Company (or, pursuant to Section 7.07, any other
Obligor created or acquiring a Domestic Subsidiary), pledging to the
Collateral Agent pursuant thereto, for the equal and ratable benefit of
the Purchasers subject to the Lends of the Senior Lenders, all of the
outstanding capital stock of all
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Domestic Subsidiaries, to secure the payment of all of the Obligations,
as any of the foregoing may be amended or supplemented from time to
time.
"DOMESTIC PLEDGED STOCK" shall mean the capital stock of the
Domestic Subsidiaries described in and pledged pursuant to the Domestic
Stock Pledge Agreement.
"DOMESTIC SUBSIDIARY" shall mean any Subsidiary which is
organized under the laws of the United States of America or any state,
territory or possession thereof or the District of Columbia.
"EBITDA/CASH INTEREST RATIO" shall mean the ratio of
Consolidated EBITDA to Cash Interest.
"ENVIRONMENTAL AUTHORITY" shall mean any foreign, federal,
state, local or regional government that exercises any form of
jurisdiction or authority under any Environmental Requirement.
"ENVIRONMENTAL AUTHORIZATIONS" shall mean all licenses,
permits, orders, approvals, notices, registrations or other legal
prerequisites for conducting the business of the Company or any
Subsidiary required by any Environmental Requirement.
"ENVIRONMENTAL JUDGMENTS AND ORDERS" shall mean all judgments,
decrees or orders arising from or in any way associated with any
Environmental Requirements, whether or not entered upon consent, or
written agreements with an Environmental Authority or other entity
arising from or in any way associated with any Environmental
Requirement, whether or not incorporated in a judgment, decree or
order.
"ENVIRONMENTAL LIABILITIES" shall mean any liabilities,
whether accrued, contingent or otherwise, arising from and in any way
associated with any Environmental Requirements.
"ENVIRONMENTAL NOTICES" shall mean notice from any
Environmental Authority or by any other person or entity, of possible
or alleged noncompliance with or liability under any Environmental
Requirement, including without limitation any complaints, citations,
demands or requests from any Environmental Authority or from any other
person or entity for correction of any violation of any Environmental
Requirement or any investigations concerning any violation of any
Environmental Requirement.
"ENVIRONMENTAL PROCEEDINGS" shall mean any judicial or
administrative proceedings arising from or in any way associated with
any Environmental Requirement.
"ENVIRONMENTAL RELEASES" shall mean releases as defined in
CERCLA or under any applicable state or local environmental law or
regulation.
"ENVIRONMENTAL REQUIREMENTS" shall mean any legal requirement
relating to health, safety or the environment and applicable to the
Company or any Subsidiary or the Aggregate Real Properties, including
but not limited to any such requirement under
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CERCLA or similar state legislation and all federal, state and local
laws, ordinances, regulations, orders, writs, decrees and common law.
"EQUIPMENT COLLATERAL" shall mean all equipment and fixtures
of each of the Obligors, whether now owned or hereafter acquired,
wherever located, including, without limitation, all machinery,
furniture, furnishings, leasehold improvements, computer equipment,
books and records, motor vehicles, forklifts, rolling stock, dies and
tools used or useful in such Obligor's business operations, and
software embedded in any such goods, excluding, however, Excluded
Equipment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor law. Any
reference to any provision of ERISA shall also be deemed to be a
reference to any successor provision or provisions thereof.
"EXCLUDED EQUIPMENT" shall mean (i) any equipment subject to a
Purchase Money Lien as to which the purchase money creditor holding
such Lien prohibits other Liens thereon without its prior consent,
unless and until either (A) such creditor grants such consent or (B)
the Debt secured by such Lien has been fully paid and satisfied; and
(ii) any equipment with respect to which the rights of possession and
use of any Obligor are created pursuant to a lease which does not
create a security interest, unless and until such time (if any) as such
Obligor acquires title to such equipment from the lessor or the lessor
abandons its rights and claims thereto.
"EVENT OF DEFAULT" has the meaning set forth in Section 9.01.
"EXECUTIVE OFFICE" shall mean the chief executive office
address of each Obligor designated as such in the Collateral
Information Certificates.
"FACTORED ACCOUNTS" shall mean all accounts of any Obligors
actually purchased by a Permitted Factor in connection with a factoring
program approved by the Required Holders, which factoring program,
among other things, shall not provide for any loans or advances to be
made to any of the Obligors on account of accounts to be purchased by
such Permitted Factor or any Lien on accounts or related assets not
purchased or identified for purchase by such Factor.
"FISCAL MONTH" shall mean any fiscal month of the Company.
"FISCAL QUARTER" shall mean any fiscal quarter of the Company.
"FISCAL YEAR" shall mean any fiscal year of the Company.
"FOREIGN PLEDGED STOCK" shall mean all capital stock of the
Direct Foreign Subsidiaries pledged pursuant to the Foreign Stock
Pledge Agreement.
"FOREIGN STOCK PLEDGE AGREEMENT" shall mean, collectively, (i)
the Foreign Stock Pledge Agreement, substantially in the form of
Exhibit E, executed by the Company (and, pursuant to Section 7.07, any
other Obligor creating or acquiring a Direct
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Foreign Subsidiary), and (ii) and if requested by the Required Holders,
any pledge or other agreement which may required pursuant to applicable
law in the jurisdiction in which a Direct Foreign Subsidiary is
located, in each case to be executed and delivered by the Company and
each other Obligor which owns any Direct Foreign Subsidiaries, pledging
to the agent pursuant thereto, for the ratable benefit of the Required
Holders subject to the Lien of the Senior Lenders, 65% of the capital
stock of all Direct Foreign Subsidiaries, to secure the payment of all
of the Obligations, as any of the foregoing may be amended or
supplemented from time to time.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary which is not a
Domestic Subsidiary.
"FULLY DILUTED BASIS" includes, without duplication, (i) all
shares of Capital Stock of the Company outstanding at the time of
determination, (ii) the Capital Stock issuable upon exercise of all
outstanding warrants, options and other rights to acquire Capital Stock
of the Company directly or indirectly and (iii) the Capital Stock of
the Company issuable upon conversion of all securities convertible
directly or indirectly into Capital Stock of the Company.
"GAAP" shall mean generally accepted accounting principles in
the United States of America applied on a basis consistent with those
which, in accordance with Section 1.03, are to be used in making the
calculations for purposes of determining compliance with the terms of
this Agreement.
"GUARANTEE" by any Person shall mean any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to
secure, purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security,
to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"HAZARDOUS MATERIALS" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and
Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing
regulations and amendments, or in any applicable state or local law or
regulation, (b) "hazardous substance", "pollutant", or "contaminant" as
defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product,
including, crude oil or any fraction thereof, (d) toxic substances, as
defined in the Toxic Substances Control Act of 1976, or in any
applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act of 1975, or in any applicable
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state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"INTANGIBLES COLLATERAL" shall mean all general intangibles of
each Obligor, whether now existing or hereafter acquired or arising,
including, without limitation, all copyrights, royalties, tax refunds,
rights to tax refunds, trademarks, trade names, service marks, patent
and proprietary rights, blueprints, drawings, designs, trade secrets,
plans, diagrams, schematics and assembly and display materials relating
thereto, all customer lists, all books and records and all computer
software and programs, and all goodwill of each Obligor associated
therewith.
"INTERCREDITOR AGREEMENT" shall mean an Intercreditor
Agreement, in form and substance satisfactory to the Purchasers, by and
among the Purchasers, the Senior Lenders and Wachovia, with respect to
the first priority liens in the Collateral in favor of the Collateral
Agent for the ratable benefit of the Senior Lenders, and the second
priority liens on the Collateral in favor of the Collateral Agent for
the ratable benefit of the Purchasers, and setting forth the relative
rights and priorities of such parties in the Collateral and matters
related thereto.
"INTEREST RATE PROTECTION AGREEMENT" shall mean an interest
rate hedging or protection agreement entered into by and between any of
the Obligors and any of the Purchasers, together with all exhibits,
schedules, extensions, renewals, amendments, substitutions and
replacements thereto and thereof.
"INVENTORY COLLATERAL" shall mean all inventory of each
Obligor, whether now owned or hereafter acquired, wherever located,
including, without limitation, all goods of such Obligor held for sale
or lease or furnished or to be furnished under contracts of service,
all goods held for display or demonstration, goods on lease or
consignment, spare parts, repair parts, returned and repossessed goods,
software embedded in such goods, all raw materials, work-in-process,
finished goods and supplies used or consumed in such Obligor's
business, together with all documents, documents of title, dock
warrants, dock receipts, warehouse receipts, bills of lading or orders
for the delivery of all, or any portion, of the foregoing; provided,
however, that "Inventory Collateral" shall not include goods which are
placed by the owner thereof on consignment with an Obligor in
compliance with Section 2-326 of the Uniform Commercial Code of the
applicable jurisdiction.
"LIEN" shall mean, with respect to any asset, any mortgage,
deed to secure debt, deed of trust, lien, pledge, charge, security
interest, security title, preferential arrangement which has the
practical effect of constituting a security interest, encumbrance, or
servitude of any kind in respect of such asset to secure or assure
payment of a Debt or a Guarantee, whether by consensual agreement or by
operation of statute or other law, or by any agreement, contingent or
otherwise, to provide any of the foregoing. For the purposes of this
Agreement, the Obligors or any Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to
such asset.
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"MARGIN STOCK" shall mean "margin stock" as defined in
Regulations T, U or X.
"MATERIAL ADVERSE EFFECT" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination, or claim or contest by any Obligor demanding the same,
in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a
material adverse effect upon, any of (a) the financial condition,
operations, business, properties or prospects of any Obligor, or any
Subsidiary, (b) the rights and remedies of the Collateral Agent or the
Purchasers under the Transaction Documents, the Collateral Agent's
security interest and Lien against the Collateral, or the ability of
any of the Obligors or any Person obligated under a Guarantee of the
Obligations to perform its obligations with respect to the Obligations
or under the Transaction Documents to which it is a party (including,
without limitation, the repudiation, revocation or any attempt to do
the same by any Obligor or any Person obligated under a Guarantee of
the Obligations or any other Transaction Document), as applicable, or
(c) the legality, validity or enforceability of any Transaction
Document.
"MATERIAL CONTRACT" shall mean (i) the License Agreement
between the Parent and Disney Enterprises, Inc. dated December 4, 2000,
and (ii) any contract, lease, instrument, guaranty or license, or other
arrangement (other than any of the Transaction Documents), whether
written or oral, to which any Obligor or any of its Subsidiaries is a
party as to which the breach, nonperformance, cancellation or failure
to renew by any party thereto could have a Material Adverse Effect.
"MATURITY DATE" shall mean July 23, 2007.
"MORTGAGES" shall mean any one, or more, or all, as the
context shall require, of (i) the Mortgage, Security Agreement and
Fixture Financing Statement dated September 22, 1999, from Churchill
Weavers, Inc., to Wachovia Bank, N.A., as collateral agent for itself
and other lenders identified in said mortgage, recorded in Book 586,
Page 332, Madison County, Kentucky, Records, as amended by the Mortgage
Amendment; and (ii) any Mortgage required by Section 7.07 (which shall
be similar to the Mortgage described in clause (i) above, subject to
modification as appropriate to take into account the law of the state
in which the Real Property covered thereby is located), in each case
together with all future amendments and supplements thereto.
"MORTGAGE AMENDMENT" shall mean an amendment, of even date
herewith, to the Mortgage described in clause (i) of the definition of
Mortgage, which is satisfactory to the Lenders, which amendment shall,
among other things, refer to this Agreement and the refinancing of the
Refinanced Agreements pursuant hereto, secure the Obligations
hereunder, and continue the Liens and security interests granted
pursuant to the Mortgage without interruption.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
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"NET CASUALTY/INSURANCE PROCEEDS", shall mean, when used with
respect to any Condemnation Awards or insurance proceeds allocable to
the Collateral or in respect of business interruption insurance, the
gross proceeds from any Casualty or Condemnation or business
interruption remaining after payment of all expenses (including
attorneys' fees) incurred in the collection of such gross proceeds.
"NET INCOME" shall mean, as applied to any Person for any
relevant fiscal period, the aggregate amount of net income of such
Person, after taxes, for such period, as determined in accordance with
GAAP.
"NOTES" shall mean, collectively, each subordinated promissory
note issued by the Company pursuant to Section 2.01, Section 2.04(a) or
any other provision hereof, in substantially the form of Exhibit A-1 or
A-2 hereto, as the case may be, maturing on the Maturity Date, or such
earlier date as provided herein, at which time all principal, interest
and other amounts owing hereunder shall be due and payable in full, and
bearing interest as set forth in this Agreement, and each Note
delivered in substitution, amendment, modification, extension or
exchange for any such Note pursuant to the provisions of this
Agreement.
"OBLIGATIONS" shall mean all Debts, indebtedness, liabilities,
covenants, duties and other obligations of the Obligors: (i) to the
Collateral Agent, any of the Purchasers, or any of their respective
successors, permitted transferees or permitted assigns, included or
arising from time to time under this Agreement or any other Transaction
Document, whether evidenced by any note or other writing, whether
arising from the extension of credit, opening of a letter of credit,
acceptance or loan guaranty, including, without limitation, principal,
interest, Yield-Maintenance Amount, fees, costs, attorney's fees and
indemnification amounts and any and all extensions or renewals thereof
in whole or in part, direct or indirect, absolute or contingent, due or
to become due, primary or secondary, or joint or several; (ii) to any
Purchaser or Affiliate thereof arising under any Interest Rate
Protection Agreement with any such Purchaser or Affiliate, including,
without limitation, any premature termination or breakage or other
costs with respect thereto; (iii) to any Purchaser and its Affiliates,
arising in connection with any banking or related transactions,
services or functions provided to the Company in connection with the
conduct of the Company's business (excluding extensions of credit
giving rise to any Debt for Money Borrowed not related to this
Agreement or any of the other Transaction Documents).
"OBLIGORS" shall mean, individually and collectively, as the
context requires, each of the following Persons: (i) the Company,
Churchill Weavers, Inc., a Kentucky corporation, Hamco, Inc., a
Louisiana corporation, and Crown Crafts Infant Products, Inc., a
Delaware corporation; (ii) any Person which becomes an Obligor pursuant
to the provisions of Section 7.07 of this Agreement; and (iii) in the
case of each Obligor, its successors and its permitted assigns.
"ORIGINAL SECURITY AGREEMENT" shall mean, collectively, each
of the "Security Agreements", as defined in the Refinanced Agreements,
which were executed and delivered by the Company and the other Obligors
and their predecessors in interest
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pursuant to the Refinanced Agreements and the "Intercreditor
Agreement", as defined in the Refinanced Agreements.
"ORIGINAL STOCK PLEDGE AGREEMENT" shall mean the "Pledge
Agreement", as defined in the Refinanced Agreements, which was executed
and delivered by the Parent pursuant to the Refinanced Agreements and
the "Intercreditor Agreement", as defined in the Refinanced Agreements.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"PERMITTED ENCUMBRANCES" shall mean, (i) as to the Collateral
granted pursuant to the Security Agreement, the encumbrances set forth
on Schedule 7.10, and (ii) as to each parcel of the Real Properties,
the encumbrances expressly permitted by the Mortgage with respect to
such parcel of the Real Properties.
"PERMITTED FACTOR" shall mean any factor approved in writing
by the Purchasers and subject to an Assignment of Factoring Credit
Balances.
"PERSON" shall mean an individual, a corporation, a limited
liability company, a partnership, an unincorporated association, a
trust or any other entity or organization, including, but not limited
to, a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" shall mean at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by
a member of the Controlled Group for employees of any member of the
Controlled Group or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or has
within the preceding 5 plan years made contributions.
"PIK EQUIVALENT" shall mean, as of any date of determination,
an amount equal to the aggregate amount of each PIK Note to be issued
pursuant to Section 2.04(a) from the date hereof to and including the
Maturity Date with respect to any principal amount being prepaid as of
such date of determination.
"PIK NOTE" shall have the meaning set forth in Section
2.04(a).
"PREFERRED SHARES", as applied to any Person, shall mean
Capital Stock of such Person which shall be entitled to preference or
priority over any other Capital Stock of such Person in respect of
either the payment of dividends or the distribution of assets upon
liquidation.
"PREMIUM" shall mean any amount payable to a lender as
consideration or compensation for the prepayment of Debt.
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"PURCHASE MONEY LIEN" shall mean any Lien (including a
negative pledge arrangement) granted by any Obligor or any Subsidiary
from time to time to vendors or financiers of equipment to secure not
less than 75% of the payment of the purchase price thereof so long as
(i) such Liens extend only to the specific equipment so purchased, (ii)
secure only such deferred payment obligation and related interest, fees
and charges and no other Debt, and (iii) are promptly released upon the
payment in full of such purchase price and related interest, fees and
charges.
"PURCHASERS" shall have the meaning set forth in the
introductory paragraph.
"QUARTERLY PAYMENT DATE" shall mean each March 31, June 30,
September 30 and December 31, commencing with September 30, 2001.
"REAL PROPERTIES" shall mean the real property owned by the
Obligors and described in the Mortgages.
"REAL PROPERTY DOCUMENTATION" shall mean the following as to
each parcel of the Real Properties, in each case in form and substance
satisfactory to the Required Holders in their reasonable judgment:
(i) an owner's/lessee's affidavit for each
parcel or tract of such Real Property;
(ii) mortgagee title insurance binders and
policies for each tract or parcel of such Real Property;
(iii) a certificate as to the insurance required
by the related Mortgage, to the extent not furnished pursuant
to Section 6.06;
(iv) an indemnification agreement regarding
hazardous materials for such Real Property;
(v) as to any Mortgage required by Section 7.07,
a current survey of each parcel or tract of such Real
Property;
(vi) as to any Mortgage required by Section 7.07,
such consents, acknowledgments, intercreditor or attornment
and subordination agreements as the Collateral Agent may
require from any Third Parties with respect to any portion of
such Real Property;
(vii) as to any Mortgage required by Section 7.07,
a report of a licensed engineer detailing an environmental
inspection of such Real Property; and
(viii) as to any Mortgage required by Section 7.07,
an appraisal of such Real Property, prepared by an appraiser
satisfactory to the Collateral Agent and engaged by and on
behalf of the Collateral Agent and the Purchasers.
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"REDEEMABLE PREFERRED STOCK" of any Person shall mean any
preferred stock issued by such Person which is at any time prior to the
Maturity Date either (i) mandatorily redeemable (by sinking fund or
similar payments or otherwise) or (ii) redeemable at the option of the
holder thereof.
"REFINANCED AGREEMENTS" shall mean, collectively, (i) the
Credit Agreement between the Company and Wachovia, dated as of August
9, 1999, as amended by Amendment No. 1 to Revolving Credit Agreement
dated as of February 23, 2000, Amendment No. 2 to Revolving Credit
Agreement dated as of March 13, 2000, Amendment No. 3 to Revolving
Credit Agreement dated as of June 4, 2000, Amendment No. 4 to Revolving
Credit Agreement dated as of August 31, 2000, Amendment No. 5 to
Revolving Credit Agreement dated as of April 3, 2001; and Amendment No.
6 to Revolving Credit Agreement dated as of June 29, 2001 (ii) the
Credit Agreement between the Company and Bank of America, N.A., dated
as of August 9, 1999, as amended by Amendment No. 1 to Revolving Credit
Agreement dated as of February 23, 2000, Amendment No. 2 to Revolving
Credit Agreement dated as of March 13, 2000, Amendment No. 3 to
Revolving Credit Agreement dated as of June 4, 2000, Amendment No. 4 to
Revolving Credit Agreement dated as of August 31, 2000, Amendment No. 5
to Revolving Credit Agreement dated as of April 3, 2001 and Amendment
No. 6 to Revolving Credit Agreement dated as of June 29, 2001; and
(iii) the Note Purchase and Private Shelf Facility between the Company
and The Prudential Insurance Company of America dated as of October 12,
1995, as amended by Amendment to 1995 Note Agreement dated as of
February 29, 2000, Amendment to 1995 Note Agreement dated as of March
13, 2000, Amendment to 1995 Note Agreement dated as of June 4, 2000,
Amendment No. 5 of 1995 Note Agreement dated as of August 31, 2000,
Amendment No. 6 of 1995 Note Agreement dated as of April 3, 2001 and
Amendment No. 7 of 1995 Note Agreement dated as of June 29, 2001.
"REFINANCING DEBT" shall mean any Debt, the proceeds of which
are applied, directly or indirectly, to refinance all or a portion of
the Debt under the Senior Credit Agreement.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among the
Company, the Purchasers in each such Purchaser's capacity as holder of
a Warrant of the Company, in substantially the form of Exhibit C,
together with all amendments, modifications or supplements thereto.
"REGULATION T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations issued
thereunder.
"REGULATION U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations issued
thereunder.
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"REGULATION X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations issued
thereunder.
"REQUIRED HOLDERS" shall mean at any time Purchasers holding
at least (1) so long as there are 3 or fewer Purchasers, 100%, (2)
otherwise, 66 2/3's% of the aggregate outstanding principal amount of
the Notes; provided, however, that such calculation shall be made
without including the principal amount of Notes held by any Purchasers
which are in default with respect to their obligations to the
Collateral Agent, any Obligor or any Purchaser.
"SECURITY AGREEMENT" shall mean that certain Security
Agreement of even date herewith, substantially in the form of Exhibit
F, executed and delivered by the Obligors and the Purchasers, as
amended or supplemented from time to time.
"SECURITY DOCUMENTS" shall mean the Blocked Account
Agreements, the Domestic Stock Pledge Agreement, the Foreign Stock
Pledge Agreement, the Security Agreement, the Mortgages, and the Waiver
Agreements.
"SENIOR CREDIT AGREEMENT" shall have the meaning set forth in
the preamble of this Agreement.
"SENIOR DEBt" shall mean and include all obligations (whether
now outstanding or hereafter incurred), the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise in
respect of (i) all payment obligations under the Senior Notes, and the
Senior Credit Agreement, in respect of principal, interest, Premium and
fees or indemnities, whether now owing or hereafter incurred (including
any interest accruing subsequent to the commencement of a proceeding
described in Section 10.01(a), regardless of whether the claims of
holders of such payment obligations for such interest are allowed in
any such proceeding) and (ii) any Refinancing Debt; provided, that the
aggregate principal amount of all Senior Debt shall not exceed
$40,000,000 and Senior Debt shall not include (a) any Debt of the
Company which, by the terms of the instrument evidencing such Debt or
under which it is outstanding, is expressly made junior and subordinate
in right of payment to any other Debt; (b) Debt of the Company to a
Subsidiary of the Company; (c) any liability for federal, state, local
or other taxes owed or owing by the Company; and (d) any accounts
payable or other liability of the Company to trade creditors.
"SENIOR DEBT DEFAULT" shall mean (i) any default in the
payment of any principal of or interest or Premium on any Senior Debt
when the same becomes due and payable, or (ii) any other event of
default under any agreement evidencing Senior Debt which would entitle
the holders of such Senior Debt to accelerate such Senior Debt,
including without limitation, any default arising as a result of a
Default or Event of Default hereunder.
"SENIOR DEBT DOCUMENTS" shall mean the Senior Credit Agreement
and all other Credit Documents (as defined in the Senior Credit
Agreement).
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"SENIOR DEBT/EBITDA RATIO" shall mean the ratio of
Consolidated Senior Debt to Consolidated EBITDA.
"SENIOR LENDERS" shall have the meaning given to such term in
the recitals hereof.
"SENIOR OFFICER" shall mean any of the following officers of
the Company, regardless of actual title: Chief Executive Officer; Chief
Operating Officer; and Chief Financial Officer.
"SENIOR NOTES" shall mean the Revolving Loan Notes and the
Term Loan Notes issued pursuant to the Senior Credit Agreement.
"STOCKHOLDERS' EQUITY" shall mean, at any time, the
shareholders' equity of the Company and the Subsidiaries, as set forth
or reflected on the most recent consolidated balance sheet of the
Company and the Subsidiaries prepared in accordance with GAAP, but
excluding any Redeemable Preferred Stock of the Company or any of the
Subsidiaries. Shareholders' equity generally would include, but not be
limited to (i) the par or stated value of all outstanding Capital
Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various
deductions such as (A) purchases of treasury stock, (B) valuation
allowances, (C) receivables due from an employee stock ownership plan,
(D) employee stock ownership plan debt guarantees, and (E) translation
adjustments for foreign currency transactions.
"SUBSIDIARY" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly
owned by the Company.
"TERMINATION EVENT" shall mean any one of (i) the occurrence
of the Maturity Date, (ii) the payment in whole of the Notes, (iii) the
date the Notes are declared to be immediately due and payable pursuant
to Section 9.01 following the occurrence of an Event of Default and
(iv) the occurrence of a Change of Control.
"THIRD PARTY" shall mean any landlord, warehousemen, servicer,
processor, bailee and other third parties which may, from time to time,
be in the possession or control of, any Collateral or any property on
which any Collateral is or may be located.
"TRADE STYLES" has the meaning set forth in Section 5.29.
"TRANSACTION DOCUMENTS" shall mean, collectively, this
Agreement, the Notes, the Warrants, the Assignment Agreement, the
Intercreditor Agreement, the Registration Rights Agreement, the
Security Documents and any and all other documents, instruments,
certificates and agreements executed and/or delivered by the Company in
connection herewith, or any one, more, or all of the foregoing, as the
context shall require, in each case either as originally executed or as
the same may from time to time be supplemented, modified, amended,
restated, extended or supplanted in accordance with the provisions
hereof or thereof.
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"UCC" shall mean the Uniform Commercial Code Secured
Transactions of Georgia (O.C.G.A. Art. 11-9) (or, if the law of a
different state is selected in any Security Document as the governing
law for purposes of such Security Document, the Uniform Commercial Code
Secured Transactions of such other state as to such Security Document),
as in effect on the date hereof.
"VOTING STOCK" shall mean, securities or other equity interest
of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election or removal
of corporate directors or persons (such as general partners or
managers) performing similar functions in the case of business entities
other than corporations.
"WACHOVIA" shall mean Wachovia Bank, N.A., a national banking
association, and its successors.
"WAIVER AGREEMENT" shall mean the Waiver and Agreement
executed and delivered by any Third Party waiving or subordinating its
Third Party Claims, and making certain other agreements in regard to
the Collateral, all on terms satisfactory to the Collateral Agent in
all respects.
"WARRANT" shall mean any common stock purchase warrant issued
and delivered by the Company on the Closing Date, substantially in the
form of Exhibit B hereto, and each common stock purchase warrant issued
and delivered in substitution or exchange for such Warrant.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly
owned by the Company.
SECTION 1.02. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section
2.05(b), is declared to be immediately due and payable pursuant to
Section 9.02, as the context requires, or where mutually agreed by the
Obligors and the Purchasers.
"DISCOUNTED VALUE" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (as converted to reflect the periodic basis on
which interest on the Note is payable, if payable other than on a
semi-annual basis) equal to the Reinvestment Yield with respect to such
Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the Y-M Business Day
next preceding the Settlement Date with respect to such Called
Principal, on the display designated as "PAGE 678" on the Telerate
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(or such other display as may replace Page 678 on the Telerate) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or (ii) if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, the
Treasury Constant Maturity Series yields reported, for the latest day
for which such yields shall have been so reported as of the Y-M
Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied
yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between
yields reported for various maturities. The Reinvestment Yield will be
rounded to that number of decimal places as appears in the interest
rate for the Notes.
"REMAINING-AVERAGE LIFE" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying (a)
each Remaining Scheduled Payment of such Called Principal (but not of
interest thereon) by (b) the number of years (calculated to the nearest
one-twelfth year) which will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to Section 2.05(b) or is declared to be immediately
due and payable pursuant to Section 9.02, as the context requires.
"TELERATE" shall mean Telerate, Inc. or such other nationally
recognized service providing comparable services as you may select as a
substitute therefor.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any
Note, an amount equal to the excess, if any, of the Discounted Value of
the Called Principal of such Note over the sum of (i) such Called
Principal plus (ii) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called Principal. The
Yield-Maintenance Amount shall in no event be less than zero.
"Y-M BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in New York City are required
or authorized to be closed.
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall have the meanings generally attributed to such terms under
GAAP; provided, however, if
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GAAP should change after the Closing Date and either the Company or the Required
Holders shall object to the application of any such change herein, then, GAAP
shall be applied on a basis consistent with the Company's most recent financial
statements for which no objection was made, and the Company shall modify its
financial reporting hereunder accordingly.
ARTICLE II.
ISSUANCE AND PURCHASE OF THE NOTE AND WARRANT
SECTION 2.01. AUTHORIZATION OF ISSUANCE OF THE NOTES AND WARRANTS. The
Company has duly authorized the issuance and sale, on the terms and subject to
the conditions set forth herein, of Notes in the aggregate principal amount not
to exceed the amount specified in the Purchaser Schedule hereto opposite each
Purchaser's name, to be dated as of the date of the Closing Date. The Company
has duly authorized the issuance and sale, on the terms and subject to the
conditions set forth herein, of the Warrants for the purchase of the percentage
specified in the Purchaser Schedule hereto opposite each Purchaser's name of the
Common Stock of the Company on a Fully Diluted Basis.
SECTION 2.02. PURCHASE AND SALE OF NOTES AND WARRANTS. The Company
hereby agrees to issue to each Purchaser and, subject to the terms and
conditions set forth herein and in reliance upon the representations and
warranties of the Company contained herein, such Purchaser agrees to exchange
certain obligations and warrants outstanding under the Refinanced Agreements for
the Notes and the Warrants. The Notes and Warrants shall be issued for the
deemed aggregate purchase price as specified in the Purchaser Schedule hereto
opposite such Purchaser's name.
SECTION 2.03. ALLOCATION OF PURCHASE PRICE. Under both generally
accepted accounting standards consistently applied and the regulations of the
Internal Revenue Service, the issuance to each Purchaser of the Notes and the
Warrants for an aggregate purchase price equal to the aggregate principal amount
of the Notes being so purchased results in the creation of "original issue
discount" on the Notes (which original issue discount may also be deemed to
constitute the value of the Warrants issued in connection with the issuance of
the Notes), and such regulations require the determination of the value of the
Warrants so delivered. Pursuant to generally accepted accounting principles
consistently applied and applicable Treasury Regulations, the Company and each
Purchaser agree that the aggregate amount of such original issue discount and
the aggregate value of the Company's Warrants is as specified in the Purchaser
Schedule hereto opposite such Purchaser's name, which original issue discount
and value of such Warrant shall be allocated to the Notes. The Company and each
Purchaser agree to recognize and adhere to the determinations and allocations of
original issue discount and valuation of the Warrant set forth herein for all
federal and state income tax purposes. In the event of any proposed transfer of
any Note by a Purchaser, such Purchaser shall, prior to such transfer, mark such
Note with a legend pertaining to the original issue discount in the form
required by Treasury Regulation Section 1.1275-3(b)(1).
SECTION 2.04. INTEREST ON THE NOTE.
(a) RATE AND PAYMENT. Interest shall accrue at a rate per annum
equal to 10% payable in immediately available funds and 1.65% payable by
delivery of a promissory note in
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substantially the form of Exhibit A-2 hereto (a "PIK NOTE"). Interest shall be
payable (i) on the last Business Day of each calendar month, commencing on July
31, 2001 and continuing thereafter until the Notes have been paid in full, (ii)
upon any prepayment of any Note to the date of prepayment on the amount prepaid,
and (iii) at maturity of the Note, whether by acceleration or otherwise.
Notwithstanding anything else contained in this Section 2.04(a), the Company
shall make payments with respect to the Notes in immediately available funds at
such times and in such minimum amounts as are necessary for the Notes not to
have "significant original issue discount" as that term is defined in Section
163(i) of the Code. For this purpose, the issue price of the Notes shall be
computed by assuming that the fair market value of the Warrant is as set forth
on the Purchaser Schedule hereto.
(b) DEFAULT RATE. After maturity, whether by acceleration or
otherwise, interest shall accrue on the Notes at the Default Rate set forth in
Section 3.05 below, all of which shall be paid in immediately available funds.
SECTION 2.05. MATURITY OF THE NOTE; PREPAYMENTS.
(a) MATURITY. The principal amount of the Note shall be payable in
one installment on the Maturity Date, unless sooner accelerated in accordance
with the terms hereof.
(b) OPTIONAL PREPAYMENT OF NOTES. At any time and from time to
time after the Senior Debt has been indefeasibly paid in full, the Company may,
at its option, upon notice as set forth in clause (d) of this Section 2.05,
prepay all of the Notes upon the concurrent payment of the amount due under
Section 2.06 hereof.
(c) PARTIAL PREPAYMENTS OF NOTES. Partial prepayments of the Notes
shall not be permitted.
(d) NOTICE OF OPTIONAL PREPAYMENT OF NOTES. In the case of a
prepayment, the Company shall give written notice thereof to each holder of any
Note not less than 30 nor more than 60 days prior to the date fixed for the
prepayment. Such notice shall set forth: (1) the date fixed for prepayment; (2)
the aggregate principal amount of Notes; and (3) the aggregate principal amount
of Notes held by such holder and the amount of accrued interest to be paid to
such holder on such date and amounts due under Section 2.06.
(e) MATURITY; ACCRUED INTEREST; SURRENDER, ETC. OF NOTES. In the
case of a prepayment of all of the Notes, the principal amount to be prepaid
shall mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and amounts
due under Section 2.06. Any Note prepaid in full shall be marked "Paid in full",
surrendered to the Company at the Company's principal place of business promptly
following prepayment and canceled and shall not be reissued, and no Note shall
be issued in lieu of any prepaid principal amount of any Note.
(f) PURCHASE OF NOTES. The Company will not, and will not permit
any Subsidiary or Affiliate of the Company to, directly or indirectly, purchase
or otherwise acquire, or offer to purchase or otherwise acquire, any outstanding
Notes except by way of payment or prepayment in accordance with the provisions
of the Notes and this Agreement.
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(g) PAYMENT ON NON-BUSINESS DAYS. If any amount hereunder or under
the Notes shall become due on a day which is not a Business Day, such payment
shall be due on the next succeeding Business Day.
(h) WARRANT OWNERSHIP. Prepayment or transfer of any Note shall
not preclude a Purchaser from continuing to own a Warrant or from exercising its
rights pursuant to such Warrant or the Registration Rights Agreement at a later
date.
SECTION 2.06. ADDITIONAL PAYMENTS.
(a) TERMINATION EVENT. Upon the occurrence of a Termination Event,
the Company shall immediately pay to the Purchasers an amount equal to
$8,000,000 in cash as additional compensation to the Purchasers for the
consummation of the transactions contemplated hereby. Once paid, such amount
shall be fully earned and nonrefundable. Such payment shall be shared by the
Purchasers in the same proportion as the principal amount of the Notes held by
each Purchaser bears to the aggregate principal amount of the Notes held by all
Purchasers.
(b) PREPAYMENT OF NOTES. If the Notes are prepaid in whole prior
to the Maturity Date for any reason whatsoever including acceleration, the
Company shall pay to the Purchasers the PIK Equivalent in cash as additional
compensation to the Purchasers for the consummation of the transactions
contemplated hereby. Once paid, such amount shall be fully earned and
nonrefundable.
ARTICLE III.
OTHER PROVISIONS RELATING TO THE NOTE
SECTION 3.01. MAKING OF PAYMENTS. The Company shall make each payment
hereunder and under the Note not later than 2:00 p.m. (Atlanta, Georgia time) on
the day when due in Dollars in same day funds to the Purchasers as provided in
the Purchaser Schedule hereto. All payments received after that hour shall be
deemed to have been received by a Purchaser on the next following Business Day.
SECTION 3.02. INCREASED COSTS. In the event that any change in any
applicable law, treaty or governmental regulation, or in the interpretation or
application thereof, or compliance by a Purchaser with any guideline, request or
directive (whether or not having the force of law) from any central bank or
other U.S. or foreign financial, monetary or other governmental authority,
shall: (a) subject such Purchaser to any tax of any kind whatsoever with respect
to this Agreement, the Notes or the Warrants or change the basis of taxation of
payments to such Purchaser of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of tax on the overall net
income of such Purchaser); (b) impose, modify, or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by or committed to be extended by any office of such Purchaser,
including, without limitation, pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or (c) impose on such Purchaser any
other condition with respect to this Agreement, the Notes or the Warrants
hereunder; and the result of any of the foregoing is to increase the cost to
such
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Purchaser of making or maintaining the Notes or the Warrants or to reduce the
amount of any payment (whether of principal, interest or otherwise) in respect
of the Notes or the Warrants, then, in any case, the Company shall promptly pay
from time to time, upon demand of such Purchaser, such additional amounts as
will compensate such Purchaser for such additional cost or such reduction, as
the case may be. Such Purchaser shall certify the amount of such additional cost
or reduced amount to the Company, and such certification shall be conclusive
absent manifest error. In determining any such amount, such Purchaser may use
any reasonable averaging and attribution methods.
SECTION 3.03. CAPITAL ADEQUACY. If, after the date of this Agreement, a
Purchaser shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Purchaser 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 would have the
effect of reducing the rate of return on such Purchaser's capital (whether on
this credit facility or otherwise) as a consequence of its obligations hereunder
to a level below that which such Purchaser could have achieved but for such
adoption, change or compliance (taking into consideration such Purchaser's
policies with respect to capital adequacy) by an amount deemed by such Purchaser
to be material, then from time to time, promptly upon demand by such Purchaser,
the Company shall pay such Purchaser such additional amount or amounts as will
compensate such Purchaser for such reduction. A certificate of such Purchaser
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder and such certification shall be conclusive
absent manifest error. In determining any such amount, such Purchaser may use
any reasonable averaging and attribution methods.
SECTION 3.04. SURVIVAL. The obligations of the Company under Sections
3.02 and 3.03 shall survive termination of this Agreement and payment of the
Note.
SECTION 3.05. DEFAULT RATE OF INTEREST. If an Event of Default shall
occur and be continuing, then interest shall accrue on such unpaid principal or
any other Obligation from the due date until and including the date on which
such principal is paid in full at a rate per annum that is two percent (2%) in
excess of the rate of interest otherwise payable hereunder (the "DEFAULT RATE")
and shall be payable in immediately available funds. Interest calculated at the
Default Rate shall be due and payable in immediately available funds upon demand
by a Purchaser.
SECTION 3.06. CALCULATION OF INTEREST. Interest payable on the Note
shall be calculated on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed. If the date for any payment of principal is
extended (whether by operation of this Agreement, any provision of law or
otherwise), interest shall be payable for such extended time at the rates
provided herein. Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be due on the next succeeding
Business Day.
SECTION 3.07. USURY. In no event shall the amount of interest due or
payable on any Obligation, when aggregated with all amounts payable by the
Company under any of the
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Transaction Documents that are deemed or construed to be interest, exceed the
maximum rate of interest allowed by Applicable Law and, in the event any such
payment is paid by the Company or received by a Purchaser, then such excess sum
shall be credited as a payment of principal, unless the Company, as applicable,
shall notify such Purchaser in writing that it elects to have such excess sum
returned to it forthwith. It is the express intent of the parties hereto that
the Company not pay, and the Purchasers not receive, directly or indirectly, in
any manner whatsoever, interest in excess of that which may be lawfully paid by
the Company under Applicable Law.
ARTICLE IV.
CONDITIONS TO PURCHASE OF THE
NOTE AND THE WARRANT
The obligations of the Purchasers under this Agreement are subject to
the satisfaction of each of the following conditions on the Closing Date:
SECTION 4.01. NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of, this Agreement or the consummation of the transactions
contemplated hereby, or which, each Purchaser's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
SECTION 4.02. DOCUMENTATION. Each Purchaser shall have received, on or
prior to the Closing Date, the following, each in the form and substance
satisfactory to such Purchaser and its counsel and duly executed:
(a) this Agreement;
(b) the Note or Notes in the principal amount specified in the
Purchaser Schedule opposite such Purchaser's name;
(c) the Warrants for the purchase of the percentage specified in
the Purchaser Schedule opposite such Purchaser's name of the Common Stock of the
Company on a Fully Diluted Basis;
(d) the Registration Rights Agreement;
(e) the Intercreditor Agreement;
(f) the Security Agreement;
(g) a certificate signed by a senior officer of the Company
stating that the representations and warranties set forth herein and in any
other Transaction Document are true and correct in all material respects on and
as of such date with the same effect as though made on and as of such date,
stating that the Company is on such date in compliance with all the terms
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and provisions of the Transaction Documents on its part to be observed or
performed, and stating that on such date after giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents and the
Senior Debt Documents, no Default or Event of Default, has occurred or is
continuing;
(h) all documents which the Purchasers may reasonably request
relating to the existence of the Obligors, the corporate authority for and the
validity of this Agreement, the Notes, the Warrants and any other Transaction
Documents, and any other matters relevant hereto, all in form and substance
satisfactory to the Purchasers, including, without limitation, a certificate of
each Obligor, signed by the Secretary or an Assistant Secretary of such Obligor,
certifying as to the names, true signatures and incumbency of the officer or
officers of such Obligor authorized to execute and deliver the Transaction
Documents, and certified copies of the following items: (i) the Certificate of
Incorporation of such Obligor, and all amendments thereto, certified by the
Secretary of State of its incorporation as of a recent date, (ii) Bylaws, (iii)
certificates of good standing or valid existence of the Secretary of State of
the state of the jurisdiction of its incorporation and of each state in which it
is qualified to do business as a foreign corporation, in each case as of a
recent date, and (iv) the action taken by the Board of Directors of such Obligor
authorizing such Obligor the execution, delivery and performance of this
Agreement, the Notes and the other Transaction Documents to which such Obligor
is a party;
(i) an opinion letter of Rogers & Hardin LLP, counsel for the
Company and it Subsidiaries, dated as of the Closing Date, and covering such
additional matters relating to the transactions contemplated hereby as the
Purchasers may reasonably request;
(j) certified copies of the executed Senior Debt Documents and
evidence that all conditions precedent thereto have been satisfied;
(k) duly executed counterparts of each of the Domestic Stock
Pledge Agreement and the Foreign Stock Pledge Agreement, together with the blank
stock powers and certificates pertaining thereto (or other evidence of
registration or perfection of the security interests of the Collateral Agent),
each Waiver Agreement requested by the Collateral Agent and the Collateral
Information Certificates, together with acknowledgment copies of duly recorded
UCC-3 amendments to existing UCC-1 financing statements filed in connection with
the Original Security Agreement, and any new UCC-1 financing statements
requested by the Lenders, in each case in form and content satisfactory to the
Collateral Agent in all respects, pertaining to the Collateral evidencing
recordation thereof in all filing offices deemed necessary by the Collateral
Agent and the Blocked Account Agreements;
(l) receipt of a payoff letter from The CIT Group/Commercial
Services, Inc. ("CIT") with respect to Debt arising in connection with factoring
arrangements, satisfactory to the Collateral Agent to the effect that upon
payment of the payoff amount specified therein as to all Debt arising in
connection with such factoring arrangements, no loans or advances shall be made
thereafter under such factoring arrangements, and that termination statements
and other releases as are necessary to satisfy, terminate and release all Liens
obtained thereunder or in connection therewith, other than with respect to
Factored Accounts, will be delivered to the Required Holders upon receipt by CIT
of such payoff amount;
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(m) duly executed counterparts of the Mortgage Amendment, together
with such UCC-3 amendments pertaining thereto as the Collateral Agent may
reasonably request;
(n) to the extent reasonably available, receipt of lien searches
reasonably acceptable to the Required Holders, showing no Liens other than (i)
Permitted Encumbrances, and (ii) Liens in favor of The CIT Group/Commercial
Services, Inc. to be terminated pursuant to paragraph (l) above;
(o) a sources and uses of funds statement;
(p) duly executed counterparts of an Assignment Agreement of even
date herewith, pursuant to which the Company absolutely assigns to the
Collateral Agent, for the ratable benefit of the Purchasers, its right, title
and interest in and to certain assets described therein in exchange for
cancellation of part of the indebtedness outstanding on the Closing Date under
the Refinanced Agreements and each notice required thereunder duly executed by
the Company;
(q) a certified copy of the Certificate Regarding Second Amended
and Restated Articles of Incorporation of the Company, as filed with the
Secretary of State of Georgia;
(r) the Purchasers' satisfaction with the management team and
board of directors of the Company and the duration of term limits for the board
of directors;
(s) the Purchasers' satisfaction with the terms and provisions of
a $960,000, 24 month trust account for the benefit of the directors and officers
pertaining to the restructuring of the Company;
(t) releases of the Obligors and its Subsidiaries from the Calvin
Klein license;
(u) simultaneously with the closing of the transactions
contemplated herein, sale of the adult bedding business pursuant to the terms
and conditions contained in the term sheet dated April 13, 2001 among the
Company and the Senior Lenders pertaining thereto, including, without
limitation, (i) the approval of the board of directors of the Company regarding
such sale, (ii) the receipt of a copy of the fairness opinion regarding such
sale, and (iii) the payment to the Senior Lenders of $8,500,000, less
transaction expenses approved by the Senior Lenders, not to exceed $3,000,000,
from the proceeds of such sale for application to obligations under the
Refinanced Agreements; and
(v) such other documents, instruments and agreements as the
Purchasers shall request.
SECTION 4.03. CORPORATE ACTIONS. All corporate and other action
required hereunder shall be satisfactory.
SECTION 4.04. NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect
has occurred since April 1, 2001.
SECTION 4.05. NO DEFAULT, ETC. No Default or Event of Default shall
exist.
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SECTION 4.06.REPRESENTATIONS ACCURATE. All representations and
warranties made by the Company contained herein or in any other Transaction
Document shall be true and correct in all material respects with the same effect
as though such representations and warranties had been made on and as of the
Closing Date.
SECTION 4.07. PAYMENT OF FEES AND EXPENSES. The Company shall have paid
all of each Purchaser's fees and expenses (including those of its legal counsel)
incurred on or prior to the Closing Date.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
In order to induce each Purchaser to enter into this Agreement, the
Company hereby represents and warrants to each such Purchaser, as set forth
below:
SECTION 5.01. CORPORATE EXISTENCE AND POWER. The Company and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to transact business in every jurisdiction where, by the nature of its
business, such qualification is necessary (as set forth on Schedule 5.01), and
has all corporate powers and all governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted, except where
any such failure to qualify or have all required governmental licenses,
authorizations, consents and approvals does not have and would not reasonably be
expected to cause a Material Adverse Effect and would not impede any rights of
the Collateral Agent or the Purchasers with respect to the Collateral.
SECTION 5.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Company of this
Agreement, the Notes and the other Transaction Documents (i) are within the
Company's corporate powers, (ii) have been duly authorized by all necessary
corporate action, and have been executed on behalf of the Company by duly
authorized officers, (iii) require no action by or in respect of or filing with,
any governmental body, agency or official, (iv) do not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
Articles of incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or any of the Subsidiaries, and (v) do not result in the creation or imposition
of any Lien on any asset of the Company (except in favor of the Collateral
Agent) or any of the Subsidiaries.
SECTION 5.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Company enforceable in accordance with its terms, and
the Notes and the other Transaction Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company and the other Obligors, as the case may be, enforceable in
accordance with their respective terms, provided that the enforceability hereof
and thereof is subject in each case to general principles of equity and to
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights generally.
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SECTION 5.04. FINANCIAL INFORMATION.
(a) The (i)(x) draft audited consolidated financial statements
(including the balance sheet and statements of income, shareholders' equity and
cash flows) of the Company and its Consolidated Subsidiaries, and (y) unaudited
consolidating financial statements (including the balance sheet and statements
of income, shareholders' equity and cash flows) of the Company and all
Subsidiaries, in each case for the Fiscal Year ending on April 1, 2001, copies
of which have been delivered to each of the Purchasers, and (ii) unaudited (x)
consolidated financial statements (including the balance sheet and statements of
income, shareholders' equity and cash flows) of the Company and its Consolidated
Subsidiaries, and (y) an opening balance sheet taking into account the
restructuring of the Company and its Consolidated Subsidiaries and the sale of
its adult bedding line of business to its former management, and the sources and
uses statement described in Section 4.02(o), copies of which have been delivered
to each of the Purchasers, fairly present, in conformity with GAAP, the
consolidated financial position of the Company and its Consolidated Subsidiaries
or the consolidating financial position of the Company and the Subsidiaries, as
the case may be, as of such dates and their consolidated or consolidating
results of operations and cash flows for such periods stated, and accurately
reflect the sources and uses described in such sources and uses statement.
(b) Since April 1, 2001, there has been no event, act, condition
or occurrence having a Material Adverse Effect.
SECTION 5.05. LITIGATION. There is no action, suit or proceeding
pending, or to the knowledge of the Company threatened, against or affecting the
Company, any of the other Obligors or any of the Subsidiaries before any court
or arbitrator or any governmental body, agency or official which could have a
Material Adverse Effect.
SECTION 5.06. COMPLIANCE WITH ERISA.
(a) The Company, the other Obligors and each member of the
Controlled Group have fulfilled their obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan and are in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code, and have not incurred any liability to the PBGC or a Plan under Title
IV of ERISA.
(b) Neither the Company, the other Obligors nor any member of the
Controlled Group is or ever has been obligated to contribute to any
Multiemployer Plan.
SECTION 5.07. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. The Company and
the Subsidiaries are in material compliance with all applicable laws,
regulations and similar requirements of governmental authorities (including,
without limitation, the Fair Labor Standards Act of 1938, as amended), except as
set forth in Section 5.12 or where such compliance is being contested in good
faith through appropriate proceedings, and except where any such failure to
comply (other than with respect to the Fair Labor Standards Act of 1938, as
amended) does not have and would not reasonably be expected to cause a Material
Adverse Effect and would not impede any rights of the Collateral Agent with
respect to the Collateral and the Obligors have adopted and continue to follow a
compliance program satisfactory to assure the accuracy of the
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foregoing statement. There have been filed on behalf of the Company and the
Subsidiaries all federal, state and local income, excise, property and other tax
returns which are required to be filed by them and all taxes due pursuant to
such returns or pursuant to any assessment received by or on behalf of the
Company or any Subsidiary have been paid. The charges, accruals and reserves on
the books of the Obligors and the Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Obligors, adequate. United
States income tax returns of the Obligors and the Subsidiaries have been
examined and closed through the Fiscal Year ended on or about March 31, 1997.
SECTION 5.08. INVESTMENT COMPANY ACT. Neither the Company nor any of
the Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 5.09. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company
nor any of the Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
SECTION 5.10. OWNERSHIP OF PROPERTY; LIENS. The Company and the
Subsidiaries has title to its properties sufficient for the conduct of its
business, and none of such property is subject to any Lien except as permitted
in Section 7.10.
SECTION 5.11. NO DEFAULT. Neither the Company nor any of the
Subsidiaries is in default under or with respect to any agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound which could have or cause a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
SECTION 5.12.ENVIRONMENTAL MATTERS.
(a) Neither the Company nor any Subsidiary is subject to any
Environmental Liability which could have or cause a Material Adverse Effect and
neither the Company nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
None of the Real Properties or any other real property owned, leased or operated
by the Company or any Subsidiary (collectively, the "AGGREGATE REAL PROPERTIES")
has been identified on any current or proposed (i) National Priorities List
under 40 C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a
state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of,
managed or otherwise handled at, or shipped or transported to or from the
Aggregate Real Properties or are otherwise present at, on, in or under the
Aggregate Real Properties, or, to the best of the knowledge of the Company, at
or from any adjacent site or facility, except for Hazardous Materials, such as
cleaning solvents, pesticides and other materials used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed, or
otherwise handled in minimal amounts in the ordinary course of business in
substantial compliance with all applicable Environmental Requirements.
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(c) The Company and each of the Subsidiaries have procured all
Environmental Authorizations necessary for the conduct of its business, and is
in substantial compliance with all Environmental Requirements in connection with
the operation of the Aggregate Real Properties and the Company's and each of the
Subsidiary's respective businesses.
SECTION 5.13. CAPITAL STOCK. All Capital Stock, Redeemable Preferred
Stock, debentures, bonds, notes and all other securities of the Company and the
Subsidiaries presently issued and outstanding are validly and properly issued in
accordance with all applicable laws, including, but not limited to, the "Blue
Sky" laws of all applicable states and the federal securities laws, or for which
the applicable statute of limitations has expired. The issued shares of Capital
Stock and Redeemable Preferred Stock of the Company's Wholly Owned Subsidiaries
are owned by the Company free and clear of any Lien or adverse claim. At least a
majority of the issued shares of capital stock of each of the Company's other
Subsidiaries (other than Wholly Owned Subsidiaries) is owned by the Company,
free and clear of any Lien or adverse claim.
SECTION 5.14. MARGIN STOCK. Neither the Company nor any of the
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Notes will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation T, U or X.
SECTION 5.15. INSOLVENCY. After giving effect to the execution and
delivery of the Transaction Documents and the transactions contemplated thereby
and the incurrence of the Obligations under this Agreement: (i) neither the
Company nor the other Obligors will (x) be "insolvent," within the meaning of
such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the
Bankruptcy Code, or Section 2 of either the "UFTA" or the "UFCA", or as defined
or used in any "Other Applicable Law" (as those terms are defined below), or (y)
be unable to pay its debts generally as such debts become due within the meaning
of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the
UFCA, or (z) have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated, within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the UFCA; and (ii)
the Obligations of the Company under the Transaction Documents will not be
rendered avoidable under any Other Applicable Law. For purposes of this Section
5.15, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA" means the Uniform
Fraudulent Conveyance Act, and "Other Applicable Law" means any other applicable
law pertaining to fraudulent transfers or acts voidable by creditors, in each
case as such law may be amended from time to time.
SECTION 5.16. INSURANCE. The Company and each of the Subsidiaries have
(either in the name of the Company or in such Subsidiary's own name), with
financially sound and reputable insurance companies and with a Best's Rating of
at least "A", insurance in at least such amounts and against at least such risks
(including on all its property, and business interruption, public liability and
worker's compensation) as are usually insured against in the same general area
by companies of established repute engaged in the same or similar business and
as required by the Security Documents.
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SECTION 5.17. PURCHASE OF COLLATERAL. Within the 12 months period
preceding the Closing Date, none of the Obligors has purchased any of the
Collateral in a bulk transfer or in a transaction which was outside the ordinary
course of the business of such Obligor's seller.
SECTION 5.18. POSSESSION OF PERMITS. The Company and each Subsidiary
possess all franchises, certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory authorities, and all
patents, trademarks, service marks, trade names, copyrights, licenses and other
rights, free from burdensome restrictions, that are necessary for the ownership,
maintenance and operation of any of its properties and assets, and neither the
Company nor any Subsidiary is in violation of any thereof except where any such
failure to possess any of the foregoing does not have and would not reasonably
be expected to cause a Material Adverse Effect and would not impede any rights
of the Collateral Agent or Purchasers with respect to the Collateral.
SECTION 5.19. LABOR DISPUTES. (i) There is no collective bargaining
agreement or other labor contract covering employees of the Company or any
Subsidiary, (ii) no such collective bargaining agreement or other labor contract
is scheduled to expire during the term of this Agreement, (iii) no union or
other labor organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of any of the Company or any Subsidiary
or for any similar purpose and (iv) there is no pending, or to the Company's
knowledge, threatened, strike, work stoppage, material unfair labor practice
claim, or other material labor dispute against or affecting the Company or any
Subsidiary or their respective employees.
SECTION 5.20. SURETY OBLIGATIONS. Except as shown on Schedule 5.20,
neither the Company nor any of its Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into to assure payment, performance or completion of performance of any
undertaking or obligation of any Person.
SECTION 5.21. RESTRICTIONS. Neither the Company nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its business
or the use or ownership of any of its assets. Neither the Company nor any of its
Subsidiaries is a party or subject to any contract or agreement which restricts
its right or ability to incur Debt, none of which prohibit the execution of or
compliance with this Agreement or the other Transaction Documents by the Company
or any of its Subsidiaries, as applicable.
SECTION 5.22. LEASES. Schedule 5.22 is a complete listing of all
material capitalized and operating leases of the Company and its Subsidiaries on
the date hereof. Each of the Company and its Subsidiaries is in compliance in
all material respects with all of the terms of each of its respective
capitalized and operating leases.
SECTION 5.23. TRADE RELATIONS. There exists no present condition or
state of facts or circumstances which would materially adversely affect the
Company or any of its Subsidiaries or prevent the Company or any of its
Subsidiaries from conducting its business after the consummation of the
transactions contemplated by this Agreement in substantially the same manner in
which they have heretofore been conducted, and, to the best of the Company's
knowledge, there exists no actual or threatened termination, cancellation or
limitation of, or any
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modification or change in, the business relationship between the Company or any
of its Subsidiaries and any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of the Company or
any of its Subsidiaries, or with any material supplier.
SECTION 5.24. CAPITAL STRUCTURE. As of the date hereof, Schedule 5.24
states (i) the correct name of each of the Subsidiaries of the Company and the
Company, its jurisdiction of incorporation and the percentage of its Capital
Stock and Redeemable Preferred Stock owned by the Company, (ii) the name of each
of the Company's and the Company's Affiliates and the nature of such
affiliation, (iii) the number, nature and holder of all Capital Stock and
Redeemable Preferred Stock of the Company and each Subsidiary of the Company,
and (iv) the number of authorized, issued and treasury shares of the Company and
each Subsidiary of the Company. The Company has good title to all of the shares
it purports to own of the Capital Stock and Redeemable Preferred Stock of each
of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Encumbrances. All such shares have been duly issued and are fully paid
and non-assessable.
SECTION 5.25. FEDERAL TAXPAYER IDENTIFICATION NUMBER. The Company's and
the other Obligors' federal taxpayer identification numbers are as indicated on
the Collateral Information Certificates.
SECTION 5.26. BONA FIDE ACCOUNTS. Each item of the Accounts Receivable
Collateral and each Factored Account arises or will arise under a contract
between an Obligor and the respective Account Debtor, or from the bona fide sale
or delivery of goods to or performance of services for the Account Debtor.
SECTION 5.27. GOOD TITLE TO COLLATERAL. The Obligors have good title to
the Collateral free and clear of all Liens, other than any Permitted
Encumbrances, and no assertable financing statement covering the Collateral is
on file in any public office other than any evidencing Permitted Encumbrances.
SECTION 5.28. RIGHT TO ASSIGN AND GRANT SECURITY INTEREST. Each of the
Obligors has full right, power and authority to make the assignment pursuant to
this Agreement and the other Transaction Documents of the Accounts Receivable
Collateral and to grant a security interest in all of the Collateral.
SECTION 5.29. TRADE STYLES. Except as may be set forth on the
Collateral Information Certificates, the Company and the other Obligors use no
trade names or trade styles (herein, "TRADE STYLES") in their business
operations and each Obligor warrants that the same shall continue, except for
any additional Trade Styles after the date hereof with respect to which the
Company has given the Collateral Agent at least 30 days prior written notice
thereof. In any event, to the extent that, now or hereafter, the Obligors use
any Trade Styles, the Company hereby represents and warrants in favor of the
Collateral Agent that: (i) all of the accounts receivable and proceeds with
respect thereto arising out of sales under the Trade Styles shall be the
property of, and belong to, the Obligors and shall constitute Accounts
Receivable Collateral; (ii) each of the Trade Styles is a trade name and trade
style (and not an independent corporation or other legal entity) by which the
Obligors identify and sell certain of its products or services
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and under which they may conduct a portion of their business; (iii) all accounts
receivable, proceeds thereof, and returned merchandise which arise from the sale
of products invoiced under the names of any of the Trade Styles shall be owned
solely by the Obligors and shall be subject to the terms of this Agreement as
they relate to Accounts Receivable Collateral; and (iv) the Company hereby
appoints the Collateral Agent as its attorney-in-fact to file such certificates
disclosing the Company's use of the Trade Styles and to take such other actions
on its behalf as are necessary to comply with the statutes of any states
relating to the use of fictitious or assumed business names, to the extent that
the Company fails to do so.
SECTION 5.30. ACCOUNT DEBTOR CAPACITY AND SOLVENCY. Each Account Debtor
hereunder (a) had the capacity to contract at the time any contract or other
document giving rise to the account was executed and (b) such Account Debtor was
not and is not "insolvent" as that term is defined in Section 5.15.
SECTION 5.31. PROCEEDINGS WITH RESPECT TO ACCOUNTS. There are no
proceedings or actions which are threatened or pending against any Account
Debtor which are reasonably likely to have a material adverse change in such
Account Debtor's financial condition or the collectibility of such account.
SECTION 5.32. LOCATION OF COLLATERAL. As of the date hereof, the
Collateral consisting of goods of the Obligors is situated only at one or more
of the Collateral Locations.
SECTION 5.33. MATERIAL CONTRACTS. Schedule 5.33 sets forth a complete
listing of all Material Contracts. Each Obligor is in compliance in all material
respects with all terms and provisions of each Material Contract to which it is
a party.
SECTION 5.34. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company
covenants, warrants and represents to each of the Purchasers that all
representations and warranties of the Company and the other Obligors contained
in this Agreement or any of the other Transaction Documents shall be true at the
time of the execution of this Agreement and the other Transaction Documents, and
shall survive the execution, delivery and acceptance thereof by the Purchasers
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 5.35. FORCE MAJEURE. None of the Obligors' business is
suffering from effects of fire, accident, strike, drought, storm, earthquake,
embargo, tornado, hurricane, act of God, acts of a public enemy or other
casualty that would have a Material Adverse Effect.
SECTION 5.36. SENIOR NOTES. The Obligations, as and when incurred,
shall be subordinate in right of payment to all of the principal of, interest
on, and all other amounts payable in respect of, the Senior Notes, the Liens of
the Collateral Agent securing the Obligations shall be subordinate and junior to
the Liens securing the Senior Notes pursuant to the Intercreditor Agreement, and
the Obligations shall be subject to the subordination provisions set forth
herein.
SECTION 5.37. OFFERING OF NOTE AND WARRANTS. Neither the Company nor,
to the best knowledge of the Company, anyone acting on its behalf has offered
the Note, the Warrants or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than the Purchasers. Neither
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the Company nor any of its Subsidiaries nor, to the best knowledge of the
Company, anyone acting on their behalf has taken, or will take, any action which
would subject the issuance or sale of the Note and the Warrants to Section 5 of
the Securities Act of 1933, as amended or the registration or qualification
provisions of the blue sky laws of any state.
SECTION 5.38 REGISTRATION RIGHTS. As of the Closing Date, except as
provided in the Registration Rights Agreement, the Company is under no
obligation to register under the Securities Act of 1933, as amended, or the
Trust Indenture Act of 1939, as amended, any of its presently outstanding
securities or any of its securities that may subsequently be issued.
SECTION 5.39 DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to the Purchasers by or on behalf of any
Obligor in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Company or any of the other Obligors which materially adversely affects the
business, property or assets, or financial condition of the Company or any such
Obligor which has not been set forth in this Agreement or in the other
documents, certificates and written statements furnished to the Purchasers by or
on behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby.
ARTICLE VI.
AFFIRMATIVE COVENANTS
The Company covenants to each Purchaser that from and after the date
hereof, and so long as any amounts remain unpaid on account of any of the
Obligations or this Agreement remains effective (whichever is the last to
occur), the Company will comply (and cause each of its Subsidiaries to comply)
with the affirmative covenants set forth below:
SECTION 6.01. INFORMATION. The Company will deliver to each of the
Purchasers:
(a) within 30 days after the Closing Date, the audited
consolidated financial statements (including the balance sheet and statements of
income, shareholders' equity and cash flows) of the Company and its Consolidated
Subsidiaries for the Fiscal Year ending on April 1, 2001, and as soon as
available and in any event within 90 days after the end of each subsequent
Fiscal Year, (i) audited consolidated financial statements (including the
balance sheet and statements of income, shareholders' equity and cash flows) of
the Company and its Consolidated Subsidiaries, and (ii) unaudited consolidating
financial statements (including the balance sheet and statements of income,
shareholders' equity and cash flows) of the Company and all Subsidiaries, in
each case as of the end of such Fiscal Year, setting forth in each case in
comparative form the figures for the previous fiscal year, with the audited such
statements being certified by the Certified Public Accountants, and with such
certification to be free of exceptions and qualifications not acceptable to the
Required Holders;
(b) as soon as available, and in any event within 40 days after
the end of each Fiscal Month for the first 24 Fiscal Months after the Closing
Date, and 30 days after the end of each Fiscal Month thereafter, and within 45
days after the end of each Fiscal Quarter, (i) consolidated
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financial statements (including the balance sheet and statements of income,
shareholders' equity and cash flows) of the Company and its Consolidated
Subsidiaries, and (ii) consolidating financial statements (including the balance
sheet and statements of income, shareholders' equity and cash flows) of the
Company and all Subsidiaries, in each case as of the end of such Fiscal Month
and Fiscal Quarter, as the case may be, and for the portion of the Fiscal Year
ending on such date, setting forth in each case in comparative form the figures
for the corresponding Fiscal Month and Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency by a Senior
Officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate (a
"COMPLIANCE CERTIFICATE"), of the Senior Officer (i) setting forth in reasonable
detail the calculations required to establish whether the Company was in
compliance with the requirements of Section 8.01, on the date of such financial
statements and (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details thereof
and the action which the Company is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set of annual
financial statements referred to in paragraph (a) above, (i) a statement of the
Certified Public Accountants to the effect that (A) such accountants acknowledge
and agree that the Purchasers may rely upon such financial statement in the
administration of this Agreement, and (B) nothing has come to their attention to
cause them to believe that any Default existed on the date of such financial
statements, and (ii) a copy of any management letter furnished to the Company by
the Certified Public Accountants;
(e) as soon as available and in no event later than the end of the
Fiscal Year of each Obligor, projections of the Obligors and their Subsidiaries
for the forthcoming Fiscal Year, and set forth Fiscal Quarter by Fiscal Quarter,
together with all material assumptions made in connection therewith;
(f) promptly, but in any event within 5 Domestic Business Days
after the Company becomes aware of the occurrence of any Default, a certificate
of the Senior Officer setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto;
(g) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which the
Company shall have filed with the Securities and Exchange Commission;
(i) if and when any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV
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of ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA, a
copy of such notice; or (iii) receives notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to administer any Plan, a
copy of such notice;
(j) written notice of the following:
(i) promptly after the Company's learning thereof, of (A)
the commencement of any litigation affecting the Company or any other
Obligor or any of their respective assets, whether or not the claim is
considered by the Company to be covered by insurance, and (B) the
institution of any administrative proceeding which in either case of
clause (A) or (B), if decided adversely, would have a Material Adverse
Effect; and
(ii) at least 30 days prior thereto, of the opening of any
new office or place of business of any Obligor or the closing of any
existing office or place of business of any Obligor; and
(iii) promptly after the Company's learning thereof, of any
labor dispute to which the Company or any other Obligor may become a
party, or any strikes or walkouts relating to any of its plants or
other facilities, which in either case will have a Material Adverse
Effect, and the expiration of any labor contract to which it is a party
or by which it is bound; and
(iv) promptly after the occurrence thereof, of any default
by any obligor under any note or other evidence of indebtedness payable
to the Company or any other Obligor exceeding $250,000; and
(v) promptly after the rendition thereof, of any judgment
in an amount exceeding $250,000 rendered against the Company or any
other Obligor; and
(vi) promptly after the Company's learning thereof,
knowledge of any and all Environmental Liabilities, pending, threatened
or anticipated Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on,
in, under or in any way affecting the Aggregate Real Properties or any
adjacent property, and all facts, events, or conditions that could lead
to any of the foregoing; and
(vii) promptly after the Company's learning thereof, of any
default by the Company or any other Obligor under the Senior Debt
Documents or of any material default under any note, indenture, loan
agreement, mortgage, lease, deed, guaranty or other similar agreement
relating to any Debt of any Obligor exceeding $250,000; and
(viii) promptly upon the execution thereof, of any amendment
to the Senior Credit Agreement, or other agreement governing or
pertaining to such Senior Debt, entered into by any Obligor as
permitted by Section 7.12(d), and such Obligor shall send the
Purchasers a copy thereof promptly thereafter;
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(k) from time to time such additional information regarding the
financial position or business (including, without limitation, tax returns and
bank statements) of the Company and the Subsidiaries as the Purchasers may
reasonably request.
SECTION 6.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS.
(a) The Company will (i) keep, and cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its business and activities; and (ii) permit, and cause each Subsidiary to
permit, any of the Purchasers (at the Company's expense if a Default or Event of
Default is in existence or at such Purchaser's respective expense, as the case
may be, prior to the occurrence of a Default or Event of Default) to visit and
inspect any of their respective properties, verify information with any Person,
to examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their respective
officers, employees and the Certified Public Accountants, the Company agreeing
to cooperate and assist in such visits and inspections, in each case prior to
the occurrence of a Default, at such reasonable times and as often as may
reasonably be requested, and after the occurrence of a Default, at any time and
without prior notice.
(b) In addition to the rights granted the Purchasers pursuant to
Section 6.02(a), the Collateral Agent (or any person or persons designated by
it) shall, in its sole discretion, have the right to call at any place of
business of the Obligors at any time and without prior notice, and, without
hindrance or delay, examine, inspect, and audit all or any portion of the
Collateral and to examine, inspect, audit and check and make copies of and
extracts from the Obligors' books, records, journals, orders, receipts and any
correspondence and other data relating to the Collateral, to the Obligors'
business or to any other transactions between the parties hereto.
(c) The Collateral Agent shall have the right, on its own or at
the direction of the Required Holders, to conduct field audits of the
Collateral, and at the expense of the Company; provided that so long as no
Default or Event of Default exists, no more than 1 such field audit shall be
conducted in any Fiscal Quarter.
SECTION 6.03. MAINTENANCE OF EXISTENCE AND MANAGEMENT. The Company
shall, and shall cause each Subsidiary, to maintain (i) their corporate
existence and carry on their business in substantially the same manner and in
substantially the same fields as such business is now carried on and maintained,
except as permitted by Sections 7.01 and 7.02, (ii) their respective corporate
charters, by-laws, partnership agreements, operating agreements and other
similar documents and agreements relating to their legal existence and
organization, and not permit any amendment or other modification thereto except
for any amendment or modification that would not affect the Obligations or
result in a Material Adverse Effect, and (iii) executive management having
sufficient skill and experience in the Company's and the Subsidiaries' industry
to manage the Company and the Subsidiaries competently and efficiently.
SECTION 6.04. USE OF PROCEEDS. On the Closing Date, the entire amount
of the Notes, will be used to refinance in part amounts outstanding under the
Refinanced Agreements, and the security interest and liens under the Original
Security Agreement, the Original Stock Pledge Agreement and the Mortgages shall
be continued without interruption to secure the Obligations
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pursuant to the Domestic Stock Pledge Agreement, the Security Agreement and the
Mortgages. No portion of the proceeds of the Notes will be used by the Company
or any Subsidiary (i) in connection with, whether directly or indirectly, any
tender offer for, or other acquisition of, stock of any corporation with a view
towards obtaining control of such other corporation, unless such tender offer or
other acquisition is to be made on a negotiated basis with the approval of the
Board of Directors of the Person to be acquired, and the provisions of Section
7.09 would not be violated, (ii) directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock, or (iii) for any purpose in violation of any applicable law or
regulation.
SECTION 6.05. COMPLIANCE WITH LAWS; PAYMENT OF TAXES. The Company will,
and will cause each of the Subsidiaries and each member of the Controlled Group
to, comply with applicable laws (including but not limited to ERISA and the Fair
Labor Standards Act of 1938, as amended), regulations and similar requirements
of governmental authorities (including but not limited to PBGC), except where
the necessity of such compliance is being contested in good faith through
appropriate proceedings diligently pursued and except where failure to comply
would not have and would not reasonably be expected to cause a Material Adverse
Effect. The Company will, and will cause each of the Subsidiaries to, pay
promptly when due all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a
lien against the property of the Company or any Subsidiary, except liabilities
being contested in good faith and against which, if requested by the Collateral
Agent, the Company or such Subsidiary will set up reserves in accordance with
GAAP.
SECTION 6.06. INSURANCE; NET CASUALTY/INSURANCE PROCEEDS.
(a) The Company will maintain, and will cause each of the
Subsidiaries to maintain (either in the name of the Company or in such
Subsidiary's own name), with financially sound and reputable insurance companies
acceptable to the Required Holders and with a Best's Rating of at least "A",
insurance on all of their property in at least such amounts and against at least
such risks (including on all its property, public liability and worker's
compensation, and business interruption insurance) as are usually insured
against in the same general area by companies of established repute engaged in
the same or similar business and as required by the Security Documents. The
Company shall deliver the originals or copies (which copies shall be certified
if requested by the Required Holders) of such policies to the Required Holders
with satisfactory lender's loss payable endorsements naming the Collateral Agent
for the Purchasers, as sole loss payee, assignee and additional insured, as its
interests may appear. Each policy of insurance or endorsement shall contain a
clause (i) not permitting cancellation by the Company without the prior written
consent of the Required Holders, and (ii) requiring the insurer to give not less
than 30 days prior written notice to the Required Holders in the event of
cancellation or non-renewal by the insurance company of the policy for any
reason whatsoever. In addition, the Company will exercise commercially
reasonable efforts to obtain, within 90 days of the Closing Date, a further
endorsement to each such policy specifying that the interest of the Collateral
Agent shall not be impaired or invalidated by any act or neglect of the Obligors
or the owner of the property or by the occupation of the premises for purposes
more hazardous than are permitted by said policy. Upon the date of this
Agreement, and from time to time thereafter upon the Required Holders request,
the Company shall provide the Required Holders with a statement from each
insurance company providing the foregoing coverage, acknowledging in favor of
the Collateral
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Agent the continued effectiveness of the foregoing insurance clauses. If the
Company or any other Obligor fails to provide and pay for such insurance, the
Collateral Agent may, at its option, but shall not be required to, procure the
same and charge the Company or such Obligor therefor as a part of the
Obligations.
(b) Net Casualty/Insurance Proceeds must be applied to either (i)
the payment of the Obligations, or (ii) the repair and/or restoration of the
Collateral. If either an Event of Default has occurred, or the cost to repair or
restore the Collateral or of loss due to business interruption exceeds $250,000,
then, in such event, the Collateral Agent, at the direction of the Required
Holders, shall determine, in their sole discretion, the manner in which Net
Casualty/Insurance Proceeds are to be applied. If no Event of Default has
occurred and the cost to repair or restore the Collateral or of loss due to
business interruption is $250,000 or less, the Company shall determine the
manner in which Net Casualty/Insurance Proceeds are to be applied.
SECTION 6.07. MAINTENANCE OF PROPERTY. The Company shall, and shall
cause each Subsidiary to, maintain all of its properties and assets in
reasonably good condition, repair and working order, ordinary wear and tear
excepted. The Obligors shall maintain all Equipment Collateral in good operating
condition and repair, reasonable wear and tear excepted and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment Collateral shall be maintained and
preserved, reasonable wear and tear excepted. Without the prior written consent
of the Collateral Agent, none of the Equipment Collateral may be affixed to any
real property such that it is characterized as a fixture under applicable law.
SECTION 6.08. [RESERVED]
SECTION 6.09. PHYSICAL INVENTORIES. The Company and the other Obligors
shall conduct a physical inventory no less frequently than annually and shall
provide to the Collateral Agent a report of such physical inventory promptly
thereafter, together with such supporting information as the Collateral Agent
shall reasonably request.
SECTION 6.10. [INTENTIONALLY DELETED]
SECTION 6.11. PRESERVATION OF INTANGIBLES COLLATERAL. The Company and
the other Obligors shall take all reasonably necessary and appropriate measures,
taking into account the value and usefulness of the relevant Intangibles
Collateral and the cost of such measures, to obtain, maintain, protect and
preserve the Intangibles Collateral including, without limitation, registration
thereof with the appropriate state or federal governmental agency or department.
SECTION 6.12. RECORDS RESPECTING COLLATERAL. All records of the Company
and the other Obligors with respect to the Collateral will be kept at their
respective Executive Offices and will not be removed from such address without
the prior written consent of the Required Holders.
SECTION 6.13. REPORTS RESPECTING COLLATERAL. The Company shall, as soon
as practicable, but in any event on or before 30 days after each Fiscal Month
for the first 24 Fiscal Months after the Closing Date, and 20 days after each
Fiscal Month thereafter, furnish or cause to be furnished to the Collateral
Agent a status report, certified by a duly authorized officer of the Company,
showing: (i) the aggregate dollar value of the items comprising the Factored
Accounts
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and the Accounts Receivable Collateral and the age of each individual item
thereof as of the last day of the preceding Fiscal Month (segregating such items
in such manner and to such degree as the Collateral Agent may request,
including, without limitation, by Account Debtor name, address, invoice number,
due date and invoice date); (ii) the aggregate dollar value of the items of
Accounts Receivable Collateral subject to "bill and hold" arrangements
(segregating such items in such manner and to such degree as the Collateral
Agent may request); (iii) the aggregate dollar value of the items comprising the
accounts payable of the Obligors and the age of each individual item thereof as
of the last day of the preceding Fiscal Month (segregating such items in such
manner and to such degree as the Collateral Agent may request); (iv) the type,
age, dollar value and location of the Inventory Collateral as at the end of the
preceding Fiscal Month, valued at the lower of its FIFO cost or market value;
and (v) the aggregate dollar value of all returns, repossessions or discounts
with respect to Inventory Collateral in excess of $250,000, and specifying for
each such return, repossession or discount, the Account Debtor, the reason for
any such return, repossession or discount and the location of any returned or
repossessed Inventory. Additionally, the Collateral Agent may, at any time in
its sole discretion, require the Company to permit the Collateral Agent in its
own name or any designee of the Collateral Agent in its own name to verify the
individual account balances of or any other matter relating to the individual
Account Debtors immediately upon its request therefor by mail, telephone,
telegraph or otherwise. The Company shall cooperate fully with the Collateral
Agent in an effort to facilitate and promptly conclude any such verification
process. In any event, with the above described status report for the month of
December of each year and upon request from the Collateral Agent, made at any
time hereafter, the Company shall furnish the Collateral Agent with a then
current customer and Account Debtor name and address list, together with (if
requested by the Collateral Agent) updates of Equipment Collateral lists and
appraisals of the Equipment Collateral and/or the Inventory Collateral. During
any period during which a Default or Event of Default exists, then, upon the
Collateral Agent's request therefor, the Company shall deliver to the Collateral
Agent copies of proof of delivery and the original copy of all documents, and
such other matters and information relating to the status of the Accounts of the
Obligors as the Collateral Agent shall reasonably request.
SECTION 6.14. COLLATERAL LOCATION WAIVERS. With respect to each of the
Collateral Locations, the Company will obtain such waivers of lien, estoppel
certificates or subordination agreements as the Collateral Agent may reasonably
require to insure the priority of its security interest in that portion of the
Collateral situated at such locations, such waivers to be obtained within (i) 30
days after the Closing Date therefor for Collateral Locations as to which the
dollar value of the Collateral at such Collateral Location is not in excess of
$1,600,000, and (ii) 60 days after the Closing Date for all other Collateral
Locations.
SECTION 6.15. MEXICAN FOREIGN STOCK PLEDGE. Within 60 days after the
Closing Date, the Company shall (i) execute and deliver to the Collateral Agent
such pledge or other agreement, and effect such registration or take such other
action, as may be required pursuant to applicable Mexican law to enable the
Collateral Agent to enforce in Mexico the pledge of stock in Burgundy
Interamericana, S.A. de C.V. described in the Foreign Stock Pledge Agreement,
and (ii) deliver to the Collateral Agent a favorable opinion acceptable to the
Required Purchasers regarding such enforceability from Mexican counsel
acceptable to the Required Purchasers and (iii) deliver in pledge the original
stock certificate evidencing such shares, together with executed blank stock
powers related thereto.
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SECTION 6.16. PAYMENT OF TAXES ON AND USE OF COLLATERAL. The Company
shall timely pay all taxes and other charges against the Collateral, and the
Company will not, nor will it permit the other Obligors to, use the Collateral
illegally.
SECTION 6.17. POST-CLOSING MATTERS. On or before (i) July 27, 2001, the
Company shall furnish to the Purchasers, a favorable opinion letter satisfactory
to the Purchasers of Cleary, Gottlieb, Steen & Hamilton, New York counsel for
the Obligors, dated as of the Closing Date, as to enforceability of the
Transaction Documents under the laws of the State of New York and (ii) August
27, 2001, the consent of Aladdin Manufacturing Corporation to the assignment of
the Escrow Agreement, as contemplated by the Assignment Agreement. In addition
the Collateral Agent is obtaining for the Purchasers a favorable opinion letter
satisfactory to the Purchasers of Stites & Harbison, Kentucky counsel for the
Purchasers, dated as of the Closing Date, as to enforceability and sufficiency
of the form of Mortgage and the Mortgage Amendment under the laws of the State
of Kentucky.
ARTICLE VII.
NEGATIVE COVENANTS
The Company covenants to each Purchaser that from and after the date
hereof and so long as any amount remains unpaid on account of any of the
Obligations or this Agreement remains effective (whichever is the last to
occur), it will not do (and will not permit any of its Subsidiaries to do),
without the prior written consent of Required Holders, any of the things or acts
set forth below:
SECTION 7.01. DISSOLUTION. The Company shall not suffer or permit
dissolution or liquidation either in whole or in part or redeem or retire any
shares of its own stock or that of the Company or Subsidiary, except through
corporate reorganization to the extent permitted by Section 7.02.
SECTION 7.02. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS.
(a) The Company will not, nor will they permit any Subsidiary to,
merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any Person, except for a merger or consolidation between Subsidiaries of
the Company or involving only the Company and one or more of its Subsidiaries in
which the Company is the surviving entity.
(b) The Company will not, nor will it permit any Subsidiary to
sell, lease or otherwise transfer all or any part of their assets (including,
without limitation, any sale and leaseback arrangement, but excluding sales of
inventory in the ordinary course of business) to, any other Person, or
discontinue or eliminate any business line or segment, provided that the
foregoing limitation on the sale, lease or other transfer of assets and on the
discontinuation or elimination of a business line or segment shall not prohibit:
(i) the sales of Factored Accounts to a Permitted Factor;
and
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(ii) dispositions of Equipment Collateral subject to the
provisions of Section 7.15.
SECTION 7.03. CHANGE IN FISCAL YEAR. The Company will not change its
Fiscal Year, or the fiscal year of any Subsidiary, without the consent of the
Required Holders.
SECTION 7.04. ENVIRONMENTAL MATTERS. The Company and the Subsidiaries
will not, and will not permit any Third Party to, use, produce, manufacture,
process, treat, recycle, generate, store, dispose of, manage at, or otherwise
handle, or ship or transport to or from the Aggregate Real Properties any
Hazardous Materials except for Hazardous Materials such as cleaning solvents,
pesticides and other similar materials used, produced, manufactured, processed,
treated, recycled, generated, stored, disposed, managed, or otherwise handled in
minimal amounts in the ordinary course of business in compliance with all
applicable Environmental Requirements.
SECTION 7.05. ENVIRONMENTAL RELEASE. The Company agrees that upon the
occurrence of an Environmental Release at or on any of the Aggregate Real
Properties it will act immediately to investigate the extent of, and to take
appropriate remedial action to eliminate, such Environmental Release, whether or
not ordered or otherwise directed to do so by any Environmental Authority.
SECTION 7.06. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
of the Subsidiaries shall enter into, or be a party to, any transaction
involving $500,000 or more with any Affiliate of the Company or such
Subsidiaries (which Affiliate is not one of the Company or a Wholly Owned
Subsidiary), except as permitted by law and in the ordinary course of business
and pursuant to reasonable terms which are fully disclosed to the Purchasers and
are no less favorable to the Company or such Subsidiary than would be obtained
in a comparable arm's length transaction with a Person which is not an
Affiliate. All obligations (consisting of Debt or otherwise) owed by any
Affiliate to the Company shall by its terms be subordinated in full to the
payment of the Obligations.
SECTION 7.07. NO ADDITIONAL SUBSIDIARIES. Neither the Company nor any
of its Subsidiaries shall hereafter create or acquire any Subsidiary or divest
itself of any material assets by transferring them to any Subsidiary. In the
event that, with the Required Holders' prior written consent, the Company
acquires or creates any Subsidiary which is a Domestic Subsidiary, then,
promptly and in any event within 10 Domestic Business Days) upon the acquisition
or creation thereof, the Company shall cause such Subsidiary to execute and
deliver to the Collateral Agent: (i) the Consent and Agreement of the Company at
the end of the Intercreditor Agreement, (ii) if it owns any capital stock of
another Domestic Subsidiary, a joinder agreement with respect to the Domestic
Stock Pledge Agreement, together with blank stock powers and the stock
certificates, (iii) if it owns any capital stock of a Direct Foreign Subsidiary,
a joinder agreement with respect to the Foreign Stock Pledge Agreement, together
with blank stock powers and the stock certificates (or otherwise make
arrangements satisfactory to the Collateral Agent for the registration or other
perfection of its security interest), (iv) if it owns any Real Property and if
requested by the Required Holders, a Mortgage thereon and such other Real
Property Documentation with respect thereto as is requested by the Required
Holders (provided, that such Mortgage and other Real Property Documentation must
be furnished as soon as reasonably practicable, but need not be furnished within
the aforesaid 10 Domestic Business
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Days period), (v) such UCC-1 financing statements as the Collateral Agent may
reasonably request and (vi) evidence of corporate authority therefor and
opinions of counsel with respect thereto, all satisfactory to the Collateral
Agent in all respects, in the case of such Security Documents, granting to the
Collateral Agent a second priority perfected Lien in all of the assets of such
Domestic Subsidiary subject only to Permitted Encumbrances.
SECTION 7.08. RESTRICTED PAYMENTS. The Company will not declare or make
any Restricted Payment during any Fiscal Year.
SECTION 7.09. INVESTMENTS. The Company shall not, and shall not permit
any of the other Obligors or any of the Subsidiaries to, make Investments in any
Person except:
(i) deposits required by government agencies, public
utilities or insurance companies;
(ii) Investments by the Company to or in any Subsidiary
existing on the Closing Date;
(iii) Investments in (1) direct obligations of the United
States Government maturing within one year, (2) certificates of deposit
issued by a commercial bank whose credit is satisfactory to the
Required Holders, (3) commercial paper rated "A1" or the equivalent
thereof by S&P or "P1" or the equivalent thereof by Moody's and in
either case maturing within 6 months after the date of acquisition,
and/or (4) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United
States bank whose long-term certificates of deposit are rated at least
"AA" or the equivalent thereof by S&P and "Aa" or the equivalent
thereof by Moody's;
(iv) Investments as a result of Interest Rate Protection
Agreements not entered into for speculative purposes and not exceeding
the aggregate amount of $1,000,000 (valued at the termination value
thereof computed in accordance with a method approved by the
International Swap Dealers Association and agreed to by the parties in
the applicable Interest Rate Protection Agreement, if any, and in any
case net of any benefits of the Company) outstanding with respect
thereto;
(v) other Investments existing on the Closing Date;
provided, however, that immediately after giving effect to the making of any
Investment permitted by this Section 7.09, no Default or Event of Default shall
have occurred and be continuing.
SECTION 7.10. PERMITTED LIENS. The Company will not, and will not
permit any Subsidiary to, create, assume or suffer to exist any Lien, directly
or indirectly, on any asset now owned or hereafter acquired by it, except, with
respect to the Collateral, the Permitted Encumbrances, and with respect to
assets other than Collateral, other Liens set forth below:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement and disclosed in the Collateral
Information Certificates;
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(b) any Lien existing on any specific fixed asset of any
corporation at the time such corporation becomes a Subsidiary and not created in
contemplation of such event;
(c) any Lien on any specific fixed asset securing Debt incurred or
assumed for the purpose of financing all or at least 75% of the cost of
acquiring or constructing such asset, provided that such Lien attaches to such
asset concurrently with or within 18 months after the acquisition or completion
of construction thereof;
(d) any Lien on any specific fixed asset of any corporation
existing at the time such corporation is merged or consolidated with or into the
Company or a Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any specific fixed asset prior to the
acquisition thereof by the Company or a Subsidiary and not created in
contemplation of such acquisition;
(f) Purchase Money Liens, securing Debt, not to exceed $250,000 in
the aggregate outstanding at any time; provided that in granting any such
Purchase Money Liens, the Company shall use its best efforts to obtain from the
holder of any such Purchase Money Lien a consent, if necessary, such that the
equipment covered by such Purchase Money Lien will not constitute Excluded
Equipment under clause (i) of the definition of "Excluded Equipment";
(g) Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do not in the
aggregate materially detract from the value of its assets or materially impair
the use thereof in the operation of its business;
(h) any Lien on Margin Stock;
provided, however, that immediately after giving effect to the creation,
assumption, existence or incurrence of any Liens permitted by this Section 7.10,
no Default or Event of Default shall have occurred and be continuing.
SECTION 7.11. RESTRICTIONS ON ABILITY OF THE COMPANY AND SUBSIDIARIES
TO PAY DIVIDENDS. The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any contractual encumbrance or restriction on the ability of any
Subsidiary to (i) pay any dividends or make any other distributions on its
Capital Stock or Redeemable Preferred Stock or any other interest or (ii) make
or repay any note or other financial obligations of the Obligors.
SECTION 7.12. PERMITTED DEBT. The Company will not, nor will it permit
any Subsidiary to, create, assume or incur any Debt, except as follows (the
amounts set forth below are in the aggregate for the Company and all
Subsidiaries).
(a) Debt owing by the Company to any other Obligor that is
subordinated to the payment of the Obligations and the Senior Subordinated
Notes;
(b) Debt to the Agent, the Collateral Agent and the Senior Lenders
under the Senior Debt Agreement, to the Purchasers under this Agreement and to
Wachovia under any document or agreement pertaining to any Letter of Credit;
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(c) Debt to Persons other than that described in the foregoing
clause(b) existing on the date of this Agreement and described in Schedule 7.12;
(d) [Reserved];
(e) Debt consisting of accrued pension fund and other employee
benefit plan obligations and liabilities;
(f) Debt consisting of deferred taxes;
(g) Debt resulting from endorsements of negotiable instruments
received in the ordinary course of business;
(h) Debt secured by Purchase Money Liens permitted hereby Section
7.10(f);
(i) contingent obligations with respect to documentary letters of
credit which have been issued but not drawn upon;
(j) Debt as a result of Interest Rate Protection Agreements as the
same are permitted under Section 7.09;
(k) Debt arising out of the refinancing, extension, renewal or
refunding of any Debt permitted by any of the foregoing paragraphs of this
Section so long as (i) the maturity of such refinanced Debt is not earlier than
the maturity of such original Debt, and (ii) the interest, fees and other
amounts payable with respect to such refinanced Debt are no greater than any
interest, fees or other amounts payable with respect to the original Debt); and
(l) Debt arising in connection with factoring arrangements with
The CIT Group/Commercial Services, Inc. described in Section 4.02(l), to be paid
off and released pursuant to the payoff letter described therein;
provided, however, that immediately after giving effect to the creation,
assumption, existence or incurrence of any Debt permitted by this Section 7.12,
no Default or Event of Default shall have occurred and be continuing.
SECTION 7.13. LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK AND
REDEEMABLE PREFERRED STOCK OF SUBSIDIARIES. The Company shall not, nor permit
any Subsidiary to, permit any Wholly Owned Subsidiary to issue any Capital Stock
or Redeemable Preferred Stock other than to the Company or one of its Wholly
Owned Subsidiaries or permit any Person other than the Company or one of its
Wholly Owned Subsidiaries to own any Capital Stock or Redeemable Preferred Stock
of a Wholly Owned Subsidiary (other than directors' qualifying shares); or sell
any of the Capital Stock or Redeemable Preferred Stock of a Subsidiary of the
Company, or permit any Subsidiary of the Company to sell any of the Capital
Stock or Redeemable Preferred Stock of any other Subsidiary.
SECTION 7.14. CHANGE OF PRINCIPAL PLACE OF BUSINESS OR LOCATION OF
COLLATERAL. None of the Obligors shall change its state of organization,
registered legal name, principal place of business or Executive Office, or open
new Collateral Locations or warehouses, or transfer
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existing Collateral Locations or warehouses, or locate the Collateral at any
location other than a Collateral Location, or maintain records with respect to
Collateral, to or at any locations other than those at which the same are
presently kept or maintained as set forth on the Collateral Information
Certificates without the Required Holder's prior written consent after at least
30 days prior written notice to the Purchasers; provided, however, that the
Company has notified the Purchasers that on or about December 31, 2001, each of
the Company and Hamco, Inc. will relocate its principal place of business and
Executive Office (with no change to its state of organization or registered
legal name) to Gonzales, Ascention Parish, Louisiana, and consent hereby is
granted with respect thereto, subject to the execution of appropriate UCC-1
financing statements requested by the Collateral Agent with respect thereto.
SECTION 7.15. DISPOSITIONS OF EQUIPMENT COLLATERAL. The Company will
not, nor permit any other Obligor to, sell, lease, exchange, arrange for a sale
and leaseback, or otherwise dispose of any of the Equipment Collateral without
the prior written consent of the Collateral Agent (acting at the direction of
the Required Holders); provided, however, that, with notice to, but without the
necessity of consent of, the Collateral Agent, from time to time hereafter, in
the ordinary course of the Obligors' business for so long as no Default or Event
of Default exists, the Obligors may (i) sell such portions of its Equipment
Collateral which in the aggregate during any 12 month period, has a market value
or a book value, whichever is more, of $500,000 or less, provided that the
proceeds are remitted to the Purchasers and applied as prepayment of the Notes
under Section 2.05, and (ii), sell, exchange or otherwise dispose of portions of
its Equipment Collateral which are obsolete, worn-out or unsuitable for
continued use by the Obligors if such Equipment Collateral is replaced promptly
upon its disposition with equipment constituting Equipment Collateral having a
market value equal to or greater than the Equipment Collateral so disposed of
and in which the Collateral Agent shall obtain and have a second priority
security interest pursuant hereto on behalf of the Purchasers subject only to
Permitted Encumbrances and the Liens securing the Senior Notes.
SECTION 7.16. MATERIAL CONTRACTS. The Company shall comply with and
enforce, and cause each Subsidiary to comply with and enforce, all material
terms and conditions of any Material Contract to which it is a party. The
Company may not, without the Required Holders' prior written consent, (i) enter
into, or permit any Subsidiary to enter into, any amendment or modification to
any Material Contract of a material nature, or (ii) permit any Material Contract
to be cancelled or terminated prior to its stated maturity. The Company shall
promptly notify the Required Holders and deliver to the Required Holders any
notice received by the Company with respect to any event which constitutes a
default by the Company or Subsidiary under any Material Contract to which the
Company or Subsidiary is a party or by which any of the assets of the Company or
Subsidiary may be bound.
SECTION 7.17. CHANGES TO FEDERAL TAXPAYER IDENTIFICATION NUMBER. No
Obligor may change its federal taxpayer identification number without 30 days'
prior written notice to the Purchasers.
SECTION 7.18. MODIFICATION OF CERTAIN DOCUMENTS, AGREEMENTS AND
INSTRUMENTS. The Company shall not:
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(a) File any resolution of its board of directors (or other
governing body) with the Secretary of State of the jurisdiction of its
organization to establish or create a series of Preferred Shares or any other
separate class of equity securities;
(b) Amend, modify, supplement or waive any term, condition or
provision of its organizational documents or enter into any agreement, document
or instrument or transaction, if the effect thereof is, or could reasonably be
expected to be, adverse to the interests of any holder of any of the Notes or to
impose restrictions upon the right and obligation of the Company to make
payments on the Notes that are more restrictive in any material respect than
those set forth in its organizational documents or such other agreements,
documents and instruments as in effect on the Closing Date; or
(c) Amend or alter the Senior Debt Notes or the Senior Debt
Documents in a manner that conflicts with the intent of the Intercreditor
Agreement or is adverse to the interests of the Purchasers, including without
limitation any modification that (a) adds or amends any covenant so that it is
more restrictive than the covenants contained in this Agreement, (b) increases
the rate of interest, Yield Maintenance Amount or any fees charged on the Senior
Notes, (c) increases the principal amount of the Senior Notes, (d) provides for
an earlier date for the payment of principal or interest on the Senior Notes or
shortens the average life of the Senior Notes, or (e) provides for additional
collateral, in each case without the prior written consent of the Required
Holders.
ARTICLE VIII.
FINANCIAL COVENANTS
The Company covenants to the Purchasers that, from and after the date
hereof and so long as any amount remains on account of any of the Obligations or
this Agreement remains effective, it will comply with the financial covenants
set forth below:
SECTION 8.01. FINANCIAL COVENANTS.
(a) MINIMUM EBITDA. Consolidated EBITDA shall not be less than:
(i) for the Fiscal Quarter ending September 30, 2001, $1,825,000; (ii) on a
cumulative basis for the Fiscal Quarter ending December 30, 2001 and the
immediately preceding Fiscal Quarter, $3,500,000; (iii) on a cumulative basis
for the Fiscal Quarter ending March 31, 2002 and the 2 immediately preceding
Fiscal Quarters, $5,550,000; and (iv) at the end of each Fiscal Quarter
thereafter, for such Fiscal Quarter and the 3 immediately preceding Fiscal
Quarters, the amount set forth below corresponding to such Fiscal Quarter:
FISCAL QUARTER ENDING MINIMUM EBITDA
June 30, 2002 $7,375,000
September 29, 2002 $7,900,000
December 29, 2002 $8,300,000
March 30, 2003 and each Fiscal $8,725,000
Quarter thereafter
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(b) DEBT/EBITDA RATIO. The Debt/EBITDA Ratio will not exceed, at
the end of each Fiscal Quarter set forth below, calculated as to Debt as of such
Fiscal Quarter and calculated as to Consolidated EBITDA for such Fiscal Quarter
and the 3 immediately preceding Fiscal Quarters (except that for the Fiscal
Quarter ending March 31, 2002, such calculation shall be for such Fiscal Quarter
and the 2 immediately preceding Fiscal Quarters), the ratio set forth below
corresponding to such Fiscal Quarter:
FISCAL QUARTER ENDING MAXIMUM DEBT/EBITDA
RATIO
March 31, 2002 7.75 to 1.0
June 30, 2002 5.65 to 1.0
September 29, 2002 5.25 to 1.0
December 29, 2002 4.75 to 1.0
March 30, 2003 and June 29, 4.50 to 1.0
2003
September 28, 2003 4.25 to 1.0
December 28, 2003 4.00 to 1.0
March 28, 2004 3.75 to 1.0
June 27, 2004 and September 3.50 to 1.0
26, 2004
December 26, 2004 through 3.25 to 1.0
December 25, 2005
And each Fiscal Quarter 3.00 to 1.0
thereafter
(c) SENIOR DEBT/EBITDA RATIO. The Senior Debt/EBITDA Ratio will
not exceed, at the end of each Fiscal Quarter set forth below, calculated as to
Senior Debt as of such Fiscal Quarter and calculated as to Consolidated EBITDA
for such Fiscal Quarter and the 3 immediately preceding Fiscal Quarters (except
that for the Fiscal Quarter ending March 31, 2002, such calculation shall be for
such Fiscal Quarter and the 2 immediately preceding Fiscal Quarters), the ratio
set forth below corresponding to such Fiscal Quarter:
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FISCAL QUARTER ENDING MAXIMUM SENIOR
DEBT/EBITDA RATIO
March 31, 2002 4.80 to 1.0
June 30, 2002 3.50 to 1.0
September 29, 2002 3.25 to 1.0
December 29, 2002 3.00 to 1.0
March 30, 2003 2.75 to 1.0
June 29, 2003 and September 2.50 to 1.0
28, 2003
December 28, 2003 2.25 to 1.0
March 28, 2004 through 2.00 to 1.0
September 26, 2004
December 26, 2004 1.75 to 1.0
March 27, 2005 and each Fiscal 1.50 to 1.00
Quarter thereafter
(d) EBITDA/CASH INTEREST RATIO. The EBITDA/Cash Interest Ratio
will not be less than, at the end of each Fiscal Quarter set forth below, for
such Fiscal Quarter and the 3 immediately preceding Fiscal Quarters (except that
for the Fiscal Quarter ending March 31, 2002, such calculation shall be for such
Fiscal Quarter and the 2 immediately preceding Fiscal Quarters), the amount set
forth below corresponding to such Fiscal Quarter:
FISCAL QUARTER ENDING MINIMUM EBITDA/CASH
INTEREST RATIO
March 31, 2002 1.60 to 1.0
June 30, 2002 1.65 to 1.0
September 29, 2002 1.80 to 1.0
December 29, 2002 2.00 to 1.0
March 30, 2003 2.20 to 1.0
June 29, 2003 through 2.25 to 1.0
December 28, 2003
March 28, 2004 through 2.50 to 1.0
December 26, 2004
March 27, 2005 through 2.75 to 1.0
December 25, 2005
And each Fiscal Quarter 3.00 to 1.00
thereafter
(e) MINIMUM STOCKHOLDERS' EQUITY. As of the end of each Fiscal
Quarter, Stockholders' Equity will not be less than the sum of (i) Stockholders'
Equity as of the Closing Date (after giving effect to the sale of its adult
bedding line of business to its former management) plus (ii) 75% of the
cumulative (since the Closing Date) Reported Net Income (excluding any Fiscal
Quarter during which Reported Net Income is less than $0.00) of the Company and
the Subsidiaries.
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(f) CAPITAL EXPENDITURES. The Company shall not, nor shall it
permit any Subsidiary to, make any expenditures (including obligations incurred
under any lease) in any Fiscal Year that are required to be capitalized under
GAAP in the aggregate for the Company and the Subsidiaries, on a consolidated
basis, exceeding $500,000.
(g) OPERATING LEASES. The Company shall not, nor shall it permit
any Subsidiary to, enter into or remain or become liable upon any lease (other
than intercompany leases between the Company and its Subsidiaries) which would
be characterized as an operating lease under GAAP if the aggregate amount of all
consolidated rents paid by the Company and its Subsidiaries under all such
leases would exceed $3,000,000 in the first Fiscal Year following the Closing
Date, with such amount increasing each Fiscal Year thereafter by an additional
5% of the amount in effect at the end of the preceding Fiscal Year.
ARTICLE IX.
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall constitute
an "EVENT OF DEFAULT", whatever the reason for such event and whether or not it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment or order of any court or any order, rule, or regulation of any
governmental or nongovernmental body:
(a) the Company shall fail to pay when due any principal of any
Note or any other Obligations, or shall fail to pay any interest on any Note
within 3 Domestic Business Days after such interest shall become due, or shall
fail to pay any fee or other Obligations within 3 Domestic Business Days after
such fee or other Obligation becomes due; or
(b) any material default shall occur pursuant to the terms of any
of the other Transaction Documents or any "Event of Default" shall occur under
the Senior Credit Agreement (as such term is defined therein); or
(c) the Company shall fail to observe or perform any covenant
contained in
(i) Sections 6.01(f), 6.02(a)(ii), 6.02(b), 6.03(i) and
(ii), 6.04, 6.13, 6.17, 7.01, 7.02, 7.07 through 7.13, inclusive, 7.15,
and 8.01;
(ii) Section 6.01(a) through (d), inclusive, and such
failure shall not have been cured within 10 Domestic Business Days
after the earlier to occur of (1) written notice thereof has been given
to the Company by the Collateral Agent or (2) the Company otherwise
becomes aware of any such failure; and
(iii) for the first Fiscal Year after the Closing Date
only, Section 6.13 and such failure shall not have been cured within 5
Domestic Business Days after the earlier to occur of (1) written notice
thereof has been given to the Company by the Agent or (2) the Company
otherwise becomes aware of any such failure, or
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(d) the Company or any other Obligor shall fail to observe or
perform any covenant or agreement contained or incorporated by reference in this
Agreement (other than those covered by paragraph (a) or (b) above) or any other
Transaction Documents and such failure shall not have been cured within 30 days
after the earlier to occur of (i) written notice thereof has been given to the
Company by the Required Holders or (ii) the Company otherwise becomes aware of
any such failure; or
(e) the Collateral Agent on behalf of the Purchasers shall cease
to hold a fully perfected, subordinated (but only to the Senior Debt and to the
extent described in the Intercreditor Agreement) Lien on the assets of any
Obligor described in any Transaction Document or any Person shall take any
action to discontinue or to assert the invalidity or unenforceability of such
security interest or the assignment under the Assignment Agreement shall cease
to be valid.
(f) any representation, warranty, certification or statement made
by the Company in ARTICLE V of this Agreement or by any Obligor in any
certificate, financial statement or other document delivered pursuant to this
Agreement or any other Transaction Documents shall prove to have been incorrect
or misleading in any material respect when made (or deemed made); or
(g) any Obligor shall fail to make any payment in respect of Debt
outstanding (other than the Notes) or under any document or agreement pertaining
to any Letter of Credit (as defined in the Senior Credit Agreement) when due or
within any applicable grace period; or
(h) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Company or any
Subsidiary in an aggregate principal amount of $250,000 or more (including,
without limitation, any required mandatory prepayment or "put" of such Debt to
the Company or any Subsidiary) or enables (or, with the giving of notice or
lapse of time or both, would enable) the holders of such Debt or commitment or
any Person acting on such holders' behalf to accelerate the maturity thereof or
terminate any such commitment prior to its normal expiration (including, without
limitation, any required mandatory prepayment or "put" of such Debt to the
Company or any Subsidiary); or
(i) the Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(j) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain
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undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Company or any Subsidiary under the federal bankruptcy
laws as now or hereafter in effect; or
(k) the Company, any Subsidiary or any member of the Controlled
Group shall fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of
intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by
the Company, any Subsidiary, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or
4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(l) (i) one or more judgments or orders of any court or other
judicial body for the payment of money in an aggregate amount in excess of
$250,000 (in excess of amounts covered by insurance) shall be rendered after the
Closing Date against any of the Company or any Subsidiary and such judgment or
order shall either continue unsatisfied and unstayed for a period of 30 days or
give rise to a Lien on any Collateral at any time; or (ii) a warrant or writ of
attachment or execution or similar process shall be issued against any property
of the Company or any Subsidiary which exceeds, individually or together with
all other such warrants, writs and processes since the Closing Date, $250,000
(in excess of amounts covered by insurance) and such warrant, writ or process
shall not be discharged, vacated, stayed or bonded for a period of 30 days;
provided, however, that in the event a bond has been issued in favor of the
claimant or other Person obtaining such attachment or writ, the issuer of such
bond shall execute a waiver or subordination agreement in form and substance
satisfactory to the Required Holders pursuant to which the issuer of such bond
subordinates its right of reimbursement, contribution or subrogation to the
Obligations and waives or subordinates any Lien it may have on the assets of the
Company or any Subsidiary; or
(m) a Change of Control shall occur; or
(n) (i) the loss of a material part of the business from any
customer of any Obligor which, during the Fiscal Year ended prior to such loss
thereof, accounted for 15% or more of the aggregate sales of the Obligors, or
(ii) the termination of the license from Disney Enterprises, Inc., or (iii) the
termination of any license agreement with any other licensor, if the license or
licenses utilized under such license agreement was or were necessary for sales
which, during the Fiscal Year ended prior to such termination, accounted for 15%
or more of the aggregate sales of the Obligors; or
(o) if, on any day, the Company could not truthfully make the
representations and warranties contained in Section 5.15; or
(p) there shall have occurred material uninsured damage to, or
loss, theft or destruction of, any material part of the Collateral; or
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(q) any strike, lockout, labor dispute, embargo, condemnation, act
of God or public enemy, or other casualty or injunction, court order, or order
or act of a governmental authority which causes, for more than 30 consecutive
days beyond the coverage period of any applicable business interruption
insurance, the cessation or substantial curtailment of revenue producing
activities at any facility of the Company or any Subsidiaries if any such event
or circumstance could reasonably be expected to have a Material Adverse Effect;
or
(r) if E. Randall Chestnut, as chief executive officer of the
Company, or Nanci Freeman, as President and Chief Executive Officer of Crown
Crafts Infant Products, Inc. shall cease for any reason (including death or
disability), respectively, to hold such offices, and a replacement of either
individual in their respective offices, which replacement must be reasonably
satisfactory to the Required Holders, is not appointed within 90 days of the
absence of such individuals from their respective offices;
SECTION 9.02. REMEDIES ON DEFAULT.
(a) Upon the occurrence and continuation of an Event of Default
(other than an Event of Default described in Section 9.01(h) and (i)), the
Required Holders may, in its sole discretion, but shall not be obligated to, by
notice to the Company declare the Notes (together with accrued interest
thereon), and all other amounts payable hereunder and under the other
Transaction Documents, to be, and the same shall thereupon become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company together with interest at
the Default Rate accruing on the principal amount thereof from and after the
date of such Event of Default, and may exercise all of their rights and remedies
under the Transaction Documents or under applicable law.
(b) Upon the occurrence of any Event of Default set forth in
clause (h) or (i) of Section 9.01 above, without any notice to the Company or
any other act by the Required Holders or any Purchaser, the Notes (together with
accrued interest thereon) and all other amounts payable hereunder and under the
other Transaction Documents, including, without limitation, all costs of
collection (including reasonable attorneys' fees if collected by or through an
attorney at law or in bankruptcy, receivership or other judicial proceedings),
shall automatically and without notice become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company together with interest thereon at the Default
Rate accruing on the principal amount thereof from and after the date of such
Event of Default
(c) Upon any Notes becoming due and payable under this Section
9.02, whether automatically or by declaration, such Notes will forthwith mature
and the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon (including pursuant to Section 3.05) and (y) the
Yield-Maintenance Amount determined in respect of such principal amount, shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Yield-Maintenance Amount by the Company in the event that
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the Notes are prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under such
circumstances.
(d) If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 9.02, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
(e) At any time after any Notes have been declared due and payable
pursuant to clause (a) of this Section 9.02, the Required Holders, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (i) the Company has paid all overdue interest on the Notes, all
principal of and Yield-Maintenance Amount, if any on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Yield-Maintenance Amount, if any, and any
overdue interest in respect of the Notes, at the Default Rate, (ii) all Events
of Default and Defaults, other than nonpayment of amounts that have become due
solely by reason of such declaration, have been cured or have been waived
pursuant to Section 11.04, and (iii) no judgment or decree has been entered for
the payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this clause (e) will extend to or affect any subsequent Event of
Default or Default or impair any right consequent thereon.
(f) No remedy herein conferred or reserved is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
default, omission or failure of performance hereunder shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
or power may be exercised from time to time and as often as may be deemed
expedient. In order to exercise any remedy reserved to the Purchasers in this
Agreement, it shall not be necessary to give any notice, other than such notice
as may be herein expressly required. Without limiting the obligations of the
Company under Section 11.03, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Agreement or any other Transaction Document, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
ARTICLE X.
SUBORDINATION OF NOTES
SECTION 10.01. SUBORDINATION. Anything in this Agreement to the
contrary notwithstanding, all amounts owing to the holders of the Notes under
this Agreement or any other Transaction Document including without limitation,
principal, Yield-Maintenance Amount, if any, interest and fees (excluding fees
and expenses of special counsel to the holders of the
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Notes) (the "SUBORDINATED DEBT"), shall be subordinate and junior to all Senior
Debt to the extent set forth in Section 10.01(a) through (g), inclusive, below.
(a) INSOLVENCY. In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or any other
Obligor, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company or any other Obligor, whether or
not involving insolvency or bankruptcy proceedings, then all Senior Debt shall
first be paid in full in cash before any payment of or on account of the
Subordinated Debt.
(b) INSOLVENCY DISTRIBUTIONS. In any of the proceedings referred
to in Section 10.01(a) above, any payment or distribution of any kind or
character, whether in cash, property, stock or obligations, which may be payable
or deliverable by the Company in respect of the Subordinated Debt shall be paid
or delivered directly to the holders of Senior Debt (or to a banking institution
selected by the court or Person making the payment or delivery or designated by
any holder of Senior Debt) for application in payment thereof in accordance with
the priorities then existing among such holders, unless and until all Senior
Debt shall have been paid in full in cash; provided, however, that no such
delivery shall be made to holders of Senior Debt of stock or obligations which
are issued pursuant to reorganization proceedings in respect of the Subordinated
Debt if such stock or obligations are subordinate and junior (whether by law or
agreement) at least to the extent provided in this Section 10.01 to the payment
of all Senior Debt then outstanding and to the payment of any stock or
obligations which are issued in exchange or substitution for any Senior Debt
then outstanding.
(c) SENIOR DEBT PAYMENT DEFAULT -- PAYMENT BLOCKAGE. If the
Company shall default in the payment of any principal of or interest or Premium
on any Senior Debt when the same becomes due and payable, whether at maturity or
at a date fixed for prepayment or by declaration of acceleration or otherwise,
then, until such default shall have been remedied by payment in full in cash or
waived, no holder of the Notes shall accept or receive any direct or indirect
payment of or on account of the Subordinated Debt.
(d) SENIOR DEBT COVENANT DEFAULTS -- PAYMENT BLOCKAGE. Upon the
occurrence and during the continuance of any Senior Debt Default (other than
under circumstances when the terms of Section 10.01(c) above are applicable), no
holder of the Notes shall accept or receive any direct or indirect payment of or
on account of any Subordinated Debt during the period (a "BLOCKAGE PERIOD")
beginning on the date of receipt by such holder of written notice of such Senior
Debt Default (a "DEFAULT SUBORDINATION NOTICE") from the Required Holders and
ending on the earliest of (i) the date when all such Senior Debt Defaults
identified in the Default Subordination Notice have been cured or waived in
writing, (ii) the date that is 180 days after receipt of such Default
Subordination Notice and (iii) the date of repayment in full of the Senior Debt,
provided that (a) there shall be no more than four Blockage Periods during the
term of the Notes, (b) during any 365-day period, the aggregate number of days
for which Blockage Periods may be in effect shall not exceed 210 days and (c) no
facts or circumstances constituting a Senior Debt Default existing on the date
of such Default Subordination Notice may be used as a basis for any subsequent
Default Subordination Notice. The provisions of this Section 10.01(d) shall not
prevent any payment on or in respect of the Subordinated Debt which would (in
the absence
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of any such Senior Debt Default) have been payable on any date during a Blockage
Period from being paid following the termination of such Blockage Period.
(e) STANDSTILL. At any time that the holders of the Notes are not
permitted to receive payments on the Subordinated Debt pursuant to either
Section 10.01(c) or (d), the holders of the Notes, to the extent they are
otherwise entitled to do so, will not accelerate the maturity of the Notes or
pursue any other remedy to enforce payment thereof or initiate, or join in the
initiation of, any bankruptcy or insolvency proceeding relative to the Company
until the earliest of (i) the date when the Senior Debt Default giving rise to
the blockage of payments on the Notes pursuant to Section 10.01(c) or (d) has
been cured or waived in writing, (ii) the date of the repayment in full of the
Senior Debt, (iii) the date that is 180 days after a Senior Debt payment
default, (iv) the end of the Blockage Period applicable to such Senior Debt
Default and (v) subject to the Intercreditor Agreement, the date on which the
Senior Debt shall have been declared due and payable prior to its stated
maturity or any holder of Senior Debt commences proceedings to collect any
Senior Debt or realize upon any material part of the collateral for any Senior
Debt (the "STANDSTILL PERIOD"). Upon the termination of the Standstill Period,
the holders of the Notes may exercise all rights or remedies they may have in
law or equity, subject to the terms hereof and of the Intercreditor Agreement.
(f) EXERCISE OF REMEDIES. So long as the Senior Debt is
outstanding, if (i) a default pursuant to which the Subordinated Debt may be
accelerated shall have occurred and is continuing and (ii) the remedies of the
holder of the Subordinated Debt shall not have been suspended under the
Intercreditor Agreement, upon 90 days prior written notice to the Senior Lenders
of its intention to do so, the holder of the Subordinated Debt may elect to
exercise any of its remedies that may exist at law or in equity. Except as
otherwise provided in this Section 10(f), so long as the Senior Debt is
outstanding, the Subordinated Lender shall not take any action to enforce any
remedies with respect to the Subordinated Debt.
(g) TURNOVER. If any payment or distribution of any character,
whether in cash, securities or other property, shall be received by any holder
of Notes in contravention of any of the terms of this Section 10.01 and before
all the Senior Debt shall have been paid in full in cash, such payment or
distribution shall be received in trust for the benefit of the holders of the
Senior Debt at the time outstanding and shall forthwith be paid over or
delivered and transferred to the holders of Senior Debt.
(h) FILING CLAIMS. Each holder of Notes shall duly and promptly
take such action as is reasonably necessary to file appropriate claims or proofs
of claim in any of the proceedings referred to in Section 10.01(a) and to
execute and deliver such other instruments and take such other actions as may be
reasonably necessary to prove or realize upon such claims and to have the
proceeds of such claims paid as provided in this Section 10.01. In the event any
holder of Notes shall not have made any such filing on or prior to the date ten
days before the expiration of the time for such filing or shall not have timely
executed or delivered any such other instruments and taken such other actions,
each holder of Senior Debt, acting through an agent or otherwise, is hereby
authorized, as the agent and attorney-in-fact for such holder of Notes for the
specific and limited purpose set forth in this paragraph, but shall have no
obligation, to file such proof of claim for or on behalf of such holder of
Notes, execute and deliver such other instruments for or on behalf of such
holder of Notes and take such other action necessary under applicable law to
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collect (subject to the provisions of Section 10.01(b)) any amounts due in
respect of such claim in such proceeding. Anything contained in this paragraph
notwithstanding, the right to vote any claim or claims in respect of the
Subordinated Debt in connection with any proceedings referred to in Section
10.01(a) is exclusively reserved to the holders of the Notes.
SECTION 10.02. OBLIGATION OF THE COMPANY UNCONDITIONAL. The provisions
of this Article X are for the purpose of defining the relative rights of the
holders of Senior Debt on the one hand, and the holders of the Notes on the
other hand, against the Company and its property, and nothing herein shall
impair, as between the Company and the holders of the Notes, the obligation of
the Company, which is unconditional and absolute, to pay to the holders thereof
the Subordinated Debt in accordance with the terms and the provisions of this
Agreement and the Notes. Except as otherwise provided in Section 10.01(e),
nothing contained herein shall prevent the holders of the Notes from exercising
all remedies otherwise permitted by applicable law or under this Agreement upon
default under this Agreement or under the Notes (including, without limitation,
the right to demand payment and sue for performance of the Agreement and of the
Notes and to accelerate the maturity of the Notes as provided in Article IX),
subject to the rights, if any, under this Article X of holders of Senior Debt to
receive cash, property, stock or obligations otherwise payable or deliverable by
the Company to the holders of the Notes.
SECTION 10.03. SUBROGATION. Upon payment in full of the Senior Debt in
cash, the holders of the Notes shall be subrogated to the rights of the holders
of the Senior Debt to receive payments or distributions of assets of the Company
made on the Senior Debt until the Subordinated Debt shall be paid in full, and,
for the purposes of such subrogation, no payments to the holders of the Senior
Debt of any cash, property, stock or obligations to which the holders of the
Notes would be entitled except for the provisions of Section 10.01 above shall,
as between the Company, its creditors (other than the holders of the Senior
Debt) and the holders of the Notes, be deemed to be a payment by the Company to
or on account of the Senior Debt.
SECTION 10.04. RIGHTS OF HOLDERS OF SENIOR DEBT. The provisions of this
Article X shall be deemed a continuing offer to all holders of Senior Debt to
act in reliance on such provisions (but no such reliance shall be required to be
proven to receive the benefits hereof) and may be enforced by such holders, and
no right of any present or future holder of any Senior Debt to enforce
subordination as provided in this Article X shall be prejudiced or impaired by
any act or failure to act on the part of the Company or by any act or failure to
act by any such holder, or by any non-compliance by the Company with the terms,
provisions and covenants of this Agreement or the Notes. Without in any way
limiting the generality of the foregoing, the holders of Senior Debt may, at any
time and from time to time, without the consent of or notice to the holders of
the Notes, and without impairing or releasing the subordination provided in this
Article X or the obligations hereunder of the holders of the Notes to the
holders of Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, or waive defaults under Senior Debt, or otherwise amend or supplement in
any manner Senior Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged or mortgaged to secure or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person, including any
guarantor or surety. The provisions of this Article X shall continue to be
effective, or be
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reinstated as of the date immediately prior to payment in full of the Senior
Debt, as the case may be, if at any time payment, or any part thereof, of any of
Senior Debt is rescinded or must otherwise be restored or returned by the
holders of Senior Debt upon occurrence of an event described in Section
10.01(a), or otherwise, all as though such payments had not been made.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopier) and shall be
effective (a) if given by mail, three (3) Business Days after being deposited in
the mails or (b) if given by telecopier, when so telecopied. Notices hereunder
shall be mailed or telecopied if to the Company at 1600 Riveredge Parkway, Suite
200, Atlanta, Georgia 30323 and if to a Purchaser, as provided on the Purchaser
Schedule hereto.
SECTION 11.02. NO WAIVER. No delay or failure on the part of any
Purchaser or any holder of the Note and the exercise of any right, power or
privilege granted under this Agreement or any other Transaction Document or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege. No waiver shall
be valid against a Purchaser unless made in writing and signed by such
Purchaser, and then only to the extent expressly specified therein.
SECTION 11.03. EXPENSES.
(a) The Company agrees to pay on demand all costs, expenses, taxes
and fees (i) incurred by any Purchaser in connection with the preparation,
execution and delivery of this Agreement and all other Transaction Documents,
including the reasonable fees and disbursements of counsel for such Purchaser;
(ii) incurred by such Purchaser in connection with the preparation, execution
and delivery of any waiver, amendment or consent by such Purchaser relating to
the Transaction Documents, including the reasonable costs and fees of counsel
for such Purchaser; and (iii) incurred by such Purchaser, including the
reasonable costs and fees of its counsel, in connection with the enforcement of
the Transaction Documents.
(b) The Company agrees to indemnify, pay and hold each Purchaser
and any holder of any of the Notes and the Warrants and the officers, directors,
employees and agents of such Purchaser and such holders (the "INDEMNIFIED
PERSONS") harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (including, without limitation, the reasonable
fees and disbursements of counsel for any Indemnified Person in connection with
any investigative, administrative or judicial proceeding, whether or not such
Indemnified Person shall be designated a party thereto) which may be incurred by
any Indemnified Person, relating to or arising out of the enforcement of this
Agreement, the Notes, the Warrants or any other Transaction Document or any
actual or proposed use of proceeds of the Notes; provided, that no Indemnified
Person shall have the right to be indemnified hereunder for its own gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction.
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SECTION 11.04. AMENDMENTS AND WAIVER.
(a) REQUIREMENTS. This Agreement, the Notes and any other
Transaction Document may be amended, and the observance of any terms hereof or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of Articles II or IV or
X hereof, or any defined term (as it is used therein), will be effective as to a
Purchaser unless consented to by such Purchaser in writing, and (b) no such
amendment or waiver may, without the written consent of the holder of each Note
at the time outstanding affected thereby, (i) change the amount or time of any
prepayment or payment of principal of, or change the rate or the time of payment
or method of computation of interest or of the Yield-Maintenance Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 2.04, 2.05, 2.06, 9.01(a) or 11.04.
(b) SOLICITATION OF HOLDERS OF NOTES.
(i) SOLICITATION. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The
Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 11.04 to each holder of outstanding Notes promptly
following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Notes.
(ii) PAYMENT. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes or any waiver or
amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted,
on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
(c) BINDING EFFECT, ETC. Any amendment or waiver consented to as
provided in this Section 11.04 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
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(d) NOTES HELD BY COMPANY, ETC. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.
SECTION 11.05. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, that the Company may not assign or
otherwise transfer any of its rights or obligations under this Agreement, the
Note or any other Transaction Document to any Person without the prior written
consent of the Required Holders. Such assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same rights, obligations and
benefits as it would have if it were a Purchaser hereunder and under the other
Transaction Documents. Notwithstanding the foregoing, a Purchaser may sell or
otherwise grant participations in all or any part of the Notes. The holder of
any such participation, if the participation agreement so provides, shall have
the same rights and benefits of a Purchaser hereunder.
SECTION 11.06. GOVERNING LAW. THIS AGREEMENT, THE NOTE AND THE WARRANT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK (WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS).
SECTION 11.07. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made by or furnished on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement.
SECTION 11.08. SEVERABILITY. If any part of any provision contained in
this Agreement shall be invalid or unenforceable under applicable law, said part
shall be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provision or the remaining provisions.
SECTION 11.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same instrument.
SECTION 11.10. SET-OFF. Upon the occurrence and during the continuation
of an Event of Default, the Company authorizes each Purchaser, without notice or
demand, to apply any indebtedness due or to become due to the Company from such
Purchaser in satisfaction of any of the indebtedness, liabilities or obligations
of the Company under this Agreement or under any other Transaction Document,
including, without limitation, the right to set-off against any deposits or
other cash collateral of the Company held by such Purchaser or an Affiliate
thereof. Any such set off shall be shared in accordance with Section 29 of the
Intercreditor Agreement.
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SECTION 11.11. TERMINATION OF AGREEMENT. This Agreement shall terminate
upon the payment in full of the Note and all Obligations relating thereto;
provided that, Sections 3.02, 3.03 and 10.03 shall survive the termination of
this Agreement.
SECTION 11.12. JURISDICTION AND VENUE. THE COMPANY AND EACH PURCHASER
HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS (FEDERAL AND STATE) OF THE
STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO THE SOLE AND ABSOLUTE
ELECTION OF THE REQUIRED HOLDERS, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS
AGREEMENT OR THE NOTES OR ANY OTHER TRANSACTION DOCUMENT SHALL BE LITIGATED IN
SUCH COURTS, AND THE COMPANY AND EACH PURCHASER WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT.
SECTION 11.13. WAIVER OF JURY TRIAL. THE COMPANY AND EACH PURCHASER
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT EITHER OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN
CONTRACT OR TORT, AT LAW OR EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND ANY OTHER TRANSACTION DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER
ENTERING INTO THIS AGREEMENT. FURTHER, THE COMPANY HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF ANY PURCHASER, NOR A PURCHASER'S COUNSEL, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PURCHASER WOULD NOT, IN THE EVENT
OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION, NO REPRESENTATIVE OR AGENT OF A PURCHASER, NOR SUCH PURCHASER'S
COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
SECTION 11.14. ENTIRE AGREEMENT. This Agreement, the Note, the Warrants
and the other Transaction Documents, together with any exhibits and schedules
attached hereto and thereto, constitute the entire understanding of the parties
with respect to the subject matter hereof and thereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect hereto or
thereto are expressly superseded hereby. The execution of this Agreement, the
Notes, the Warrants and the other Transaction Documents by the Company was not
based upon any facts or materials provided by any Purchaser, nor was the Company
induced to execute this Agreement, the Notes, the Warrants or the other
Transaction Documents by any representation, statement or analysis made by any
Purchaser.
[Signatures On Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers all as of the day and year first above
written.
ISSUER:
CROWN CRAFTS, INC.
By: /s/ E. Randall Chestnut
--------------------------------
Name: E. Randall Chestnut
Title: Executive Vice President
The foregoing Agreement is hereby
accepted as of the date first above written.
BANK OF AMERICA, N.A.
By: /s/ John F. Register
---------------------------
Name: John F. Register
Title: Principal
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Paul G. Price
---------------------------
Name: Paul G. Price
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ R.E.S. Bowen
---------------------------
Name: R.E.S. Bowen
Title: Vice President
S-1
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EXHIBIT A-1
FORM OF SUBORDINATED NOTE
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE PURCHASE AGREEMENT
REFERRED TO BELOW) PURSUANT TO, AND TO THE EXTENT PROVIDED HEREIN. ANY HOLDER OF
THIS INSTRUMENT SHALL BE DEEMED TO BE BOUND BY, AND SUBJECT TO, THE TERMS OF
SUCH PURCHASE AGREEMENT.
SUBORDINATED NOTE
U.S. $_________ [Date]
FOR VALUE RECEIVED, the undersigned, CROWN CRAFTS, INC., a corporation
organized under the laws of the State of Georgia (the "COMPANY"), hereby
promises to pay to the order of [INSERT PURCHASER'S NAME] (together with any
subsequent holder hereof, the "HOLDER") the principal sum of
______________________________ AND NO/100 UNITED STATES DOLLARS ($________) in
accordance with the terms of that certain Subordinated Note and Warrant Purchase
Agreement, dated as of July __, 2001, by and among the Company, Bank of America,
N.A., The Prudential Insurance Company of America and Wachovia Bank, N.A. (as
hereafter amended, modified or supplemented, the "PURCHASE AGREEMENT") and in
any event, no later than July __, 2007, unless sooner accelerated. In addition,
the Company agrees to pay interest accrued on the principal amount outstanding
under this Note from time to time, at such interest rates, payable at such
times, and computed in such manner, as specified in the Purchase Agreement, in
strict accordance with the terms thereof. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Purchase
Agreement.
All payments of principal and interest shall be made in lawful money of
the United States of America in immediately available funds at the Principal
Office of the Holder as specified in the Purchase Agreement.
This Note is issued pursuant to, and is the Note referred to in, the
Purchase Agreement, and the Holder is and shall be entitled to all benefits
thereof. The Purchase Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events,
and restrictions on prepayments on account of principal hereof. To the extent
prepayment is allowed, prepayment is subject to payment of a prepayment premium
specified in the Purchase Agreement.
In case an Event of Default shall occur and be continuing, the
principal of and all accrued interest on this Note may automatically become, or
be declared, due and payable in the manner
A-1-1
68
and with the effect provided in the Purchase Agreement. The Company agrees to
pay, and save the Holder harmless against, any liability for the payment of all
reasonable costs and expenses, including reasonable attorneys' fees actually
incurred, arising in connection with the enforcement by the Holder of any of its
rights under this Note or the Purchase Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE HOLDER AND THE COMPANY
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF).
THE COMPANY HEREBY EXPRESSLY WAIVES ANY PRESENTMENT, DEMAND, PROTEST OR
NOTICE IN CONNECTION WITH THIS NOTE, NOW OR HEREAFTER REQUIRED BY APPLICABLE
LAW.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officers as of the date first above written.
CROWN CRAFTS, INC.
By:
----------------------------------------
Name:
Title:
A-1-2
69
EXHIBIT A-2
FORM OF SUBORDINATED PIK NOTE
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF CERTAIN SENIOR DEBT (AS DEFINED IN THE PURCHASE AGREEMENT
REFERRED TO BELOW) PURSUANT TO, AND TO THE EXTENT PROVIDED HEREIN. ANY HOLDER OF
THIS INSTRUMENT SHALL BE DEEMED TO BE BOUND BY, AND SUBJECT TO, THE TERMS OF
SUCH PURCHASE AGREEMENT.
SUBORDINATED NOTE
U.S. $_________ [Date]
FOR VALUE RECEIVED, the undersigned, CROWN CRAFTS, INC., a corporation
organized under the laws of the State of Georgia (the "COMPANY"), hereby
promises to pay to the order of [INSERT PURCHASER'S NAME] (together with any
subsequent holder hereof, the "HOLDER") the principal sum of
______________________________ AND NO/100 UNITED STATES DOLLARS ($________) in
accordance with the terms of that certain Subordinated Note and Warrant Purchase
Agreement, dated as of July __, 2001, by and among the Company, Bank of America,
N.A., The Prudential Insurance Company of America and Wachovia Bank, N.A. (as
hereafter amended, modified or supplemented, the "PURCHASE AGREEMENT") and in
any event, no later than July __, 2007, unless sooner accelerated. No interest
shall be charged on this Note. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Purchase
Agreement.
All payments of principal and interest shall be made in lawful money of
the United States of America in immediately available funds at the Principal
Office of the Holder as specified in the Purchase Agreement.
This Note is issued pursuant to, and is the Note referred to in, the
Purchase Agreement, and the Holder is and shall be entitled to all benefits
thereof. The Purchase Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events,
and restrictions on prepayments on account of principal hereof. To the extent
prepayment is allowed, prepayment is subject to payment of a prepayment premium
specified in the Purchase Agreement.
In case an Event of Default shall occur and be continuing, the
principal of and all accrued interest on this Note may automatically become, or
be declared, due and payable in the manner and with the effect provided in the
Purchase Agreement. The Company agrees to pay, and save
A-2-1
70
the Holder harmless against, any liability for the payment of all reasonable
costs and expenses, including reasonable attorneys' fees actually incurred,
arising in connection with the enforcement by the Holder of any of its rights
under this Note or the Purchase Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE HOLDER AND THE COMPANY
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF).
THE COMPANY HEREBY EXPRESSLY WAIVES ANY PRESENTMENT, DEMAND, PROTEST OR
NOTICE IN CONNECTION WITH THIS NOTE, NOW OR HEREAFTER REQUIRED BY APPLICABLE
LAW.
Time is of the essence of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered by its duly authorized officers as of the date first above written.
CROWN CRAFTS, INC.
By:
--------------------------------
Name:
Title:
A-2-2
71
EXHIBIT B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT.
CROWN CRAFTS, INC.
SERIES [B][C] COMMON STOCK PURCHASE WARRANT
NEW YORK, NEW YORK
JULY 23, 2001
CROWN CRAFTS, INC., a Georgia corporation (the "COMPANY"), for value
received, hereby certifies that [NAME OF HOLDER] or its registered assigns is
entitled to purchase from the Company __________ duly authorized, validly
issued, fully paid and nonassessable shares of the Company's series [B][C]
non-voting common stock, par value $1.00 per share (the "WARRANT STOCK"), each
share convertible, as set forth in the Second Amended and Restated Articles of
Incorporation of the Company, into shares of Series A Common Stock, at an
initial exercise price per share equal to the product of (a) the lesser of (i)
135% of the Market Price of the Original Common Stock for the twenty (20)
consecutive Business Days immediately following the Original Issuance Date and
(ii) $.113 and (b) 1.43036586 (the "INITIAL EXERCISE PRICE"), at any time or
from time to time after the twentieth (20th) Business Day following Original
Issuance Date and prior to 5:00 p.m., New York City time, on the later of (i)
six (6) years from the Original Issuance Date and (ii) ninety (90) days from
receipt by the holder of this Warrant of the Expiration Notice (the "EXPIRATION
DATE"), all subject to the terms, conditions and adjustments set forth below in
this Warrant. Capitalized terms used in this Warrant and not otherwise defined
shall have the respective meanings specified in Section 13.
This Warrant is one of the Common Stock Purchase Warrants (the
"WARRANTS", such term to include all Warrants issued in substitution or exchange
therefor) issued in connection with and as consideration for (i) the Credit
Agreement dated as of July 23, 2001 (the "CREDIT AGREEMENT") among the Company,
Churchill Weavers, Inc., Hamco, Inc. and Crown Crafts Infant Products, Inc., as
borrowers, the Holders and Wachovia, as agent and (ii) the Subordinated Note and
72
Warrant Purchase Agreement dated as of July 23, 2001 (the "PURCHASE AGREEMENT")
among the Company and the Holders.
1. EXERCISE OF WARRANT.
1A. MANNER OF EXERCISE. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day on or after the twentieth (20th) Business Day following the Original
Issuance Date to and including the Expiration Date, by surrender of this
Warrant, with the form of subscription at the end hereof (or a reasonable
facsimile thereof) duly executed by such holder, to the Company at its principal
office (or, if such exercise shall be in connection with an underwritten public
offering of shares of Common Stock (or Other Securities) subject to this
Warrant, at the location at which the underwriters shall have agreed to accept
delivery thereof), accompanied by payment (except as otherwise provided in
Section 1F), by wire transfer of immediately available funds to a bank account
designated by the Company or by certified or official bank check payable to the
order of the Company), in the amount obtained by multiplying (a) the number of
shares of Original Common Stock (without giving effect to any adjustment
therein) designated in such form of subscription by (b) the applicable Initial
Exercise Price.
1B. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK. The number of
duly authorized, validly issued, fully paid and nonassessable shares of Warrant
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Warrant Stock which would otherwise (but for the provisions of Section 2) be
issuable upon such exercise, as designated by the holder hereof pursuant to
Section 1A, by a fraction of which (x) the numerator is the applicable Initial
Exercise Price and (y) the denominator is the Exercise Price in effect on the
date of such exercise. The "EXERCISE PRICE" shall initially be equal to the
applicable Initial Exercise Price, shall be adjusted and readjusted from time to
time as provided in Section 2 and, as so adjusted and readjusted, shall remain
in effect until a further adjustment or readjustment thereof is required by
Section 2.
1C. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall
be deemed to have been effected and the Exercise Price shall be determined
immediately prior to the close of business (unless such exercise shall be in
connection with an underwritten public offering of shares of Common Stock (or
Other Securities) subject to this Warrant, in which event concurrently with such
exercise) on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 1A, and at such time the person or persons
in whose name or names any certificate or certificates for shares of Warrant
Stock (or Other Securities) shall be issuable upon such exercise as provided in
Section 1C shall be deemed to have become the holder or holders of record
thereof.
1D. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the
exercise of this Warrant, in whole or in part, and in any event within three (3)
Business Days thereafter (unless such exercise
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73
shall be in connection with an underwritten public offering of shares of Common
Stock (or Other Securities) subject to this Warrant, in which event concurrently
with such exercise), the Company at its expense shall cause to be issued in the
name of and delivered to the holder hereof or, subject to Section 8, as such
holder may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise, and
(b) in case such exercise is in part only, a new Warrant
or Warrants of like tenor, specifying in the aggregate on the face or
faces thereof the number of shares of Original Common Stock equal to
the number of such shares specified on the face of this Warrant (as
adjusted pursuant to Section 2 herein) minus the number of such shares
designated by the holder upon such exercise as provided in Section 1A
and any amount of shares which shall have been cancelled in payment or
partial payment of the Exercise Price as provided in Section 1F.
1E. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in Section 2B) on
the Warrant Stock or Other Securities issued upon such exercise. If any
fractional interest in a share of Warrant Stock would, except for the provisions
of the first sentence of this Section 1E, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the product of the Market Price then in effect and such fractional interest.
1F. CASHLESS EXERCISE. As an alternative to or in combination with
the exercise of this Warrant by payment by wire transfer of immediately
available funds (or by certified or official bank check), as provided above in
Section 1A, the holder of this Warrant may exercise its right to purchase some
or all of the shares of Warrant Stock pursuant to this Warrant, on a net basis
without the exchange of any funds (a "CASHLESS EXERCISE"), such that the holder
hereof receives that number of shares of Warrant Stock subscribed to pursuant to
this Warrant less that number of shares of Warrant Stock, valued at Market
Price, at the time of exercise equal to the aggregate Exercise Price that would
otherwise have been paid by the holder of this Warrant for such shares of
Warrant Stock.
1G. NOTICE OF EXPIRATION. The Company shall give to the holder of
this Warrant at least ninety (90) days prior to July 23, 2007 but in any event
no more than one hundred twenty (120) days prior to such date, written notice of
the expiration of this Warrant (the "EXPIRATION NOTICE").
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2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS;
ADJUSTMENT OF EXERCISE PRICE.
2A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the
Company, at any time or from time to time after the Original Issuance Date,
shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2C or 2D) without
consideration or for a consideration per share (determined pursuant to Section
2E) less than the Market Price in effect on the date of and immediately prior to
such issue or sale, then, and in each such case, subject to Section 2H, the
Exercise Price shall be reduced, concurrently with such issue or sale, to a
price determined by multiplying the Exercise Price then in effect by a fraction,
(a) the numerator of which shall be equal to (i) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale plus (ii) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
such Additional Shares of Common Stock so issued or sold would purchase
at the Market Price then in effect, and
(b) the denominator of which shall be equal to the number
of shares of Common Stock outstanding immediately after such issue or
sale of Additional Shares of Common Stock,
provided that, for the purposes of this Section 2A, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
Section 2C or 2D, such Additional Shares shall be deemed to be outstanding, and
(y) treasury shares shall not be deemed to be outstanding. Any adjustment to the
Exercise Price shall cause simultaneously a proportional increase in the number
of shares of Original Common Stock that the holder hereof is entitled to
purchase pursuant to this Warrant.
2B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company
at any time or from time to time after the Original Issuance Date shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement and any redemption or
acquisition of any such stock or Options on the Common Stock) other than a
dividend described in Section 2D or payable in Additional Shares of Common Stock
or in Options for Common Stock, then the Company shall pay over to the holder of
this Warrant, on the date on which such dividend or other distribution is paid
to the holders of Common Stock, the securities and other property (including
cash) which such holder would have received if such holder had exercised this
Warrant in full immediately prior to the record date fixed in connection with
such dividend or other distribution or, in the absence of a record date,
immediately prior to the date of such payment or distribution.
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2C. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the Original Issuance Date,
shall issue, sell, grant or assume, or shall fix a record date for the
determination of holders of any class of securities entitled to receive, any
Options or Convertible Securities, whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
then, and in each such case, the maximum number of Additional Shares of Common
Stock (as set forth in the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, issuable upon the conversion or exchange of
such Convertible Securities (or the exercise of such Options for Convertible
Securities and subsequent conversion or exchange of the Convertible Securities
issued), shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date,
provided, that such Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant to
Section 2E) of such shares would be less than the Market Price in effect on the
date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading, as the case may be, and provided, further, that in any such
case in which Additional Shares of Common Stock are deemed to be issued,
(a) if an adjustment of the Exercise Price shall be made
upon the fixing of a record date as referred to in the first sentence
of this Section 2C, no further adjustment of the Exercise Price shall
be made as a result of the subsequent issue or sale of any Options or
Convertible Securities for the purpose of which such record date was
set;
(b) no further adjustment of the Exercise Price shall be
made upon the subsequent issue or sale of Additional Shares of Common
Stock or Convertible Securities upon the exercise of such Options or
the conversion or exchange of such Convertible Securities;
(c) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any change in
the consideration payable to the Company, or change in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such change becoming effective, be recomputed to reflect such
change insofar as it affects such Options, or the rights of conversion
or exchange under such Convertible Securities, which are outstanding at
such time;
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(d) upon the expiration of any such Options or of the
rights of conversion or exchange under any such Convertible Securities
which shall not have been exercised (or upon purchase by the Company
and cancellation or retirement of any such Options which shall not have
been exercised or of any such Convertible Securities the rights of
conversion or exchange under which shall not have been exercised), the
Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or retirement, as the case
may be), be recomputed as if:
(i) in the case of Options for Common Stock or
in the case of Convertible Securities, the only Additional
Shares of Common Stock issued or sold (or deemed issued or
sold) were the Additional Shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and
the consideration received therefor was (x) an amount equal to
(A) the consideration actually received by the Company for the
issue, sale, grant or assumption of all such Options, whether
or not exercised, plus (B) the consideration actually received
by the Company upon such exercise, minus (C) the consideration
paid by the Company for any purchase of such Options which
were not exercised, or (y) an amount equal to (A) the
consideration actually received by the Company for the issue,
sale, grant or assumption of all such Convertible Securities
which were actually converted or exchanged, plus (B) the
additional consideration, if any, actually received by the
Company upon such conversion or exchange, minus (C) the
excess, if any, of the consideration paid by the Company for
any purchase of such Convertible Securities, the rights of
conversion or exchange under which were not exercised, over an
amount that would be equal to the Fair Value of the
Convertible Securities so purchased if such Convertible
Securities were not convertible into or exchangeable for
Additional Shares of Common Stock, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
(y) the consideration deemed to have been received by the
Company (pursuant to Section 2E) upon the issue or sale of the
Convertible Securities with respect to which such Options were
actually exercised, minus (z) the consideration paid by the
Company for any purchase of such Options which were not
exercised; and
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(e) no recomputation pursuant to subsection (c) or (d)
above shall have the effect of increasing the Exercise Price then in
effect by an amount in excess of the amount of the adjustment thereof
originally made in respect of the issue, sale, grant or assumption of
such Options or Convertible Securities.
2D. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the Original Issuance Date,
shall declare or pay any dividend or other distribution on any class or series
of securities of the Company payable in shares of Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, the Exercise Price in
effect immediately prior to such split or dividend shall, concurrently with the
effectiveness of such split or dividend be proportionately decreased. For
purposes of this Section 2D, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend or other distribution,
immediately after the close of business on the record date for the determination
of holders of any class or series of securities entitled to receive such
dividend or other distribution (or if no such record is taken, then immediately
prior to such payment or other distribution), or (b) in the case of any such
subdivision, at the close of business on the day immediately prior to the day
upon which such corporate action becomes effective.
2E. COMPUTATION OF CONSIDERATION. For the purposes of this
Warrant:
(a) The consideration for the issue or sale of any
Additional Shares of Common Stock or for the issue, sale, grant or
assumption of any Options or Convertible Securities, irrespective of
the accounting treatment of such consideration,
(i) insofar as it consists of cash, shall be
computed as the amount of cash received by the Company, and
insofar as it consists of securities or other property, shall
be computed as of the date immediately preceding such issue,
sale, grant or assumption as the Fair Value of such
consideration (or, if such consideration is received for the
issue or sale of Additional Shares of Common Stock and the
Market Price of such securities is less than the Fair Value of
such consideration, then such consideration shall be valued at
the Market Price of such Additional Shares of Common Stock),
in each case without deducting any expenses paid or incurred
by the Company, any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or
others performing similar services or any accrued interest or
dividends in connection with such issue or sale, and
(ii) in case Additional Shares of Common Stock
are issued or sold or Options or Convertible Securities are
issued, sold, granted or assumed together with other stock or
securities or other assets of the Company for a consideration
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which covers both, shall be the proportion of such
consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or
Options or Convertible Securities, as the case may be, all as
determined in good faith by the Board of Directors or the
Company.
(b) All Additional Shares of Common Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class or series of stock of the Company and all
Additional Shares of Common Stock issued to effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock) shall be deemed to have been issued without
consideration.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to Section 2C, relating to Options
and Convertible Securities, shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the issue,
sale, grant or assumption of the Options or Convertible
Securities in question, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise in full of such
Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as
provided in the foregoing subsection (a),
by
(ii) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
2F. ADJUSTMENTS FOR COMBINATIONS, ETC. In case at any time or from
time to time after the Original Issuance Date, the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
2G. DILUTION IN CASE OF OTHER SECURITIES. In case at any time or
from time to time after the Original Issuance Date, any Other Securities shall
be issued or sold or shall become
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subject to issue or sale upon the conversion or exchange of any capital stock
(or Other Securities) of the Company (or any issuer of Other Securities or any
other Person referred to in Section 2I) or to subscription, purchase or other
acquisition pursuant to any Options issued or granted by the Company (or any
such other issuer or Person) for a consideration such as to dilute the exercise
rights granted by this Warrant on a basis to which the other provisions of this
Section 2 do not apply, then, and in each such case, the computations,
adjustments and readjustments provided for in this Warrant with respect to the
Exercise Price shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable
upon the exercise of this Warrant, so as to protect the holder of this Warrant
against the effect of such dilution.
2H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than 1% of the
Exercise Price in effect at the time such adjustment is otherwise so required to
be made, such amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall equal in the aggregate at least 1% of such Exercise Price.
2I. CAPITAL REORGANIZATION. If there shall be any consolidation or
merger to which the Company is a party, other than a consolidation or a merger
in which the Company is a continuing corporation and which does not result in
any reclassification of, or change (other than within Section 2F or a change in
par value) in, outstanding shares of Common Stock, or any sale or conveyance of
the property of the Company as an entirety or substantially as an entirety (any
such event being called a "CAPITAL REORGANIZATION"), then, effective upon the
effective date of such Capital Reorganization, the holder of this Warrant shall
have the right to purchase, upon exercise of this Warrant, the kind and amount
of shares of stock and other securities and property (including cash) which such
holder would have owned or have been entitled to receive after such Capital
Reorganization if this Warrant had been exercised immediately prior to such
Capital Reorganization. Notwithstanding anything contained herein to the
contrary, the Company shall not effect any Capital Reorganization unless prior
to the consummation thereof each corporation or entity (other than the Company)
which may be required to deliver any securities or other property upon the
exercise of Warrants shall assume, by written instrument delivered to each
holder of Warrants, the obligation to deliver to such holder such securities or
other property as to which, in accordance with the foregoing provisions, such
holder may be entitled, and such corporation or entity shall have similarly
delivered to the holder of this Warrant an opinion of counsel for such
corporation or entity, satisfactory to the holder of this Warrant, which opinion
shall state that all the outstanding Warrants shall thereafter continue in full
force and effect and shall be enforceable against such corporation or entity in
accordance with the terms hereof and thereof, and address such other matters as
such holder may reasonably request. The provisions of this Section shall
similarly apply to successive Capital Reorganizations.
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2J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
Exercise Price in the case of (i) the issuance of the Warrants; (ii) the
issuance of shares of Warrant Stock issuable upon exercise of the Warrants; and
(iii) the issuance of shares of Common Stock pursuant to the Crown Crafts, Inc.
Stock Plan of the Company dated July 23, 2001.
2K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event
requiring an adjustment of the Exercise Price, then and in each such case the
Company shall promptly deliver to the holder of this Warrant an Officer's
Certificate stating the Exercise Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares of Common Stock issuable
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based. Within ninety
(90) days after the end of each fiscal year in which any such adjustment shall
have occurred, or within thirty (30) days after any request therefor by the
holder of this Warrant stating that such holder contemplates the exercise of
such Warrant, the Company will obtain and deliver to the holder of this Warrant
the opinion of its regular independent auditors or another firm of independent
public accountants of recognized national standing selected by the Company's
Board of Directors, which opinion shall confirm the statements in the most
recent Officer's Certificate delivered under this Section 2K. It is understood
and agreed that the independent public accountants rendering any such opinion
shall be entitled expressly to assume in such opinion the accuracy of any
determination of fair value made by the Company's Board of Directors pursuant to
Section 2E.
2L. OTHER NOTICES. In case at any time:
(a) the Company shall declare to the holders of Common
Stock any dividend other than a regular periodic cash dividend or any
periodic cash dividend in excess of 115% of the cash dividend for the
comparable fiscal period in the immediately preceding fiscal year;
(b) the Company shall declare or pay any dividend upon
Common Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the holders of
Common Stock;
(c) the Company shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class
or series or other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
the property, business or assets of the Company to, another corporation
or other entity;
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(e) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company or any partial
liquidation of the Company or distribution to holders of Common Stock;
(f) there shall be made any tender offer for any shares
of capital stock of the Company; or
(g) there shall be any other Transaction;
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least fifteen (15) days prior to any event referred to in
subsection (a) or (b) above, at least thirty (30) days prior to any event
referred to in subsection (c), (d) or (e) above, and within five (5) days after
it has knowledge of any pending tender offer or other Transaction, written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction or the date by which shareholders must tender shares
in any tender offer and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or tender offer or Transaction known to the Company, at least thirty
(30) days prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders, if either is required.
2M. CERTAIN EVENTS. If any event occurs as to which, in the good
faith judgment of the Board of Directors of the Company, the other provisions of
this Warrant are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holders of the Warrants in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall appoint its regular independent auditors or
another firm of independent public accountants of recognized national standing
which shall give their opinion upon the adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants. Upon receipt of
such opinion, the Board of Directors of the Company shall forthwith make the
adjustments described therein; provided, that no such adjustment shall have the
effect of increasing the Exercise Price as otherwise determined pursuant to this
Warrant. The Company may make such
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reductions in the Exercise Price as it deems advisable, including any reductions
necessary to ensure that any event treated for Federal income tax purposes as a
distribution of stock or stock rights not be taxable to recipients.
2N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by
amendment of its certificate of incorporation or by-laws or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all such
action as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (b) will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any Liens upon the exercise of all Warrants from time to time
outstanding, (c) will not take any action which results in any adjustment of the
Exercise Price if the total number of shares of Common Stock or Other Securities
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock or Other Securities then authorized
by the Company's certificate of incorporation and available for the purpose of
issue upon such conversion, and (d) will not issue any capital stock of any
class or series which has the right to more than one vote per share or any
capital stock of any class or series which is preferred as to dividends or as to
the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage (or floating rate related to market yields)
of par value or stated value in respect of participation in dividends and a
fixed sum or percentage of par value or stated value in any such distribution of
assets.
2O. NO ADJUSTMENT IN EXERCISE PRICE. Any provision herein to the
contrary notwithstanding, no adjustment in the Exercise Price shall be made in
respect of the issuance of Additional Shares of Common Stock, or the issuance,
sale, grant or assumption of any Options or Convertible Securities, unless the
consideration per share (determined pursuant to Section 2E) for an Additional
Share of Common Stock issued or deemed to be issued by the Company is less than
the Market Price in effect on the date of, and immediately prior to, any such
issue, sale, grant or assumption.
3. STOCK TO BE RESERVED. The Company will at all times reserve
and keep available out of its authorized but unissued Common Stock, solely for
the purpose of issue upon the exercise of this Warrant and conversion of the
Warrant Stock issued upon exercise hereof as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants and conversion of all Warrant Stock issuable upon exercise
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of all outstanding Warrants, and the Company will maintain at all times all
other rights and privileges sufficient to enable it to fulfill all its
obligations hereunder. The Company covenants that all shares of Common Stock
which shall be so issuable shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, free from preemptive or similar rights on
the part of the holders of any shares of capital stock or securities of the
Company or any other Person, and free from all taxes, Liens and charges with
respect to the issue thereof (not including any income taxes payable by the
holders of Warrants being exercised in respect of gains thereon), and the
Exercise Price will be credited to the capital and surplus of the Company. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be so issued without violation of any applicable law or
regulation, or of any applicable requirements of the National Association of
Securities Dealers, Inc. and of any domestic securities exchange upon which the
Common Stock may be listed.
4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of the exercise of Warrants or the
conversion of shares of Warrant Stock require registration with or approval of
any governmental authority under any Federal or State law (other than the
Securities Act, registration under which is governed by the Registration Rights
Agreement), before such shares may be issued upon the exercise thereof, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. Shares of Common Stock issuable upon exercise of the Warrants or conversion
of the Warrant Stock shall be registered by the Company under the Securities Act
or similar statute then in force if required by the Registration Rights
Agreement and subject to the conditions stated in such agreement. At any such
time as the Common Stock is listed on any national securities exchange or quoted
by the Nasdaq National Market or any successor thereto or any comparable system,
the Company will, at its expense, obtain promptly and maintain the approval for
the listing on each such exchange or the quoting by the Nasdaq National Market
or such successor thereto or comparable system, upon official notice of
issuance, of the shares of Common Stock issuable upon exercise of the then
outstanding Warrants or conversion of the then outstanding Warrant Stock and
maintain the listing or quoting of such shares after their issuance so long as
the Common Stock is so listed or quoted; and the Company will also cause to be
so listed or quoted, will register under the Exchange Act and will maintain such
listing or quoting of, any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any securities of the same
class or series shall be listed on such national securities exchange by the
Company.
5. ISSUE TAX. The issuance of certificates for shares of Warrant
Stock upon exercise of this Warrant shall be made without charge to the holder
hereof for any issuance tax in respect thereto.
6. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of such Warrant.
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7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall
not entitle the holder hereof to any of the rights of a stockholder of the
Company, except as expressly contemplated herein. No provision of this Warrant,
in the absence of the actual exercise of such Warrant and receipt by the holder
thereof of Warrant Stock issuable upon such exercise, shall give rise to any
liability on the part of such holder as a stockholder of the Company, whether
such liability shall be asserted by the Company or by creditors of the Company.
8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each Warrant originally issued and each Warrant issued upon direct or
indirect transfer or in substitution for any Warrant pursuant to this Section 8
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant has not been registered under the Securities Act of 1933,
as amended (the "ACT"), and may not be transferred in the absence of
such registration or an exemption therefrom under such Act."
Except as otherwise permitted by this Section 8, (a) each certificate for
Warrant Stock (or Other Securities) issued upon the exercise of any Warrant, and
(b) each certificate issued upon the direct or indirect transfer of any such
Warrant Stock (or Other Securities) shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "ACT"), and may not
be transferred in the absence of such registration or an exemption
therefrom under such Act."
The holder of any Restricted Securities shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing the
applicable legend set forth above in this Section 8 when such securities shall
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering such Restricted Securities,
(b) sold to the public pursuant to Rule 144 or any comparable rule under the
Securities Act, or (c) when, in the opinion of independent counsel for the
holder thereof experienced in Securities Act matters, such restrictions are no
longer required in order to insure compliance with the Securities Act. The
Company will pay the reasonable fees and disbursements of counsel for any holder
of Restricted Securities in connection with all opinions rendered pursuant to
this Section 8.
9. AVAILABILITY OF INFORMATION. The Company will cooperate with
each holder of any Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information-reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and
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copies of all regular and periodic reports and all registration statements and
prospectuses filed by the Company with any securities exchange or with the
Commission.
10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of the holder of this Warrant, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Warrants, except at such times
as the Company is subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act. For the purpose of this Section 10, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant and
the holders of any securities issued or issuable upon the exercise hereof are
each entitled to the benefits of the Registration Rights Agreement.
12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
12A. OWNERSHIP OF WARRANTS. Except as otherwise required by law,
the Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary. Subject to
Section 8, a Warrant, if properly assigned, may be exercised by a new holder
without first having a new Warrant issued.
12B. TRANSFER AND EXCHANGE OF WARRANTS. This Warrant is freely
transferable with or without the Notes issued under and as defined in the
Purchase Agreement.. Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the principal office of the Company,
the Company at its expense will (subject to compliance with Section 8, if
applicable) execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Original Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
12C. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the holder, upon delivery of its unsecured indemnity
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
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"ACQUIRING COMPANY" shall have the meaning specified in
Section 2I.
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in
Section 2I.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or deemed
to be issued pursuant to Section 2C or 2D) by the Company after the
Original Issuance Date, whether or not subsequently reacquired or
retired by the Company, other than shares of Common Stock issued upon
(i) the exercise or partial exercise of the Warrants, or (ii) the
conversion of the Warrant Stock issued upon exercise of the Warrants
into Series A Common Stock.
"AFFILIATE" shall have the meaning specified in the Purchase
Agreement.
"ANNOUNCEMENT DATE" shall have the meaning specified in
Section 2I.
"BOFA" shall mean Bank of America, N.A., together with its
successors and assigns.
"BUSINESS DAY" shall mean any day on which banks are open for
business in Atlanta, Georgia and New York City (other than a Saturday,
Sunday or legal holiday in the States of New York, New Jersey or
Georgia ), provided, that any reference to "days" (unless Business Days
are specified) shall mean calendar days.
"CASHLESS EXERCISE" shall have the meaning specified in
Section 1F.
"COMMISSION" shall mean the Securities and Exchange Commission
or any successor federal agency having similar powers.
"COMMON STOCK" shall mean the Warrant Stock, any Series A
Common Stock or any other capital stock into which such stock shall
have been converted or changed or any stock resulting from any
reclassification of such stock and all other stock of any class or
classes (however designated) of the Company the holders of which have
the right, without limitation as to amount, either to all or to a share
of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference.
"COMPANY" shall mean Crown Crafts, Inc., a Georgia
corporation.
"CONSUMMATION DATE" shall have the meaning specified in
Section 2I.
"CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares of capital stock (other than Common Stock) or
other securities which are or may be at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
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"CREDIT AGREEMENT" shall have the meaning specified in the
opening paragraphs of this Warrant.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended.
"EXERCISE PRICE" shall have the meaning specified in Section
1B.
"EXPIRATION DATE" shall have the meaning specified in the
opening paragraphs of this Warrant.
"EXPIRATION NOTICE" shall have the meaning specified in
Section 1G.
"FAIR VALUE" shall mean with respect to any securities or
other property, the fair value thereof as of a date which is within
fifteen (15) days of the date as of which the determination is to be
made (a) determined by agreement between the Company and the Required
Holders, or (b) if the Company and the Required Holders fail to agree,
determined jointly by an independent investment banking firm retained
by the Company and by an independent investment banking firm retained
by the Required Holders, either of which firms may be an independent
investment banking firm regularly retained by the Company, or (c) if
the Company or the Required Holders shall fail so to retain an
independent investment banking firm within ten (10) Business Days of
the retention of such a firm by the Required Holders or the Company, as
the case may be, determined solely by the firm so retained, or (d) if
the firms so retained by the Company and by such holders shall be
unable to reach a joint determination within fifteen (15) Business Days
of the retention of the last firm so retained, determined by another
independent investment banking firm which is not a regular investment
banking firm of the Company chosen by the first two such firms.
"INITIAL EXERCISE PRICE" shall have the meaning specified in
the opening paragraphs of this Warrant.
"LIENS" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind
(including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction) or any other
type of preferential arrangement for the purpose, or having the effect,
of protecting a creditor against loss or securing the payment or
performance of an obligation.
"MARKET PRICE" shall mean on any date specified herein, (a)
with respect to Common Stock or to common stock (or equivalent equity
interests) of an Acquiring Person or its Parent, the amount per share
equal to (i) the average sale price of the last
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sale price of shares of Common Stock, regular way, or of shares of such
common stock (or equivalent equity interests) for the immediately
preceding twenty (20) Business Days (or such other period as may be
specified in this Warrant) or, if no such sale takes place on any such
date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to
trading, or (ii) if no shares of Common Stock or no shares of such
common stock (or equivalent equity interests), as the case may be, are
then listed or admitted to trading on any national securities exchange,
the average sale price of the last sale price of shares of Common
Stock, regular way, or of shares of such common stock (or equivalent
equity interests) for the immediately preceding twenty (20) Business
Days (or such other period as may be specified in this Warrant), or, if
no such sale takes place on any such date, the average of the reported
closing bid and asked prices thereof on such date, in each case as
quoted in the Nasdaq National Market or, if no shares of Common Stock
or no shares of such common stock (or equivalent equity interest), as
the case may be, are then quoted in the Nasdaq National Market, as
published by the National Quotation Bureau, Incorporated or any similar
successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Company, or (iii)
if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or
admitted to trading on any national securities exchange or quoted or
published in the over-the-counter market, the higher of (x) the book
value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors
of the Company, as of the last day of any month ending within sixty
(60) days preceding the date as of which the determination is to be
made or (y) the Fair Value thereof; and (b) with respect to any other
securities, the Fair Value thereof; provided, that all determinations
of the Market Price shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such
period.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in
the name of the Company by its President, one of its Vice Presidents or
its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Additional Shares of Common
Stock or Convertible Securities.
"ORGANIC DOCUMENT" means, relative to any Person, its articles
or certificate of incorporation or organization or certificate of
limited partnership, its by-laws, partnership or operating agreement or
other organizational documents, and all stockholders agreements, voting
trusts and similar arrangements applicable to any of its stock or
partnership interests or other ownership interests, in each case, as
amended.
"ORIGINAL ISSUANCE DATE" shall mean July 23, 2001, the
original date of issuance of this Warrant.
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"OTHER SECURITIES" shall mean any stock (other than Common
Stock) and any other securities of the Company or any other Person
(corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise
of the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section
2I or otherwise.
"PARENT" shall have the meaning specified in Section 2I.
"PERSON" shall mean and include an individual, a partnership,
an association, a joint venture, a corporation, a trust, a limited
liability company, an unincorporated organization and a government or
any department or agency thereof.
"PRUDENTIAL" shall mean The Prudential Insurance Company of
America, together with its successors and assigns.
"PURCHASE AGREEMENT" shall have the meaning specified in the
opening paragraphs of this Warrant.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement dated of even date herewith by and among the Company,
WACHOVIA, BofA and Prudential, as amended, modified or supplemented
from time to time in accordance with its terms.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3%
of all the Warrants at the time outstanding, determined on the basis of
the number of shares of Common Stock then purchasable upon the exercise
of all Warrants then outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing
the applicable legend set forth in Section 8 and (b) any shares of
Common Stock (or Other Securities) which have been issued upon the
exercise of Warrants and which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section,
and (c) unless the context otherwise requires, any shares of Common
Stock (or Other Securities) which are at the time issuable upon the
exercise of Warrants and which, when so issued, will be evidenced by a
certificate or certificates bearing the applicable legend set forth in
such section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SERIES A COMMON STOCK" shall mean the voting series A common
stock, par value $1.00 per share, of the Company
"TRANSACTION" shall have the meaning specified in Section 2I.
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"WACHOVIA" shall mean Wachovia Bank, N.A. and its successors
and assigns.
"WARRANT" shall have the meaning specified in the opening
paragraphs of this Warrant.
"WARRANT STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
14. REMEDIES. The Company stipulates that the remedies at law of
the holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
15. WARRANTIES, ETC. The Company represents and warrants, each and
all of which representations and warranties are made as of the Original Issuance
Date and shall survive the execution and delivery of this Warrant:
(a) CAPITALIZATION AND OWNERSHIP OF THE COMPANY; OTHER
EQUITY RIGHTS. The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, of which (i) 34,377,748 shares have
been designated Series A and 8,594,437 of which are outstanding on the
Original Issuance Date; (ii) 10,246,329 shares have been designated
Series B, none of which are issued and outstanding on the Original
Issuance Date; and (iii) 5,375,923 shares have been designated Series
C, none of which are outstanding on the Original Issuance Date. The
record and, to the best knowledge of the Company, beneficial ownership
of the outstanding capital stock of the Company as of the Original
Issuance Date is set forth in Schedule 15(b). All such outstanding
shares are duly authorized, validly issued, fully paid and
nonassessable, and are not, and will not have been, issued in violation
of any preemptive rights. No issued, no authorized but unissued and no
treasury shares of capital stock of the Company are subject to any
preemptive right, option, warrant, right of conversion or purchase or
any similar right issued or granted by the Company or, to the best
knowledge of the Company, by any of its shareholders. There are no
agreements or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the Company to which the
Company or, to the best knowledge of the Company, any of its
shareholders is a party.
(b) AUTHORIZATION AND ISSUANCE OF WARRANTS. The issuance
of the Warrants has been duly authorized and, upon delivery of the
Warrant certificates in accordance with the terms hereof, the Warrants
will have been validly issued and fully paid and nonassessable, free
and clear of all Liens and the issuance thereof will not give rise to
any preemptive rights. The issuance of the shares of Common Stock
subject to the Warrants (including shares of Series A Common Stock
issuable upon conversion of Warrant Stock)
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has been duly authorized and, when issued upon exercise of the Warrants
or conversion of the Warrant Stock in accordance with the terms hereof,
such shares will have been validly issued and fully paid and
nonassessable, free and clear of all Liens. 22,345,536 shares of Common
Stock have been duly reserved for issuance upon the exercise of the
Warrants and conversion of the Warrant Stock. Except as set forth in
the Registration Rights Agreement, no Person has the right to demand or
any other right to cause the Company to file any registration statement
under the Securities Act relating to any securities of the Company or
any right to participate in the any such registration.
(c) SECURITIES LAWS. The offer, issuance, sale and
delivery of the Warrants as provided in the Purchase Agreement, and the
issuance and delivery of Common Stock upon the exercise of the Warrants
or conversion of the Warrant Stock by the holder, are and will be
exempt from the registration requirements of the Securities Act and all
applicable state securities laws, as such laws are currently in effect.
(d) NO INTEGRATION OF ISSUE. Neither the Company nor any
Person authorized or employed by the Company as agent, broker or
otherwise in connection with the offering of the Warrants has offered
the Warrants for sale to, or solicited any offers to buy the Warrants
from, or otherwise approached or negotiated or communicated in respect
thereof with, anyone other than Prudential, Wachovia and BofA. Neither
the Company nor any Person acting on behalf of the Company will sell or
offer any class or series of securities to, or solicit any offers to
buy any class of securities from, or otherwise approach, negotiate or
communicate in respect thereof with, any Person so as to require the
registration of the Warrants under the Securities Act or any applicable
state securities laws.
16. COVENANTS. The Company covenants and agrees that for so long
as any Warrant Stock is outstanding:
(a) INCONSISTENT AGREEMENTS. The Company will not, and
will not permit any Subsidiary to, enter into any agreement containing
any provision which would be violated or breached by the issuance of
the Warrants or shares in connection therewith or by the performance by
the Company or any Subsidiary of its obligations under this Warrant.
(b) ORGANIC DOCUMENTS. The Company shall not permit to
occur any amendment, alteration or modification to its Organic
Documents, as constituted on the Original Issuance Date, the effect of
which would be to alter, impair or adversely affect either the rights
and benefits of the holders or the duties and obligations of the
Company under this Warrant.
(c) ISSUANCE OF ADDITIONAL RIGHTS, OPTIONS AND WARRANTS.
The Company shall not issue any rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
convertible securities, whether or not the right to exercise such
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rights, options or warrants or to convert or exchange such convertible
securities is immediately exercisable or is conditioned upon the
passage of time, an occurrence or non-occurrence of some other event,
or both.
(d) ANTITAKEOVER STATUTES. The Company shall take all
action necessary to avoid the application of any "fair price,"
"moratorium," "control share acquisition," "business combination,"
"shareholder protection" or similar antitakeover statute to the
transactions contemplated by this Warrant.
17. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be sent (a) by registered or certified
mail, return receipt requested, or (b) by a recognized overnight delivery
service, addressed (i) if to any holder of any Warrant or any holder of any
Common stock (or Other Securities), at the registered address of such holder as
set forth in the applicable register kept at the principal office of the
Company, or (ii) if to the Company, to the attention of the Company's Chief
Financial Officer at its principal office, provided that the exercise of any
Warrant shall be effected in the manner provided in Section 1.
18. MISCELLANEOUS.
(a) This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
(b) The agreements of the Company contained in this Warrant other
than those applicable solely to the Warrants and the holders thereof shall inure
to the benefit of and be enforceable by any holder or holders at the time of any
Warrant Stock (or Other Securities) issued upon the exercise of Warrants,
whether so expressed or not.
(c) This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of New York.
(d) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
CROWN CRAFTS, INC.
By:
----------------------------------
Name:
Title:
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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To CROWN CRAFTS, INC.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____ shares
of Original Common Stock of CROWN CRAFTS, INC., [AND HEREWITH MAKES PAYMENT OF
$_______________ THEREFOR](1) [IN A CASHLESS EXERCISE PURSUANT TO SECTION 1F OF
THE WITHIN WARRANT](2), and requests that the certificates for such shares be
issued in the name of, and delivered to _________________________ whose address
is ________________________.
Dated:
-------------------------------
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
- ---------------
(1) Use in connection with an exercise involving a delivery of funds to the
Company.
(2) Use in connection with a Cashless Exercise.
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FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________________ the
right represented by such Warrant to purchase _________________________ shares
of Common Stock of CROWN CRAFTS, INC., to which such Warrant relates, and
appoints _________________________ Attorney to make such transfer on the books
of CROWN CRAFTS, INC., maintained for such purpose, with full power of
substitution in the premises.
Dated:
-------------------------------
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
95
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 23, 2001 among CROWN
CRAFTS, INC. (the "COMPANY") and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
("PRUDENTIAL"), WACHOVIA BANK, N.A. ("WACHOVIA") and BANK OF AMERICA, N.A.
("BOFA" and collectively, with Prudential, Wachovia and their respective
successors and assigns, the "HOLDERS"). Capitalized terms used and not otherwise
defined herein shall have the respective meanings given such term in Section 3.
1. BACKGROUND. The Company is the issuer of certain Common Stock
Purchase Warrants (the "WARRANTS", such term to include all Warrants issued in
substitution therefor) issued in connection with and as consideration for the
Holders entering into (i) the Credit Agreement dated as of July 23, 2001 among
the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products,
Inc., the Holders and Wachovia, as agent, and (ii) the Subordinated Note and
Warrant Purchase Agreement dated as of July 23, 2001 among the Company and the
Holders, pursuant to which the Company has agreed to issue 5,375,923 shares of
Series C Common Stock to Prudential, 7,149,841 shares of Series B Common Stock
to Wachovia and 3,096,488 shares of Series B Common Stock to BofA (collectively,
the "WARRANT SHARES"), each Warrant Share convertible into shares of Series A
Common Stock.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 REGISTRATION ON REQUEST.
(a) REQUEST. Upon the written request of the holders of
more than a majority of the Registrable Securities then issued or issuable,
requesting that the Company effect the registration under the Securities Act of
all or part of such holders' Registrable Securities and specifying the intended
method of disposition thereof and whether or not such requested registration is
to be an underwritten offering, the Company will promptly give written notice of
such requested registration to all other holders of Registrable Securities and
thereupon the Company will use its best efforts to effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company
has been so requested to register by such holders, and
(ii) all other Registrable Securities which the
Company has been requested to register by the holders thereof by written request
given to the Company within 30 days after the giving of such written notice by
the Company (which request shall specify the intended method of disposition of
such Registrable Securities), all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered.
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(b) REGISTRATION OF OTHER SECURITIES. Whenever the
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more holders of Registrable Securities,
no securities other than Registrable Securities shall be included among the
securities covered by such registration unless (a) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (b) the holders of all
Registrable Securities to be covered by such registration shall have consented
in writing to the inclusion of such other securities.
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to the
holders of a majority of the Registrable Securities to be so registered and (ii)
as shall permit the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition specified in their request
for such registration. The Company agrees to include in any such registration
statement all information which holders of Registrable Securities being
registered shall reasonably request.
(d) EXPENSES. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
2.1.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective,
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, or (iii) if the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied.
(f) SELECTION OF UNDERWRITERS. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company with the
approval of the holders of a majority of the Registrable Securities to be so
registered; provided, however, that if the Company has not selected an
underwriter reasonably acceptable to such holders within thirty (30) days after
the Company's receipt of the request for registration from such holders, then
such holders may select an underwriter reasonably acceptable to the Company in
connection with such registration.
(g) PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities requested
to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration, allocated pro rata among the holders thereof requesting such
registration on the basis of the respective percentages of the Registrable
Securities of the Company held by the holders of Registrable Securities which
have requested that such
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Registrable Securities be included. In connection with any registration as to
which the provisions of this clause (g) apply, no securities other than
Registrable Securities shall be covered by such registrations.
(h) LIMITATIONS. Anything in Section 2.1(a) to the
contrary notwithstanding, the Company will not be required to effect a
registration pursuant to this Section 2.1, (i) unless the request for such
registration covers at least 19.9% of the Registrable Securities; (ii) after the
Company has effected two (2) long form (Form S-1) registrations pursuant to this
Section 2.1 (although nothing shall herein limit the Company's obligations to
effect a registration pursuant to a short form (Form S-3) registration), or
(iii) during the ninety (90) day period following the effective date of a long
form (Form S-1) registration that would have permitted the inclusion of
Registrable Securities, provided that the Company has included all Registrable
Securities that the holders have requested to be included to the extent
otherwise required by this Agreement; and (iv) if the Company shall furnish to
the holders of all Registrable Securities to be covered by such registration a
certificate signed by the chief executive officer of the Company stating that,
in the good faith judgment of the Company's board of directors, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed, the Company shall have the right to defer such filing for
a period of not more than sixty (60) days after receipt of the registration
request of such holders; provided, however, that the Company may not utilize
this right more than once in any 180-day period. The Company shall require each
other person to which it grants registration rights hereafter to abide by the
restrictions set forth in clause (iii) of this Section 2.1(h). In the event the
Company is not obligated to effect any requested registration by virtue of the
foregoing clauses (i) through (iv), such request shall not be deemed to be a
demand for registration for purposes of Section 2.1(a).
2.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the
Company at any time proposes to register any of its securities under the
Securities Act (other than by a registration on Form S-4 or S-8 or any successor
or similar form and other than pursuant to Section 2.1 or a registration
relating solely to a Rule 145 transaction or any registration form that does not
permit secondary sales), whether or not for sale for its own account, it will
each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 2.2 to have its Registrable Securities included in such registration.
Upon the written request of any such holder made within thirty (30) days after
the receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered,
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any
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Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a
registration under Section 2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall be deemed to have been
effected pursuant to Section 2.1 or shall relieve the Company of its obligation
to effect any registration upon request under Section 2.1. The Company will pay
all Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a
registration pursuant to this Section 2.2 involves an underwritten offering of
the securities being so registered, whether or not for sale for the account of
the Company, to be distributed by or through one or more underwriters of
recognized standing under underwriting terms appropriate for such a transaction,
(ii) the Registrable Securities so requested to be registered for sale for the
account of holders of Registrable Securities are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Registrable Securities pursuant to Section 2.4 (b), or if so requested, is
not obligated to do so under Section 2.4 (b)), and (iii) the managing
underwriter of such underwritten offering shall inform the Company and the
holders of the Registrable Securities requesting such registration by letter of
its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering, then the Company may include all securities proposed by the
Company to be sold for its own account and may decrease the number of
Registrable Securities and other securities of the Company so requested to be
included in such registration (pro rata among the holders thereof on the basis
of the respective numbers of such securities requested to be included by such
holders) to the extent necessary to reduce the number of securities to be
included in the registration to the level recommended by the managing
underwriter; provided, however, that in no event shall more than 30% of the
aggregate number of Registrable Securities requested to be included by the
Holders be excluded.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible
or in any event no later than sixty (60) days after the end of the period within
which requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such registration and
thereafter use its best efforts to cause such registration statement to become
effective, provided that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the circumstances
specified in Section 2.2(a), its securities which are Registrable Securities) at
any time prior to the effective date of the registration statement relating
thereto, and provided, further, that the Company will furnish to each seller a
copy of the proposed registration statement at least three (3) business days
prior to the filing thereof;
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(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement continuously effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until the earlier of (i) 180 days following the effective
date of such registration and (ii) such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement; provided, however,
the Company shall not be obligated to prepare and furnish any such prospectus
supplements or amendments relating to any material nonpublic information at any
such time as the Board of Directors of the Company has determined that, for good
business reasons, the disclosure of such material nonpublic information at that
time would be materially detrimental to the Company in the circumstances and is
not otherwise required under applicable law (including applicable securities
laws) provided the Company may only delay its obligations pursuant to the
aforementioned proviso for a period of 60 days in any 180-day period, and
provided, further, that the 180-day period referenced in (i) shall be tolled for
the number of days during which the Company delays the filing of any supplement
or amendment;
(iii) furnish to each seller of Registrable
Securities covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions as
each seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and to take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements of this clause (iv) be obligated to be so qualified or to consent
to general service of process in such jurisdiction;
(v) use its best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities;
(vi) furnish to each seller of Registrable
Securities:
(1) if such registration includes in
underwritten public offering, an opinion of counsel for the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), addressed to and
reasonably
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satisfactory in form and substance to each such seller, and covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel delivered to the underwriters
in underwritten public offerings of securities and such other legal
matters as any such seller may reasonably request, and
(2) if such registration includes an
underwritten public offering, a copy of any "comfort" letter delivered
to any underwriter by the independent public accountants who have
certified the Company's financial statements included in such
registration statement;
(vii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and, subject to
subsection (ii) above, at the request of any such seller promptly prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and furnish to each such
seller at least five (5) business days prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus and not
file any thereof to which any such seller shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(ix) provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the effective date
of such registration statement;
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any securities of the same class or series as such Registrable Securities
are then listed;
(xi) enter into such agreements and take such
other actions as the Requisite Holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities; and
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(xii) for so long as such registration has not
been withdrawn or abandoned, not file or cause to be effected any other
registration of any of the Company's equity securities or securities convertible
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-4, Form S-8 or any successor forms), whether on
its own behalf or at the request of any holder or holders of such securities,
until a period of one hundred eighty (180) days has elapsed from the effective
date of such a registration at the benefit of holders of Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in clause (vii) of this Section
2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (vii) of this Section
2.3 and, if so directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
holder's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to each such holder and the
underwriters and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in underwriting agreements of
the same type, including, without limitation, indemnities to the effect and to
the extent provided in Section 2.6. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement shall also be conditions precedent to the obligations of such holders
of Registrable Securities. Any such holder of Registrable Securities shall not
be required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at
any time proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if
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requested by any holder of Registrable Securities as provided in Section 2.2 and
subject to the provisions of Section 2.2(b), arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement shall also be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act; provided, however, that any records,
information or documents that are furnished by the Company and that are
nonpublic shall be used only in connection with such registration and, unless
otherwise disclosed by the Company as part of such registration, shall be kept
strictly confidential by any seller of Registrable Securities except to the
extent disclosure of such records, information or documents is required by
written order of a court or other governmental authority having jurisdiction or
as permitted by the Purchase Agreement.
2.6 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the seller of any
Registrable Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
seller or any such director or officer or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus
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or summary prospectus contained therein, or any amendment or supplement thereto,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and the Company will reimburse such seller and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.3, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 2.6(a)) the Company, its
directors and officers and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
the maximum amount of liability in respect of indemnification pursuant to this
Section 2.6(b) shall be limited in the case of any selling securityholder to an
amount equal to the net proceeds actually received by such securityholder from
the sale of such security pursuant to such registration. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.6(a) or 2.6(b), such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under Section
2.6(a) or 2.6(b), as the case may be, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled
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to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to
that specified in this Section 2.6 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority other than the
Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification
required by this Section 2.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
2.7 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities or the
marketability of such Registrable Securities under any such registration.
2.8 GRANT OF ADDITIONAL REGISTRATION RIGHTS. From and after the
date of this Agreement, without the consent of the holders of a majority of the
Registrable Securities then issued or issuable, the Company shall not enter into
any agreements with any holder or prospective holder of any securities of the
Company that, upon any registration of any of its securities, the Company will
include among the securities that it then registers securities owned by such
holder or prospective holder except to the extent any registration rights so
given are consistent with the registration and other rights provided in this
Agreement.
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"COMMON STOCK" shall mean any Warrant Shares or Series A Common Stock.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"COMPANY" shall have the meaning specified in the introductory
paragraph of this Agreement.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
"HOLDERS" shall have the meaning specified in the introductory
paragraph of this Agreement.
"PERSON" shall mean a corporation, an association, a partnership, a
business, a limited liability company, an individual, a governmental or
political subdivision thereof or a governmental agency.
"REGISTRABLE SECURITIES" shall mean (a) any Warrant Shares or "Other
Securities" (as such term is defined in the Warrant) received upon the exercise
of the Warrants, (b) any Series A Common Stock received upon the conversion of
any Warrant Shares, (c) any securities purchased upon exercise, or issued upon
conversion or exchange, of other Registrable Securities, and (d) any securities
issued or issuable with respect to any other Registrable Securities by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) such securities shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, or (d) such securities
shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with Section 2, including, without
limitation, all registration, filing and National Association of Securities
Dealers fees, all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, the fees and disbursements incurred by the holders of Registrable
Securities to be registered (including the fees and disbursements of any counsel
and accountants retained by the holders of the Registrable Securities to be
registered), premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered and any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are to be borne by the selling Holders, such expenses
shall not include salaries of Company personnel or general overhead expenses of
the Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally
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prepared by the Company in the ordinary course of its business or which the
Company would have incurred in any event.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as of the same shall be in effect at the time. References to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"SERIES A COMMON STOCK" shall mean the series A common stock, $1.00 par
value per share, of the Company.
"SERIES B COMMON STOCK" shall mean the nonvoting series B common stock,
$1.00 par value per share, of the Company.
"SERIES C COMMON STOCK" shall mean the nonvoting series C common stock,
$1.00 par value per share, of the Company.
"WARRANT SHARES" shall have the meaning specified in Section 1.
"WARRANTS" shall have the meaning specified in Section 1.
4. RULE 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will file the reports required to be filed by it under the Securities
Act and the Exchange Act and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of 66 2/3% or more of the Registrable Securities then issued or
issuable. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 5, whether
or not such Registrable Securities shall have been marked to indicate such
consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of Registrable Securities pursuant to this
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Agreement or any determination of any number or percentage of Registrable
Securities held by any holder or holders of Registrable Securities contemplated
by this Agreement. If the beneficial owner of any Registrable Securities so
elects, the Company may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities.
7. COVENANT OF HOLDERS. Each Holder covenants and agrees that
during the two (2) year period immediately following the date hereof, it will
not purchase or otherwise acquire (whether by means of purchase, debt conversion
or otherwise) any shares of Common Stock (or equivalent equity interests) or any
securities convertible, exercisable or exchangeable into Common Stock (or
equivalent equity interests) other than the Registrable Securities at a price
per share below the then current Market Price (as such term is defined in the
Warrants) of the Common Stock then outstanding.
8. NOTICES. All communications provided for hereunder shall be
sent by first-class mail and (a) if addressed to a party other than the Company,
addressed to such party in the manner set forth on the signature pages hereof,
or at such other address as such party shall have furnished to the Company in
writing, or (b) if addressed to the Company, at 1600 Riveredge Parkway, Suite
200, Atlanta, Georgia 30323 or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding; provided, however, that any such
communication to the Company may also, at the option of any of the parties
hereunder, be either delivered to the Company at its address set forth above or
to any officer of the Company.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities.
10. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
11. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that money damages may be insufficient to compensate the holders of any
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
12. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
13. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
CROWN CRAFTS, INC.
By:
---------------------------------------
Title:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
---------------------------------------
Title: Vice President
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Managing Director
WACHOVIA BANK, N.A.
By:
---------------------------------------
Title:
191 Peachtree Street, NE
30th Floor
Atlanta, Georgia 30303
Attention: Leveraged Finance
BANK OF AMERICA, N.A.
By:
---------------------------------------
Title:
Independence Center
100 North Tryon Street
15th Floor, NCI 001-15-06
Charlotte, North Carolina 28255
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EXHIBIT D
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") dated as of July 23,
2001, by and among CROWN CRAFTS, INC., a Georgia corporation (the "Company"),
and any Domestic Subsidiary of the Company which becomes a Pledgor Subsidiary
pursuant to Section 24 hereof and Section 7.07 of the Purchase Agreement
referred to below (each a "Pledgor Subsidiary"; the Company and the Pledgor
Subsidiaries being collectively referred to as the "Pledgors" and individually
as a "Pledgor") and WACHOVIA BANK, N.A., a national banking association (in its
individual capacity, "Wachovia") organized under the laws of the United States
of America, as collateral agent (in such capacity, together with its successors
and assigns, the "Collateral Agent") for itself, and for Purchasers from time to
time under the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers have entered into that certain
Subordinated Note and Warrant Purchase Agreement dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms, the "Purchase Agreement"; capitalized terms used
herein without definition have the meanings set forth in the Purchase
Agreement), pursuant to which the Purchasers have agreed, subject to the terms
thereof, to make available to the Company certain financial accommodations;
WHEREAS, the Company, the Purchasers, the Senior Lenders, and Wachovia,
as Agent, are parties to that certain Intercreditor Agreement dated as of the
date hereof (as amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms, the "Intercreditor Agreement"), pursuant
to which the Purchasers have appointed the Collateral Agent.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. The Pledge. Each of the Pledgors hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Collateral
Agent, and grants to the Collateral Agent, for the ratable benefit of the
Purchasers, a security interest in all of each Pledgor's right, title and
interest in, to and under the following (collectively, the "Pledged
Collateral"): (a) all of the shares of common stock, equity interests and other
securities (collectively, "Securities") of the respective Domestic Subsidiaries
held by such Pledgor as set forth on Exhibit A attached hereto, as amended or
supplemented from time to time (collectively, the "Issuers"); (b) any additional
Securities of any of the Issuers as may from time to time be issued to the
respective Pledgor or otherwise acquired by such Pledgor; (c) any additional
Securities of the Issuer as may hereafter at any time be delivered to the
Collateral Agent by or on behalf of the Pledgor; (d) any cash or additional
Securities or other property at any time and from time to time receivable or
otherwise distributable in respect of, in exchange for, or in substitution of,
any of the property referred to in
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any of the immediately preceding clauses (a) through (c); and (e) any and all
products and proceeds of any of the foregoing, together with all other rights,
titles, interests, powers, privileges and preferences pertaining to said
property.
Section 2. Obligations Secured. This Agreement is made, and the
security interest created hereby is granted to the Collateral Agent, to secure
the prompt performance and payment in full of the Obligations.
Section 3. Representations and Warranties. Each of the Pledgors,
jointly and severally, hereby represents and warrants to the Collateral Agent as
follows:
(a) Validly Issued, etc. All of the Securities of each Issuer have
been validly issued and are fully paid and nonassessable.
(b) Title and Liens. Each Pledgor is, and, except as permitted by
the Purchase Agreement, will at all times continue to be, the legal and
beneficial owner of the applicable Pledged Collateral and none of the Pledged
Collateral is subject to any Lien (other than the senior Lien for the benefit of
the holders of the Senior Debt and the Lien created by this Agreement, as
contemplated in the Intercreditor Agreement).
(c) Name; Chief Executive Office; Taxpayer ID Number. The correct
corporate name of each Pledgor, the state of its organization, the chief
executive office and principal place of business of each Pledgor, the location
of each Pledgor's books and records relating to the respective Pledged
Collateral, and the Federal Identification number of each Pledgor is set forth
on Exhibit B attached hereto. None of the Pledgors has any offices or places of
business other than as set forth on Exhibit B.
(d) Authority, etc. Each of the Pledgors (i) has the power and
authority to pledge the Pledged Collateral in the manner hereby done or
contemplated and (ii) will defend its title or interest thereto or therein
against any and all Liens (other than the Lien created by this Agreement and a
junior Lien for the benefit of the holders of the Senior Subordinated Notes, as
contemplated in the Purchase Agreement), however arising, of all persons.
(e) No Approval. No consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of the
pledges effected hereby.
(f) Outstanding Shares. The Securities pledged by each of the
Pledgors hereunder constitute all of the issued and outstanding Shares of the
respective Domestic Subsidiary owned by each of the Pledgors.
Section 4. Covenants. Each of the Pledgors hereby
unconditionally covenants and agrees as follows:
(a) No Liens; No Sale of Pledged Collateral. None of the Pledgors
will create, assume, incur or permit or suffer to exist or to be created,
assumed or incurred, any Lien on any of the Securities (other than the senior
Lien for the benefit of the Senior Lenders and the Lien created by this
Agreement, as contemplated in the Intercreditor Agreement), and will not, except
as permitted by the Purchase Agreement, without the prior written consent of the
Collateral
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Agent (which consent shall not be unreasonably withheld), sell, lease, assign,
transfer or otherwise dispose of all or any portion of the Securities (or any
interest therein).
(b) Change of Locations, Name, Etc. Without giving the Collateral
Agent 30 days' prior written notice, none of the Pledgors will (i) change such
Pledgor's state of organization, registered legal name, chief executive office,
principal place of business, or the location of its books and records relating
to any of the Pledged Collateral or (ii) change such Pledgor's name, identity or
structure.
Section 5. Additional Shares.
(a) During the period this Agreement is in effect, without the
consent of the Collateral Agent, none of the Pledgors shall permit any of the
Issuers to issue any additional shares of capital stock or other equity
securities or interests, unless such additional shares have been delivered and
pledged to the Collateral Agent. Further, without the consent of the Collateral
Agent, none of the Pledgors shall permit any of the Issuers to amend or modify
its respective articles or certificate of incorporation in a manner which would
materially adversely affect the voting, liquidation, preference or other rights
of a holder of the Pledged Collateral.
(b) Each of the Pledgors agrees that, until this Agreement has
terminated in accordance with its terms, any additional Securities of any of the
Issuers at any time issued to any of the Pledgors or otherwise acquired by any
of the Pledgors shall be promptly delivered or otherwise transferred to the
Collateral Agent as additional Pledged Collateral and shall be subject to the
Lien of, and the terms and conditions of, this Agreement.
Section 6. Registration in Nominee Name, Denominations. The
Collateral Agent shall have the right (in its sole and absolute discretion) to
hold the Pledged Collateral in its own name as pledgee, the name of its nominee
(as Collateral Agent or as sub-agent) or the name of the applicable Pledgor,
endorsed or assigned in blank pursuant to a separate blank stock power or in
favor of the Collateral Agent or (where applicable) registered in the name of
the Collateral Agent in the relevant stock registry. Each of the Pledgors will
promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Collateral registered in
the name of such Pledgor. The Collateral Agent shall at all times have the right
to exchange the certificates representing Pledged Collateral for certificates of
smaller or larger numbers of shares for any purpose consistent with this
Agreement.
Section 7. Voting Rights; Dividends, etc.
(a) So long as no Event of Default shall have occurred and be
continuing, with respect to any Securities:
(i) each of the Pledgors shall be entitled to exercise
any and all voting and/or consensual rights and powers accruing to an owner of
the Pledged Collateral or any part thereof for any purpose not inconsistent with
the terms and conditions of this Agreement or any agreement giving rise to or
otherwise relating to any of the Obligations; provided, however, that none of
the Pledgors shall exercise, or refrain from exercising, any such right or power
if any such action would have a materially adverse effect on the value of such
Pledged Collateral in the reasonable judgment of the Collateral Agent;
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(ii) each of the Pledgors shall be entitled to retain and
use any and all cash dividends, interest and principal paid on the Pledged
Collateral, but any and all stock and/or liquidating dividends, other
distributions in property, return of capital or other distributions made on or
in respect of Pledged Collateral, whether resulting from a subdivision,
combination or reclassification of outstanding Securities of any of the Issuers
which are pledged hereunder or received in exchange for the respective Pledged
Collateral or any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets or on the liquidation, whether voluntary
or involuntary, of any of the Issuers, or otherwise, shall be and become part of
the Pledged Collateral pledged hereunder and, if received by any of the
Pledgors, shall forthwith be delivered to the Collateral Agent to be held as
collateral subject to the terms and conditions of this Agreement.
(b) The Collateral Agent agrees to execute and deliver to each of
the Pledgors, or cause to be executed and delivered to each of the Pledgors, as
appropriate, at the sole cost and expense of such Pledgor, all such proxies,
powers of attorney, dividend orders and other instruments as such Pledgor may
reasonably request for the purpose of enabling such Pledgor to exercise the
voting and/or consensual rights and powers which such Pledgor is entitled to
exercise pursuant to clause (a)(i) above and/or to receive the dividends which
such Pledgor is authorized to retain pursuant to subsection (a)(ii) above.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of each the Pledgors to exercise the voting and/or
consensual rights and powers which such Pledgor is entitled to exercise pursuant
to subsection (a)(i) above and/or to receive the dividends, interest and
principal that such Pledgor is authorized to receive and retain pursuant to
subsection (a)(ii) above shall cease, and all such rights thereupon shall become
immediately vested in the Collateral Agent, which shall have, to the extent
permitted by law, the sole and exclusive right and authority (acting at the
direction of the Required Purchasers) to exercise such voting and/or consensual
rights and powers which each of the Pledgors shall otherwise be entitled to
exercise pursuant to subsection (a)(i) above and/or to receive and retain the
dividends which each of the Pledgors shall otherwise be authorized to retain
pursuant to subsection (a)(ii) above. Any and all money and other property paid
over to or received by the Collateral Agent pursuant to the provisions of this
subsection (c) shall be retained by the Collateral Agent as additional
collateral hereunder and shall be applied in accordance with the provisions of
Section 10. If any of the Pledgors shall receive any dividends or other property
which it is not entitled to receive under this Section, such Pledgor shall hold
the same in trust for the Collateral Agent, without commingling the same with
other funds or property of or held by such Pledgor, and shall promptly deliver
the same to the Collateral Agent upon receipt by such Pledgor in the identical
form received, together with any necessary endorsements.
Section 8. Event of Default Defined. For purposes of this
Agreement, "Event of Default" shall mean:
(a) any of the Pledgors shall fail to observe or perform any
covenant or agreement contained in Sections 4(a), 5, or 7(a)(ii) hereof;
(b) any of Pledgors shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by the
immediately preceding subsection
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(a)) for a period of 30 days after written notice thereof has been given to such
Pledgor by the Collateral Agent; and
(c) an Event of Default under and as defined in the Purchase
Agreement shall occur and be continuing.
Section 9. Remedies upon Default.
(a) Subject to the Intercreditor Agreement, in addition to any
right or remedy that the Collateral Agent may have under the Purchase Agreement
or otherwise under applicable law, if an Event of Default shall have occurred
and be continuing, the Collateral Agent may exercise any and all the rights and
remedies of a secured party under the Uniform Commercial Code as in effect in
any applicable jurisdiction (the "Code") and may otherwise sell, assign,
transfer, endorse and deliver the whole or, from time to time, any part of the
Pledged Collateral at a public or private sale or on any securities exchange,
for cash, upon credit or for other property, for immediate or future delivery,
and for such price or prices and on such terms as the Collateral Agent (acting
at the direction of the Required Purchasers, in their sole discretion) shall
deem appropriate. As further provided for in Section 14 hereof, the Collateral
Agent shall be authorized at any sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Pledged Collateral for their own account in
compliance with the Securities Laws (as such term is defined in Section 14
below) and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer, endorse and deliver to the purchaser or
purchasers thereof the Pledged Collateral so sold. Each purchaser at any sale of
Pledged Collateral shall take and hold the property sold absolutely free from
any claim or right on the part of any of the Pledgors, and each of the Pledgors
hereby waives (to the fullest extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which any of the Pledgors now has or may at
any time in the future have under any applicable law now existing or hereafter
enacted. Each of the Pledgors agrees that, to the extent notice of sale shall be
required by applicable law, at least ten days' prior written notice to the
applicable Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification,
but notice given in any other reasonable manner or at any other reasonable time
shall constitute reasonable notification. Such notice, in case of public sale,
shall state the time and place for such sale, and, in the case of sale on a
securities exchange, shall state the exchange on which such sale is to be made
and the day on which the respective Pledged Collateral, or portion thereof, will
first be offered for sale at such exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and shall state in the notice or publication (if
any) of such sale. At any such sale, the applicable Pledged Collateral, or
portion thereof to be sold, may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may determine (acting at the direction of the
Required Purchasers, in their sole and absolute discretion). The Collateral
Agent shall not be obligated to make any sale of any of the Pledged Collateral
if it shall determine not to do so regardless of the fact that notice of sale of
the Pledged Collateral may have been given. The Collateral Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case the sale of all or any part of the
Pledged Collateral is made on credit or for future
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delivery, the Pledged Collateral so sold may be retained by the Collateral Agent
until the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability to any of the Pledgors in case
any such purchaser or purchasers shall fail to take up and pay for the Pledged
Collateral so sold and, in case of any such failure, such Pledged Collateral may
be sold again upon like notice. At any public sale made pursuant to this
Agreement, the Collateral Agent or any secured party, to the extent permitted by
applicable law, may bid for or purchase, free from any right of redemption, stay
and/or appraisal on the part of any of the Pledgors (all said rights being also
hereby waived and released to the extent permitted by applicable law), any part
of or all the Pledged Collateral offered for sale and may make payment on
account thereof by using any claim then due and payable to the Collateral Agent
from any of the Pledgors as a credit against the purchase price, and the
Collateral Agent may, upon compliance with the terms of sale and to the extent
permitted by applicable law, hold, retain and dispose of such property without
further accountability to any of the Pledgors therefor. For purposes hereof, a
written agreement to purchase all or any part of the Pledged Collateral shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such
sale pursuant to such agreement and none of the Pledgors shall be entitled to
the return of any Pledged Collateral subject thereto, notwithstanding the fact
that after the Collateral Agent shall have entered into such an agreement all
Events of Default may have been remedied or the Obligations may have been paid
in full as herein provided. Each of the Pledgors hereby waives any right to
require any marshaling of assets and any similar right.
(b) In addition to exercising the power of sale herein conferred
upon it, the Collateral Agent (acting at the direction of the Required
Purchasers) shall also have the option to proceed by suit or suits at law or in
equity to foreclose this Agreement and sell the Pledged Collateral or any
portion thereof pursuant to judgment or decree of a court or courts having
competent jurisdiction.
(c) In addition to the foregoing, the Collateral Agent (acting at
the direction of the Required Purchasers) shall have all other rights, powers
and remedies which are available to it under any applicable laws.
(d) The rights and remedies of the Collateral Agent under this
Agreement are cumulative and not exclusive of any rights or remedies which it
would otherwise have.
Section 10. Application of Proceeds of Sale and Cash. Each of the
Pledgors agrees to pay to the Collateral Agent all Enforcement Costs (as defined
below) paid or incurred by the Collateral Agent. This agreement in this Section
10 shall survive the termination of this Agreement and the Lien on the Pledged
Collateral. All Enforcement Costs, together with interest thereon from the date
of any demand therefor until paid in full at a per annum rate of interest equal
at all times to the Default Rate, shall be paid by the Company to the Collateral
Agent whenever demanded by the Collateral Agent.
Any proceeds of the collection of the sale or other disposition of the
Pledged Collateral will be applied by the Collateral Agent in accordance with
the terms of the Purchase Agreement, subject to the Intercreditor Agreement. If
the sale or other disposition of the Pledged Collateral fails to satisfy all of
the Obligations, the Debtors shall remain liable to the Collateral Agent and the
Purchasers for any deficiency. Any surplus from the sale or disposition of the
Pledged
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Collateral shall be paid to the respective Pledgor or to any other party
entitled thereto or shall otherwise be paid over in a manner permitted by law
after payment in full of all Obligations and the Enforcement Costs related to
any such payment.
As used herein, the term "Enforcement Costs" means all reasonable
expenses, charges, costs and fees whatsoever (including, without limitation,
reasonable attorneys' fees and expenses) of any nature whatsoever paid or
incurred by or on behalf of the Collateral Agent in connection with (a) the
collection or enforcement of any or all of the Obligations or this Agreement
(including, without limitation, reasonable attorneys' fees incurred prior to the
institution of any suit or other proceeding), (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Pledged Collateral,
(c) the monitoring, inspection, administration, processing, servicing of any or
all of the Obligations and/or the Pledged Collateral, (d) the preparation of
this Agreement, the Security Documents, and the preparation and review of lien
and record searches, reports, certificates, and/or other documents or
information relating from time to time to the taking, perfection, inspection,
preservation, protection and/or release of a Lien on the Pledged Collateral, the
value of the Pledged Collateral, or otherwise relating to the Collateral Agent's
or any Lender's rights, powers and remedies under this Agreement or with respect
to the Pledged Collateral, and (e) all filing and/or recording taxes or fees and
all stamp and other similar taxes and fees payable or determined to be payable
in connection with the execution and delivery of this Agreement and any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes or fees, the Pledgors hereby agreeing jointly and severally to
indemnify and save the Collateral Agent and the Purchasers harmless from and
against such liabilities
Section 11. Collateral Agent Appointed Attorney-in-Fact. From and
after the occurrence and during the existence of an Event of Default, each of
the Pledgors hereby constitutes and appoints the Collateral Agent as the
attorney-in-fact of each Pledgor with full power of substitution either in the
Collateral Agent's name or in the name of each of the Pledgors to do any of the
following with respect to any Securities and the related Pledged Collateral: (a)
to perform any obligation of any of the Pledgors hereunder in such Pledgor's
name or otherwise; (b) to ask for, demand, sue for, collect, receive, receipt
and give acquittance for any and all moneys due or to become due under and by
virtue of any Pledged Collateral; (c) to prepare, execute, file, record or
deliver notices, assignments, financing statements, continuation statements,
applications for registration or like papers to perfect, preserve or release the
Collateral Agent's security interest in the Pledged Collateral or any of the
documents, instruments, certificates and agreements described in Section 13(b);
(d) to verify facts concerning the Pledged Collateral in its own name or a
fictitious name; (e) to endorse checks, drafts, orders and other instruments for
the payment of money payable to any of the Pledgors, representing any interest
or dividend or other distribution payable in respect of the Pledged Collateral
or any part thereof or on account thereof and to give full discharge for the
same; (f) to exercise all rights, powers and remedies which any of the Pledgors
would have, but for this Agreement, under the Pledged Collateral; and (g) to
carry out the provisions of this Agreement and to take any action and execute
any instrument which the Collateral Agent may deem necessary or advisable to
accomplish the purposes hereof, and to do all acts and things and execute all
documents in the name of each of the Pledgors or otherwise, deemed by the
Collateral Agent as necessary, proper and convenient in connection with the
preservation,
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perfection or enforcement of its rights hereunder. Nothing herein contained
shall be construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by it, or to present or file any claim or notice, or to take any action
with respect to the Pledged Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, and no action
taken by the Collateral Agent or omitted to be taken with respect to the Pledged
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of the Pledgor or to any claim or action against the Collateral
Agent. The power of attorney granted herein is irrevocable and coupled with an
interest.
Section 12. Reimbursement of Collateral Agent. Each of the
Pledgors agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, disbursements and other
charges of its counsel and of any experts or agents, that the Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or any sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the
failure by any of the Pledgors to perform or observe any of the provisions
hereof. Any such amounts payable as provided hereunder shall be additional
obligations secured hereby and by the other Security Documents.
Section 13. Further Assurances. Each of the Pledgors shall, at
its sole cost and expense, take all action that may be necessary or desirable in
the Collateral Agent's sole discretion or at the request of the Required
Holders, so as at all times to maintain the validity, perfection, enforceability
and priority of the Collateral Agent's security interest in the Pledged
Collateral, or to enable the Collateral Agent to exercise or enforce its rights
hereunder, including without limitation (a) delivering to the Collateral Agent,
endorsed or accompanied by such instruments of assignment as the Collateral
Agent may specify, any and all chattel paper, instruments, letters of credit and
all other undertakings of guaranty and documents evidencing or forming a part of
the Pledged Collateral and (b) executing and delivering financing statements,
pledges, designations, notices and assignments, in each case in form and
substance satisfactory to the Collateral Agent, relating to the creation,
validity, perfection, priority or continuation of the security interest granted
hereunder. Subject to the foregoing, each of the Pledgors agrees to take, and
authorizes the Collateral Agent to take on such Pledgor's behalf, any or all of
the following actions with respect to any Pledged Collateral as the Collateral
Agent shall deem necessary to perfect the security interest and pledge created
hereby or to enable the Collateral Agent to enforce its rights and remedies
hereunder: (i) to register in the name of the Collateral Agent any Pledged
Collateral in certificated or uncertificated form; (ii) to endorse in the name
of the Collateral Agent any Pledged Collateral issued in certificated form; and
(iii) by book entry or otherwise, identify as belonging to the Collateral Agent
a quantity of securities that constitutes all or part of the Pledged Collateral
registered in the name of the Collateral Agent. Notwithstanding the foregoing
each of the Pledgors agrees that Pledged Collateral which is not in certificated
form or is otherwise in book-entry form shall be held for the account of the
Collateral Agent. Each of the Pledgors hereby authorizes the Collateral Agent to
execute and file in all necessary and appropriate jurisdictions (as determined
by the Collateral Agent) one or more financing or continuation statements (or
any other document or instrument referred to in the immediately preceding clause
(b)) in the name of the applicable Pledgor and to sign such Pledgor's name
thereto. Each of the Pledgors authorizes the Collateral Agent to file any such
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financing statement, document or instrument without the signature of such
Pledgor to the extent permitted by applicable law. To the extent permitted by
applicable law, a carbon, photographic, xerographic or other reproduction of
this Agreement or any financing statement is sufficient as a financing
statement. Any property comprising part of the Pledged Collateral required to be
delivered to the Collateral Agent pursuant to this Agreement shall be
accompanied by proper instruments of assignment duly executed by each of the
Pledgors and by such other instruments or documents as the Collateral Agent may
reasonably request.
Section 14. Securities Laws. In view of the position of the
Pledgors in relation to the Pledged Collateral, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar applicable law hereafter enacted
analogous in purpose or effect, whether foreign or domestic (such Act and any
such similar applicable law as from time to time in effect being called the
"Securities Laws") with respect to any disposition of the Pledged Collateral
permitted hereunder. Each of the Pledgors understands that compliance with the
Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or
any part of the Pledged Collateral in accordance with the terms hereof, and
might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Collateral could dispose of the same. Similarly, there
may be other legal restrictions or limitations affecting the Collateral Agent in
any attempt to dispose of all or part of the Pledged Collateral in accordance
with the terms hereof under applicable Blue Sky or other state securities laws
or similar applicable law analogous in purpose or effect. The Pledgor recognizes
that in light of the foregoing restrictions and limitations the Collateral Agent
may, with respect to any sale of the Pledged Collateral, limit the purchasers to
those who will agree, among other things, to acquire such Pledged Collateral for
their own account, for investment, and not with a view to the distribution or
resale thereof. Each of the Pledgors acknowledges and agrees that in light of
the foregoing restrictions and limitations, the Collateral Agent, in its sole
and absolute discretion, may, in accordance with applicable law, (a) proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Collateral or part thereof shall have been filed under
the Federal Securities Laws and (b) approach and negotiate with a single
potential purchaser to effect such sale. Each of the Pledgors acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions. In
the event of any such sale, the Collateral Agent shall incur no responsibility
or liability for selling all or any part of the Pledged Collateral in accordance
with the terms hereof at a price that the Collateral Agent (acting at the
direction of the Required Purchasers, in their sole and absolute discretion),
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more than a
single purchaser were approached. The provisions of this Section will apply
notwithstanding the existence of public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
Section 15. Indemnification. Each of the Pledgors agrees jointly
and severally to indemnify and hold the Collateral Agent and any corporation
controlling, controlled by, or under common control with, the Collateral Agent
and any officer, attorney, director, shareholder, agent or employee of the
Collateral Agent or any such corporation (each an "Indemnified Person"),
harmless from and against any claim, loss, damage, action, cause of action,
liability, cost and
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expense or suit of any kind or nature whatsoever (collectively, "Losses"),
brought against or incurred by an Indemnified Person, in any manner arising out
of or, directly or indirectly, related to or connected with this Agreement,
including without limitation, the exercise by the Collateral Agent of any of its
rights and remedies under this Agreement or any other action taken by the
Collateral Agent pursuant to the terms of this Agreement; provided, however, the
Pledgor shall not be liable to an Indemnified Person for any Losses to the
extent that such Losses result from the gross negligence or willful misconduct
of such Indemnified Person. Each Pledgor's obligations under this section shall
survive the termination of this Agreement and the payment in full of the
Obligations.
Section 16. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall remain
in full force and effect until it terminates in accordance with its terms. Each
of the Pledgors and the Collateral Agent hereby agree that the security interest
created by this Agreement in the Pledged Collateral shall not terminate and
shall continue and remain in full force and effect notwithstanding the transfer
to any of the Pledgors or any person designated by it of all or any portion of
the Pledged Collateral.
Section 17. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the Collateral
and all obligations of each Pledgor hereunder, shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Purchase Agreement, any other Credit Document, the Intercreditor Agreement, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of the payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, any other Credit Document, the Intercreditor
Agreement, or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other collateral,
or any release or amendment or waiver of or consent to or departure from any
guaranty, for all or any of the Obligations, including, without limitation, the
release of any one or more Pledgors or other Persons from this Agreement or any
other agreement securing the payment and performance of the Obligations or other
indebtedness of the Pledgors or of any other Person to the Purchasers, the
Agent, the Collateral Agent, or the holders of the Senior Subordinated Notes, or
(d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, any of the Pledgors in respect of the Obligations or in
respect of this Agreement (other than the indefeasible payment in full of all
the Obligations).
Section 18. No Waiver. Neither the failure on the part of the
Collateral Agent to exercise, nor the delay on its part in exercising any right,
power or remedy hereunder, nor any course of dealing between the Collateral
Agent and any of the Pledgors shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power, or remedy hereunder
preclude any other or the further exercise thereof or the exercise of any other
right, power or remedy.
Section 19. Notices. Notices, requests and other communications
required or permitted hereunder shall be given in accordance with the applicable
terms of the Purchase Agreement.
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Section 20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 21. Amendments. No amendment or waiver of any provision
of this Agreement nor consent to any departure by any of the Pledgors herefrom
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 22. Binding Agreement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that none of the Pledgors shall be
permitted to assign this Agreement or any interest herein or in the Pledged
Collateral, or any part thereof, or any cash or property held by the Collateral
Agent as collateral under this Agreement.
Section 23. Termination. Upon indefeasible payment in full of all
of the Obligations, and termination of all Commitments under the Purchase
Agreement, this Agreement shall terminate. Upon termination of this Agreement in
accordance with its terms the Collateral Agent agrees to take such actions as
the Company may reasonably request, and at the sole cost and expense of the
Company, (a) to return the Pledged Collateral to the applicable Pledgor, and (b)
to evidence the termination of this Agreement, including, without limitation,
the filing of any releases or any termination statements under the Uniform
Commercial Code.
Section 24. Joint and Several Liability; Additional Pledgors;
Release of Pledgors. The obligations and liabilities of the Pledgors from time
to time party to this Agreement shall be joint and several. Section 7.07 of the
Purchase Agreement provides that Domestic Subsidiaries which own or acquire a
Domestic Subsidiary and which are not Pledgors must become Pledgors hereunder
by, among other things, executing and delivering to the Agent a joinder with
respect to this Agreement. Any Domestic Subsidiary which executes and delivers
to the Agent a joinder with respect to this Agreement shall be a Pledgor for all
purposes hereunder and shall thereafter be jointly and severally liable with all
other Pledgors then party to this Agreement or thereafter joined hereto.
Section 25. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
Section 26. Headings. Section headings used herein are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
Section 27. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute but one agreement.
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Section 28. Subordination to Senior Debt Documents. This
Agreement and the liens and security interests created hereby are subject and
subordinated to the Senior Debt Documents.
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IN WITNESS WHEREOF, each of the Pledgors has executed and delivered
this Agreement under seal as of the date first written above.
CROWN CRAFTS, INC. (SEAL)
By:
----------------------------------
Name:
Title:
Agreed to, accepted and acknowledged as
of the date first written above.
WACHOVIA BANK, N.A., as Collateral Agent
By:
-----------------------------
Title:
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EXHIBIT A
PLEDGED COLLATERAL
PLEDGOR: CROWN CRAFTS, INC.
Certificate
Nos. for
No. of Shares No. of Shares No. of Shares No. of Shares Pledged
Name of Subsidiary Class of Stock Authorized Issued Outstanding Pledged Shares
- ------------------ -------------- ------------- ------------- ------------- ------------- -----------
Churchill Weavers, Inc. Common $100 par 2,000 306 306 306 16
Hamco, Inc. Common/no par 1,000 1,000 1,000 1,000 4
The Red Calliope Common $0.001 par 10,000 100 100 100 27
(predecessor of Crown
Crafts Infant Products,
Inc., no replacement
certificates having been
issued)
123
EXHIBIT B
Pledgors
Crown Crafts, Inc. a Georgia corporation
1600 RiverEdge Parkway
Suite 200
Atlanta, Georgia 30328
Federal Tax I.D. # 58-0678148
124
EXHIBIT E
FOREIGN STOCK PLEDGE AGREEMENT
THIS FOREIGN STOCK PLEDGE AGREEMENT (this "Agreement") dated as of July
__, 2001 by and among CROWN CRAFTS, INC., a Georgia corporation, (the "Company")
and any Domestic Subsidiary of the Company which becomes a Pledgor Subsidiary
pursuant to Section 24 hereof and Section 7.07 (each a "Pledgor Subsidiary") of
the Purchase Agreement referred to below; the Company and the Pledgor
Subsidiaries being collectively referred to as the "Pledgors" and individually
as a "Pledgor") and WACHOVIA BANK, N.A., a national banking association (in its
individual capacity, "Wachovia") organized under the laws of the United States
of America, as collateral agent (in such capacity, together with its successors
and assigns, "Collateral Agent") for itself, and for Purchasers from time to
time under the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers have entered into that certain
Subordinated Note and Warrant Purchase Agreement dated as of the date hereof (as
amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms, the "Purchase Agreement"; capitalized terms used
herein without definition have the meanings set forth in the Purchase
Agreement), pursuant to which the Purchasers have agreed, subject to the terms
thereof, to make available to the Company certain financial accommodations;
WHEREAS, the Company, the Purchasers, the Senior Lenders, and Wachovia,
as Agent, are parties to that certain Intercreditor Agreement dated as of the
date hereof (as amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms, the "Intercreditor Agreement"), pursuant
to which the Purchasers have appointed the Collateral Agent.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. The Pledge. Each of the Pledgors hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Collateral
Agent, and grants to the Collateral Agent, for the ratable benefit of the
Purchasers, a security interest in all of each Pledgor's right, title and
interest in, to and under the following (collectively, the "Pledged
Collateral"): (a) all of the shares of common stock, equity interests and other
securities (collectively, "Securities") of the respective Direct Foreign
Subsidiaries held by such Pledgor as set forth on Exhibit A attached hereto
(collectively, the "Issuers"); provided, however, that the Securities pledged
pursuant hereto shall not include (i) Securities owned by any of the Pledgors in
excess of Securities evidencing 65% of the voting power of each class of capital
stock owned by such Pledgor or (ii) to the extent that applicable law requires
that the applicable Issuer issue directors' qualifying shares, such qualifying
shares; (b) subject to the provisions of Section 5(b) hereof, any additional
Securities of any of the Issuers as may from time to time be issued to the
respective Pledgor or otherwise acquired by such Pledgor; (c) any additional
Securities of the Issuer as may
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hereafter at any time be delivered to the Collateral Agent by or on behalf of
the Pledgor; (d) any cash or additional Securities or other property at any time
and from time to time receivable or otherwise distributable in respect of, in
exchange for, or in substitution of, any of the property referred to in any of
the immediately preceding clauses (a) through (c); and (e) any and all products
and proceeds of any of the foregoing, together with all other rights, titles,
interests, powers, privileges and preferences pertaining to said property.
Section 2. Obligations Secured. This Agreement is made, and the
security interest created hereby is granted to the Collateral Agent, to secure
the prompt performance and payment in full of the Obligations.
Section 3. Representations and Warranties. Each of the Pledgors,
jointly and severally, hereby represents and warrants to the Collateral Agent as
follows:
(a) Validly Issued, etc. All of the Securities of each
Issuer have been validly issued and are fully paid and nonassessable.
(b) Title and Liens. Each Pledgor is, and, except as
permitted by the Purchase Agreement, will at all times continue to be, the legal
and beneficial owner of the applicable Pledged Collateral and none of the
Pledged Collateral is subject to any Lien (other than the senior Lien for the
benefit of the holders of the Senior Debt and the Lien created by this
Agreement).
(c) Name; Chief Executive Office; Taxpayer ID Number. The
correct corporate name of each Pledgor, the state of organization, chief
executive office and principal place of business of each Pledgor, the location
of each Pledgor's books and records relating to the respective Pledged
Collateral, and the Federal Identification number of each Pledgor is set forth
on Exhibit B attached hereto. None of the Pledgors has any offices or places of
business other than as set forth on Exhibit B.
(d) Authority, etc. Each of the Pledgors (i) has the
power and authority to pledge the Pledged Collateral in the manner hereby done
or contemplated and (ii) will defend its title or interest thereto or therein
against any and all Liens (other than the Lien created by this Agreement),
however arising, of all persons.
(e) No Approval. No consent or approval of any
Governmental Authority or any securities exchange was or is necessary to the
validity of the pledges effected hereby.
(f) Outstanding Shares. The Securities pledged by each of
the Pledgors hereunder constitute 65% of the issued and outstanding Shares of
the respective Direct Foreign Subsidiary owned by each of the Pledgors.
Section 4. Covenants. Each of the Pledgors hereby
unconditionally covenants and agrees as follows:
(a) No Liens; No Sale of Pledged Collateral. None of the
Pledgors will create, assume, incur or permit or suffer to exist or to be
created, assumed or incurred, any Lien on any of the Securities (other than the
senior Lien for the benefit of the Senior Lenders and the
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Lien created by this Agreement), and will not, except as otherwise permitted by
the Purchase Agreement, without the prior written consent of the Collateral
Agent (which consent shall not be unreasonably withheld), sell, lease, assign,
transfer or otherwise dispose of all or any portion of the Securities (or any
interest therein).
(b) Change of Locations, Name, Etc. Without giving the
Collateral Agent 30 days prior written notice, none of the Pledgors will (i)
change such Pledgor's chief executive office, principal place of business, or
the location of its books and records relating to any of the Pledged Collateral
or (ii) change such Pledgor's name, identity or structure.
Section 5. Additional Shares.
(a) During the period this Agreement is in effect,
without the consent of the Collateral Agent, none of the Pledgors shall permit
any of the Issuers to issue any additional shares of capital stock or other
equity securities or interests, unless such additional shares have been
delivered and pledged to the Collateral Agent. Further, without the consent of
the Collateral Agent, none of the Pledgors shall permit any of the Issuers to
amend or modify its respective articles or certificate of incorporation (or
other analogous organizational document) in a manner which would materially
adversely affect the voting, liquidation, preference or other rights of a holder
of the Pledged Collateral.
(b) Each of the Pledgors agrees that, until this
Agreement has terminated in accordance with its terms, any additional Securities
of any of the Issuers at any time issued to any of the Pledgors or otherwise
acquired by any of the Pledgors shall be promptly delivered or otherwise
transferred to the Collateral Agent as additional Pledged Collateral and shall
be subject to the Lien of, and the terms and conditions of, this Agreement;
provided that if compliance with this Section 5(b) would result in more than 65%
of the voting power of any class of such capital stock of an Issuer being
included in the Pledged Collateral, the Pledgor shall pledge only such portion
of such capital stock as shall result in 65% of the voting power of such class
of capital stock owned by the Pledgor being included in the Pledged Collateral.
Section 6. Registration in Nominee Name, Denominations.
The Collateral Agent shall have the right (in its sole and absolute discretion)
to hold the Pledged Collateral in its own name as pledgee, the name of its
nominee (as Collateral Agent or as sub-agent) or the name of the applicable
Pledgor, endorsed or assigned in blank pursuant to a separate blank stock power
or in favor of the Collateral Agent or (where applicable) registered in the name
of the Collateral Agent in the relevant stock registry. Each of the Pledgors
will promptly give to the Collateral Agent copies of any notices or other
communications received by it with respect to Pledged Collateral registered in
the name of such Pledgor. The Collateral Agent shall at all times have the right
to exchange the certificates representing Pledged Collateral for certificates of
smaller or larger numbers of shares for any purpose consistent with this
Agreement.
Section 7. Voting Rights; Dividends, etc.
(a) So long as no Event of Default shall have occurred
and be continuing, with respect to any Securities:
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(i) each of the Pledgors shall be entitled to
exercise any and all voting and/or consensual rights and
powers accruing to an owner of the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms
and conditions of this Agreement or any agreement giving rise
to or otherwise relating to any of the Obligations; provided,
however, that none of the Pledgors shall exercise, or refrain
from exercising, any such right or power if any such action
would have a materially adverse effect on the value of such
Pledged Collateral in the reasonable judgment of the
Collateral Agent;
(ii) each of the Pledgors shall be entitled to
retain and use any and all cash dividends, interest and
principal paid on the Pledged Collateral, but any and all
stock and/or liquidating dividends, other distributions in
property, return of capital or other distributions made on or
in respect of Pledged Collateral, whether resulting from a
subdivision, combination or reclassification of outstanding
Securities of any of the Issuers which are pledged hereunder
or received in exchange for the respective Pledged Collateral
or any part thereof or as a result of any merger,
consolidation, acquisition or other exchange of assets or on
the liquidation, whether voluntary or involuntary, of any of
the Issuers, or otherwise, shall be and become part of the
Pledged Collateral pledged hereunder and, if received by any
of the Pledgors, shall forthwith be delivered to the
Collateral Agent to be held as collateral subject to the terms
and conditions of this Agreement.
(b) The Collateral Agent agrees to execute and deliver to
each of the Pledgors, or cause to be executed and delivered to each of the
Pledgors, as appropriate, at the sole cost and expense of such Pledgor, all such
proxies, powers of attorney, dividend orders and other instruments as such
Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and/or consensual rights and powers which such Pledgor is
entitled to exercise pursuant to clause (a)(i) above and/or to receive the
dividends which such Pledgor is authorized to retain pursuant to subsection
(a)(ii) above.
(c) Upon the occurrence and during the continuance of an
Event of Default, all rights of each the Pledgors to exercise the voting and/or
consensual rights and powers which such Pledgor is entitled to exercise pursuant
to subsection (a)(i) above and/or to receive the dividends, interest and
principal that such Pledgor is authorized to receive and retain pursuant to
subsection (a)(ii) above shall cease, and all such rights thereupon shall become
immediately vested in the Collateral Agent, which shall have, to the extent
permitted by law, the sole and exclusive right and authority (acting at the
direction of the Required Purchasers) to exercise such voting and/or consensual
rights and powers which each of the Pledgors shall otherwise be entitled to
exercise pursuant to subsection (a)(ii) above and/or to receive and retain the
dividends which each of the Pledgors shall otherwise be authorized to retain
pursuant to subsection (b) above. Any and all money and other property paid over
to or received by the Collateral Agent pursuant to the provisions of this
subsection (c) shall be retained by the Collateral Agent as additional
collateral hereunder and shall be applied in accordance with the provisions of
Section 10. If any of the Pledgors shall receive any dividends or other property
which it is not entitled to receive under this Section, such Pledgor shall hold
the same in trust for the Collateral Agent, without commingling the same with
other funds or property of or held by such Pledgor,
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and shall promptly deliver the same to the Collateral Agent upon receipt by such
Pledgor in the identical form received, together with any necessary
endorsements.
Section 8. Event of Default Defined. For purposes of this
Agreement, "Event of Default" shall mean:
(a) any of the Pledgors shall fail to observe or perform
any covenant or agreement contained in Sections 4(a), 5, or 7(a)(ii) hereof;
(b) any of Pledgors shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those covered by
the immediately preceding subsection (a)) for a period of 30 days after written
notice thereof has been given to such Pledgor by the Collateral Agent; and
(c) an Event of Default under and as defined in the
Purchase Agreement shall occur and be continuing.
Section 9. Remedies upon Default.
(a) Subject to the Intercreditor Agreement, in addition
to any right or remedy that the Collateral Agent may have under the Purchase
Agreement, the other Transaction Documents or otherwise under applicable law, if
an Event of Default shall have occurred and be continuing, the Collateral Agent
may exercise any and all the rights and remedies of a secured party under the
Uniform Commercial Code as in effect in any applicable jurisdiction (the "Code")
and may otherwise sell, assign, transfer, endorse and deliver the whole or, from
time to time, any part of the Pledged Collateral at a public or private sale or
on any securities exchange, for cash, upon credit or for other property, for
immediate or future delivery, and for such price or prices and on such terms as
the Collateral Agent (acting at the direction of the Required Purchasers, in
their sole discretion) shall deem appropriate. As further provided for in
Section 14 hereof, the Collateral Agent shall be authorized at any sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to Persons who will represent and agree that they are purchasing the Pledged
Collateral for their own account in compliance with the Securities Laws (as such
term is defined in Section 14, below) and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer, endorse and deliver
to the purchaser or purchasers thereof the Pledged Collateral so sold. Each
purchaser at any sale of Pledged Collateral shall take and hold the property
sold absolutely free from any claim or right on the part of any of the Pledgors,
and each of the Pledgors hereby waives (to the fullest extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which any of the
Pledgors now has or may at any time in the future have under any applicable law
now existing or hereafter enacted. Each of the Pledgors agrees that, to the
extent notice of sale shall be required by applicable law, at least ten days'
prior written notice to the applicable Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification, but notice given in any other reasonable
manner or at any other reasonable time shall constitute reasonable notification.
Such notice, in case of public sale, shall state the time and place for such
sale, and, in the case of sale on a securities exchange, shall state the
exchange on which such sale is to be made and the day on which the respective
Pledged Collateral, or portion thereof, will first be offered for sale at such
exchange. Any such public
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sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix and shall state in the
notice or publication (if any) of such sale. At any such sale, the applicable
Pledged Collateral, or portion thereof to be sold, may be sold in one lot as an
entirety or in separate parcels, as the Collateral Agent may determine (acting
at the direction of the Required Purchasers, in their sole and absolute
discretion). The Collateral Agent shall not be obligated to make any sale of any
of the Pledged Collateral if it shall determine not to do so regardless of the
fact that notice of sale of the Pledged Collateral may have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case the
sale of all or any part of the Pledged Collateral is made on credit or for
future delivery, the Pledged Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability to any of the
Pledgors in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. At any public sale made
pursuant to this Agreement, the Collateral Agent or any secured party, to the
extent permitted by applicable law, may bid for or purchase, free from any right
of redemption, stay and/or appraisal on the part of any of the Pledgors (all
said rights being also hereby waived and released to the extent permitted by
applicable law), any part of or all the Pledged Collateral offered for sale and
may make payment on account thereof by using any claim then due and payable to
the Collateral Agent from any of the Pledgors as a credit against the purchase
price, and the Collateral Agent may, upon compliance with the terms of sale and
to the extent permitted by applicable law, hold, retain and dispose of such
property without further accountability to any of the Pledgors therefor. For
purposes hereof, a written agreement to purchase all or any part of the Pledged
Collateral shall be treated as a sale thereof; the Collateral Agent shall be
free to carry out such sale pursuant to such agreement and none of the Pledgors
shall be entitled to the return of any Pledged Collateral subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default may have been remedied or the
Obligations may have been paid in full as herein provided. Each of the Pledgors
hereby waives any right to require any marshaling of assets and any similar
right.
(b) In addition to exercising the power of sale herein
conferred upon it, the Collateral Agent shall also have the option to proceed by
suit or suits at law or in equity to foreclose this Agreement and sell the
Pledged Collateral or any portion thereof pursuant to judgment or decree of a
court or courts having competent jurisdiction.
(c) In addition to the foregoing, the Collateral Agent
shall have all other rights, powers and remedies which are available to it under
any applicable laws.
(d) The rights and remedies of the Collateral Agent under
this Agreement are cumulative and not exclusive of any rights or remedies which
it would otherwise have.
Section 10. Application of Proceeds of Sale and Cash. Each of the
Pledgors agrees to pay to the Collateral Agent all Enforcement Costs (as defined
below) paid or incurred by the Collateral Agent. This agreement in this Section
10 shall survive the termination of this Agreement and the Lien on the Pledged
Collateral. All Enforcement Costs, together with interest
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thereon from the date of any demand therefor until paid in full at a per annum
rate of interest equal at all times to the Default Rate, shall be paid by the
Company to the Collateral Agent whenever demanded by the Collateral Agent.
Any proceeds of the collection of the sale or other disposition of the
Collateral will be applied by the Collateral Agent in accordance with the terms
of the Intercreditor Agreement. If the sale or other disposition of the
Collateral fails to satisfy all of the Obligations, the Debtors shall remain
liable to the Collateral Agent and the Purchasers for any deficiency. Any
surplus from the sale or disposition of the Pledged Collateral shall be paid to
the respective Debtor or to any other party entitled thereto or shall otherwise
be paid over in a manner permitted by law after payment in full of all
Obligations and the Enforcement Costs related to any such payment.
As used herein, the term "Enforcement Costs" means all reasonable
expenses, charges, costs and fees whatsoever (including, without limitation,
reasonable attorneys' fees and expenses) of any nature whatsoever paid or
incurred by or on behalf of the Collateral Agent in connection with (a) the
collection or enforcement of any or all of the Obligations or this Agreement
(including, without limitation, reasonable attorneys' fees incurred prior to the
institution of any suit or other proceeding), (b) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral, (c) the
monitoring, inspection, administration, processing, servicing of any or all of
the Obligations and/or the Collateral, (d) the preparation of this Agreement,
the Security Documents, and the preparation and review of lien and record
searches, reports, certificates, and/or other documents or information relating
from time to time to the taking, perfection, inspection, preservation,
protection and/or release of a Lien on the Collateral, the value of the
Collateral, or otherwise relating to the Collateral Agent's or any Secured
Party's rights, powers and remedies under this Agreement or with respect to the
Collateral, and (e) all filing and/or recording taxes or fees and all stamp and
other similar taxes and fees payable or determined to be payable in connection
with the execution and delivery of this Agreement and any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes or fees, the Pledgors hereby agreeing jointly and severally to indemnify
and save the Collateral Agent and the Purchasers harmless from and against such
liabilities
Section 11. Collateral Agent Appointed Attorney-in-Fact. From and
after the occurrence and during the existence of an Event of Default, each of
the Pledgors hereby constitutes and appoints the Collateral Agent as the
attorney-in-fact of each Pledgor with full power of substitution either in the
Collateral Agent's name or in the name of each of the Pledgors to do any of the
following with respect to any Securities and the related Pledged Collateral: (a)
to perform any obligation of any of the Pledgors hereunder in such Pledgor's
name or otherwise; (b) to ask for, demand, sue for, collect, receive, receipt
and give acquittance for any and all moneys due or to become due under and by
virtue of any Pledged Collateral; (c) to prepare, execute, file, record or
deliver notices, assignments, financing statements, continuation statements,
applications for registration or like papers to perfect, preserve or release the
Collateral Agent's security interest in the Pledged Collateral or any of the
documents, instruments, certificates and agreements described in Section 13(b);
(d) to verify facts concerning the Pledged Collateral in its own name or a
fictitious name; (e) to endorse checks, drafts, orders and other instruments for
the payment of money payable to any of the Pledgors, representing any interest
or dividend or other distribution payable in respect of the Pledged
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Collateral or any part thereof or on account thereof and to give full discharge
for the same; (f) to exercise all rights, powers and remedies which any of the
Pledgors would have, but for this Agreement, under the Pledged Collateral; and
(g) to carry out the provisions of this Agreement and to take any action and
execute any instrument which the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, and to do all acts and things and
execute all documents in the name of each of the Pledgors or otherwise, deemed
by the Collateral Agent as necessary, proper and convenient in connection with
the preservation, perfection or enforcement of its rights hereunder. Nothing
herein contained shall be construed as requiring or obligating the Collateral
Agent to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or
notice, or to take any action with respect to the Pledged Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby, and no action taken by the Collateral Agent or omitted to be
taken with respect to the Pledged Collateral or any part thereof shall give rise
to any defense, counterclaim or offset in favor of the Pledgor or to any claim
or action against the Collateral Agent. The power of attorney granted herein is
irrevocable and coupled with an interest.
Section 12. Reimbursement of Collateral Agent. Each of the
Pledgors agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees disbursements and other
charges of its counsel and of any experts or agents, that the Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or any sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the
failure by any of the Pledgors to perform or observe any of the provisions
hereof. Any such amounts payable as provided hereunder shall be additional
obligations secured hereby and by the other Security Documents.
Section 13. Further Assurances. Each of the Pledgors shall, at
its sole cost and expense, take all action that may be necessary or desirable in
the Collateral Agent's sole discretion or at the request of the Required
Holders, so as at all times to maintain the validity, perfection, enforceability
and priority of the Collateral Agent's security interest in the Pledged
Collateral, or to enable the Collateral Agent to exercise or enforce its rights
hereunder, including without limitation (a) delivering to the Collateral Agent,
endorsed or accompanied by such instruments of assignment as the Collateral
Agent may specify, any and all chattel paper, instruments, letters of credit and
all other undertakings of guaranty and documents evidencing or forming a part of
the Pledged Collateral and (b) executing and delivering financing statements,
pledges, designations, notices and assignments, in each case in form and
substance satisfactory to the Collateral Agent, relating to the creation,
validity, perfection, priority or continuation of the security interest granted
hereunder. Subject to the foregoing, each of the Pledgors agrees to take, and
authorizes the Collateral Agent to take on such Pledgor's behalf, any or all of
the following actions with respect to any Pledged Collateral as the Collateral
Agent shall deem necessary to perfect the security interest and pledge created
hereby or to enable the Collateral Agent to enforce its rights and remedies
hereunder: (i) to register in the name of the Collateral Agent any Pledged
Collateral in certificated or uncertificated form; (ii) to endorse in the name
of the Collateral Agent any Pledged Collateral issued in certificated form; and
(iii) by book entry or otherwise, identify as belonging to the Collateral Agent
a quantity of securities that constitutes all or part of the Pledged Collateral
registered in the name of the Collateral Agent.
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Notwithstanding the foregoing each of the Pledgors agrees that Pledged
Collateral which is not in certificated form or is otherwise in book-entry form
shall be held for the account of the Collateral Agent. Each of the Pledgors
hereby authorizes the Collateral Agent to execute and file in all necessary and
appropriate jurisdictions (as determined by the Collateral Agent) one or more
financing or continuation statements (or any other document or instrument
referred to in the immediately preceding clause (b)) in the name of the
applicable Pledgor and to sign such Pledgor's name thereto. Each of the Pledgors
authorizes the Collateral Agent to file any such financing statement, document
or instrument without the signature of such Pledgor to the extent permitted by
applicable law. To the extent permitted by applicable law, a carbon,
photographic, xerographic or other reproduction of this Agreement or any
financing statement is sufficient as a financing statement. Any property
comprising part of the Pledged Collateral required to be delivered to the
Collateral Agent pursuant to this Agreement shall be accompanied by proper
instruments of assignment duly executed by each of the Pledgors and by such
other instruments or documents as the Collateral Agent may reasonably request.
Section 14. Securities Laws. In view of the position of the
Pledgors in relation to the Pledged Collateral, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar applicable law hereafter enacted
analogous in purpose or effect, whether foreign or domestic (such Act and any
such similar applicable law as from time to time in effect being called the
"Securities Laws") with respect to any disposition of the Pledged Collateral
permitted hereunder. Each of the Pledgors understands that compliance with the
Securities Laws might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to dispose of all or
any part of the Pledged Collateral in accordance with the terms hereof, and
might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Collateral could dispose of the same. Similarly, there
may be other legal restrictions or limitations affecting the Collateral Agent in
any attempt to dispose of all or part of the Pledged Collateral in accordance
with the terms hereof under applicable Blue Sky or other state securities laws
or similar applicable law analogous in purpose or effect. The Pledgor recognizes
that in light of the foregoing restrictions and limitations the Collateral Agent
may, with respect to any sale of the Pledged Collateral, limit the purchasers to
those who will agree, among other things, to acquire such Pledged Collateral for
their own account, for investment, and not with a view to the distribution or
resale thereof. Each of the Pledgors acknowledges and agrees that in light of
the foregoing restrictions and limitations, the Collateral Agent, in its sole
and absolute discretion, may, in accordance with applicable law, (a) proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Collateral or part thereof shall have been filed under
the Federal Securities Laws and (b) approach and negotiate with a single
potential purchaser to effect such sale. Each of the Pledgors acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions. In
the event of any such sale, the Collateral Agent shall incur no responsibility
or liability for selling all or any part of the Pledged Collateral in accordance
with the terms hereof at a price that the Collateral Agent(acting at the
direction of the Required Holders, in their sole and absolute discretion), may
in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more than a
single purchaser were approached. The provisions of this Section will apply
notwithstanding the
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existence of public or private market upon which the quotations or sales prices
may exceed substantially the price at which the Collateral Agent sells.
Section 15. Indemnification. Each of the Pledgors agrees to
indemnify and hold the Collateral Agent and any corporation controlling,
controlled by, or under common control with, the Collateral Agent and any
officer, attorney, director, shareholder, agent or employee of the Collateral
Agent or any such corporation (each an "Indemnified Person"), harmless from and
against any claim, loss, damage, action, cause of action, liability, cost and
expense or suit of any kind or nature whatsoever (collectively, "Losses"),
brought against or incurred by an Indemnified Person, in any manner arising out
of or, directly or indirectly, related to or connected with this Agreement,
including without limitation, the exercise by the Collateral Agent of any of its
rights and remedies under this Agreement or any other action taken by the
Collateral Agent pursuant to the terms of this Agreement; provided, however, the
Pledgor shall not be liable to an Indemnified Person for any Losses to the
extent that such Losses result from the gross negligence or willful misconduct
of such Indemnified Person. The Pledgor's obligations under this section shall
survive the termination of this Agreement and the payment in full of the
Obligations.
Section 16. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall remain
in full force and effect until it terminates in accordance with its terms. Each
of the Pledgors and the Collateral Agent hereby agree that the security interest
created by this Agreement in the Pledged Collateral shall not terminate and
shall continue and remain in full force and effect notwithstanding the transfer
to any of the Pledgors or any person designated by it of all or any portion of
the Pledged Collateral.
Section 17. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the grant of a security interest in the Collateral
and all obligations of each Pledgor hereunder, shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Purchase Agreement, any other Transaction Documents, the Intercreditor
Agreement, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of the payment of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to any
departure from the Purchase Agreement, any other Transaction Documents, the
Intercreditor Agreement, or any other agreement or instrument relating to any of
the foregoing, (c) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any guaranty, for all or any of the Obligations, including, without
limitation, the release of any one or more Pledgors or other Persons from this
Agreement or any other agreement securing the payment and performance of the
Obligations or other indebtedness of the Pledgors or of any other Person to the
Purchasers or the Agent or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any of the Pledgors in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
Section 18. No Waiver. Neither the failure on the part of the
Collateral Agent to exercise, nor the delay on its part in exercising any right,
power or remedy hereunder, nor any course of dealing between the Collateral
Agent and any of the Pledgors shall operate as a waiver
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thereof, nor shall any single or partial exercise of any such right, power, or
remedy hereunder preclude any other or the further exercise thereof or the
exercise of any other right, power or remedy.
Section 19. Notices. Notices, requests and other communications
required or permitted hereunder shall be given in accordance with the applicable
terms of the Purchase Agreement.
Section 20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 21. Amendments. No amendment or waiver of any provision
of this Agreement nor consent to any departure by any of the Pledgors herefrom
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 22. Binding Agreement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that none of the Pledgors shall be
permitted to assign this Agreement or any interest herein or in the Pledged
Collateral, or any part thereof, or any cash or property held by the Collateral
Agent as collateral under this Agreement.
Section 23. Termination. Upon indefeasible payment in full of all
of the Bank Obligations, and termination of all Commitments under the Purchase
Agreement, this Agreement shall terminate. Upon termination of this Agreement in
accordance with its terms the Collateral Agent agrees to take such actions as
the Company may reasonably request, and at the sole cost and expense of the
Company, (a) to return the Pledged Collateral to the applicable Pledgor, and (b)
to evidence the termination of this Agreement, including, without limitation,
the filing of any releases or any termination statements under the Uniform
Commercial Code.
Section 24. Joint and Several Liability; Additional Pledgors;
Release of Pledgors. The obligations and liabilities of the Pledgors from time
to time party to this Agreement shall be joint and several. Section 7.07 of the
Purchase Agreement provides that Domestic Subsidiaries which own or acquire a
Significant Direct Foreign Subsidiary and which are not Pledgors must become
Pledgors by, among other things, executing and delivering to the Agent a
counterpart to this Agreement. Any Domestic Subsidiary which executes and
delivers to the Agent a counterpart of this Agreement shall be a Pledgor for all
purposes hereunder and shall thereafter be jointly and severally liable with all
other Pledgors then party to this Agreement or thereafter joined hereto.
Section 25. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
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Section 26. Headings. Section headings used herein are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Agreement.
Section 27. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute but one agreement.
Section 28. Subordination to Senior Debt Documents. This
Agreement and the liens and security interests created hereby are subject and
subordinated to the Senior Debt Documents.
[Signatures on Next Page]
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IN WITNESS WHEREOF, each of the Pledgors has executed and delivered
this Agreement under seal as of this the date first written above.
CROWN CRAFTS, INC.
By: (SEAL)
-------------------------------
Name:
--------------------------------
Title:
-------------------------------
Agreed to, accepted and acknowledged as
of the date first written above.
WACHOVIA BANK, N.A., as Collateral Agent
By:
----------------------------------------
Title:
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EXHIBIT A
PLEDGED COLLATERAL
PLEDGOR: CROWN CRAFTS, INC.
Certificate
No. of Shares No. of Shares No. of Shares No. of Shares Nos. for
Name of Subsidiary Class of Stock Authorized Issued Outstanding Pledged Pledged Shares
- ------------------ -------------- ------------- ------------- ------------- ------------- --------------
Burgundy Interamericana, Common 50,000 50,000 50,000 49,999 1, 2, 3 and 4
S.A. de C.V.
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EXHIBIT B
PLEDGORS
Crown Crafts, Inc., a Georgia corporation
1600 RiverEdge Parkway
Suite 200
Atlanta, Georgia 30328
Federal Tax I.D. # 58-0678148
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EXHIBIT F
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of July 23,
2001, by and among CROWN CRAFTS, INC., a Georgia corporation (the "Parent"),
CHURCHILL WEAVERS, INC., a Kentucky corporation ("Weavers"), HAMCO, INC., a
Louisiana corporation ("Hamco"), and CROWN CRAFTS INFANT PRODUCTS, INC, a
Delaware corporation ("CCIP" with the Parent, Weavers, and Hamco, individually
and collectively, the "Debtors"), and WACHOVIA BANK, N.A., a national banking
association organized under the laws of the United States of America, acting as
Collateral Agent under this Agreement and the Intercreditor Agreement (as
described below) for the "Purchasers" from time to time party to the Purchase
Agreement described below ("Wachovia" and, in its capacity as Collateral Agent,
together with any successor agent, the "Agent").
RECITALS:
WHEREAS, the Parent and the Purchasers have entered into that certain
Subordinated Note and Warrant Purchase Agreement dated as of the date hereof
(as amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms, the "Purchase Agreement"; capitalized terms used
herein without definition have the meanings set forth in the Purchase
Agreement), pursuant to which the Purchasers have agreed, subject to the terms
thereof, to make available to the Parent certain financial accommodations;
WHEREAS, the Purchasers, the Senior Lenders and Wachovia Bank, N.A.,
as Collateral Agent, have entered into that certain Intercreditor Agreement
dated as of the date hereof (as amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, the "Intercreditor
Agreement"), pursuant to which Wachovia Bank, N.A. is appointed as Collateral
Agent for the Purchasers;
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which the parties
hereto hereby acknowledge, the parties hereto agree as follows:
DEFINITIONS
In addition to the definitional provisions contained in SECTION 5.9
hereof and the defined terms contained in the Purchase Agreement which are
incorporated by reference herein as set forth in the Recitals hereto, as used
in this Agreement, the terms defined in the Preamble and Recitals hereto shall
have the respective meanings specified therein, and the following terms shall
have the following meanings:
140
"Account Debtor" shall mean the Person who is obligated on any of the
Accounts Receivable Collateral or Factored Accounts or otherwise is obligated
as a purchaser or lessee of any of the Inventory Collateral.
"Accounts Receivable Collateral" shall mean and include all accounts,
instruments, and chattel paper, including, without limitation, all rights of
each Debtor to payment for goods sold or leased, or to be sold or to be leased,
or for services rendered or to be rendered, howsoever evidenced or incurred,
and together with all returned or repossessed goods and all books, records,
computer tapes, programs and ledger books arising therefrom or relating
thereto, all whether now owned or hereafter acquired or arising; provided that
the term "Accounts Receivable Collateral" shall not include Factored Accounts.
"Approved Depository" means either (a) the Agent or (b) another
depository bank which is acceptable to the Agent, with whom the Agent has
entered into an agreement satisfactory to it and pursuant to which, among other
things, the Approved Depository: (i) agrees to waive any right of setoff with
respect to the Collateral, the Cash Collections and the Cash Deposits; (ii)
acknowledges and agrees that the Agent has a security interest in the
Collateral, and that it is the bailee of the Agent with respect thereto; and
(iii) agrees that, upon notice from the Agent of an Event of Default, it will
act strictly in accordance with the instructions of the Agent with respect to
deposit balances of the Debtors held by it, including, without limitation, any
instructions of the Agent to remit such balances to it, and not in accordance
with any instructions of the Debtors, or any other Person.
"Balances Collateral" shall mean all property of each Debtor left with
the Agent or any Purchaser or in the possession, custody or control now or
hereafter of the Agent or any Purchaser, all deposit accounts of each Debtor
now or hereafter opened with the Agent or any Purchaser or with another
depositary which has executed a Blocked Account Agreement, all certificates of
deposit issued by the Agent or any Purchaser to any Debtor or by another issuer
which has executed a Blocked Account Agreement or where the certificate of
deposit has been pledged with the Agent, all drafts, checks and other items
deposited in or with the Agent or any Purchaser by any Debtor for collection
now or hereafter.
"Blocked Account Agreement" means a Blocked Account Agreement
substantially in the form and substance acceptable to the Required Holders,
executed and delivered by any depositary institution with which any Debtor has
a demand deposit, operating account or other such similar depositary
relationship.
"Cash Collections" means all cash, checks, drafts, items and other
instruments for the payment of money received by each Debtor from proceeds of
Collateral.
"Cash Deposits" means all deposits of Cash Collections with depository
banks, including with the Approved Depositaries.
"CITCSI" means The CIT Group/Commercial Services, Inc.
"Collateral" means the personal property in which the Agent, for the
benefit of the Purchasers, is granted a security interest pursuant to SECTION
1.1.
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"Collateral Information Certificate" means that certain Collateral
Information Certificate dated as of even date herewith which was executed and
delivered to the Agent by each of the Debtors and which contains the disclosure
of information pertaining to the Collateral.
"Collateral Locations" shall mean the respective state of organization
of each Debtor, chief executive office of each Debtor and those additional
locations, if any, of each Debtor set forth and described in the Collateral
Information Certificate.
"Collateral Reserve Account" shall mean any non-interest bearing,
demand deposit account which any Debtor is or may be required to open and
maintain with the Agent pursuant to the requirements of SECTION 3.1.6 hereof.
"Debtors" means, individually and collectively, as the context
requires, each of the following Persons, each of them being jointly and
severally obligated as Debtors hereunder: (i) each of the Debtors listed in the
first paragraph of this Agreement; (ii) any Person which becomes a Debtor
pursuant to the provisions of the Purchase Agreement; and (iii) in the case of
each Debtor, its successors and its permitted assigns.
"Default Rate" shall have the meaning given such term in the Purchase
Agreement.
"Enforcement Costs" means all reasonable expenses, charges, costs and
fees whatsoever (including, without limitation, attorneys' fees and expenses)
of any nature whatsoever paid or incurred by or on behalf of the Agent in
connection with (a) the collection or enforcement of any or all of the Secured
Obligations or this Agreement (including, without limitation, attorneys' fees
incurred prior to the institution of any suit or other proceeding), (b) the
creation, perfection, collection, maintenance, preservation, defense,
protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, (c) the monitoring, inspection, administration,
processing, servicing of any or all of the Secured Obligations and/or the
Collateral, (d) the preparation of this Agreement, the Security Documents, and
the preparation and review of lien and record searches, reports, certificates,
and/or other documents or information relating from time to time to the taking,
perfection, inspection, preservation, protection and/or release of a Lien on
the Collateral, the value of the Collateral, or otherwise relating to the
Agent's or any Purchaser's rights, powers and remedies under this Agreement or
with respect to the Collateral, and (e) all filing and/or recording taxes or
fees and all stamp and other similar taxes and fees payable or determined to be
payable in connection with the execution and delivery of this Agreement and any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees, each Debtor hereby agreeing to indemnify
and save the Agent and the Purchasers harmless from and against such
liabilities.
"Equipment Collateral" shall mean all equipment and fixtures of each
Debtor, whether now owned or hereafter acquired, wherever located, including,
without limitation, all machinery, furniture, furnishings, leasehold
improvements, computer equipment, books and records, motor vehicles, forklifts,
rolling stock, dies and tools used or useful in such Debtor's business
operations, and software embedded in any such goods, excluding, however,
Excluded Equipment.
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"Event of Default" has the meaning given such term in SECTION 9.01 of
the Purchase Agreement.
"Excluded Equipment" means (i) any equipment subject to a Purchase
Money Lien as to which the purchase money creditor holding such Lien prohibits
other Liens thereon without its prior consent, unless and until either (A) such
creditor grants such consent or (B) the Debt secured by such Lien has been
fully paid and satisfied; and (ii) any equipment with respect to which the
rights of possession and use of any Debtor are created pursuant to a lease
which does not create a security interest, unless and until such time (if any)
as such Debtor acquires title to such equipment from the lessor or the lessor
abandons its rights and claims thereto.
"Factored Accounts" means all accounts of any Debtor actually
purchased by a Permitted Factor in connection with a factoring program approved
by the Purchasers, which factoring program, among other things, shall not
provide for any loans or advances to be made to any of the Debtors on account
of accounts to be purchased by such Permitted Factor or any Lien on accounts or
related assets not purchased or identified for purchase by such Factor.
"Factoring Balances Agreement" means the Assignment of Factoring
Balances Agreement dated on or about the date of this Agreement among the
Debtors, collectively and individually, the Agent, and CITCSI.
"Governmental Authority" means any nation or government, any state or
other political subdivision or agency thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Intangibles Collateral" shall mean all general intangibles of each
Debtor, whether now existing or hereafter acquired or arising, including,
without limitation, all copyrights, royalties, tax refunds, rights to tax
refunds, trademarks, trade names, service marks, patent and proprietary rights,
blueprints, drawings, designs, trade secrets, plans, diagrams, schematics and
assembly and display materials relating thereto, all customer lists, all books
and records and all computer software and programs, and all goodwill of each
Debtor associated therewith.
"Inventory Collateral" shall mean all inventory of each Debtor,
whether now owned or hereafter acquired, wherever located, including, without
limitation, all goods of such Debtor held for sale or lease or furnished or to
be furnished under contracts of service, all goods held for display or
demonstration, goods on lease or consignment, spare parts, repair parts,
returned and repossessed goods, software embedded in such goods, all raw
materials, work- in-process, finished goods and supplies used or consumed in
such Debtor's business, together with all documents, documents of title, dock
warrants, dock receipts, warehouse receipts, bills of lading or orders for the
delivery of all, or any portion, of the foregoing; provided, however, that
"Inventory Collateral" shall not include goods which are placed by the owner
thereof on consignment with a Debtor in compliance with SECTION 2-326 of the
UCC of the applicable jurisdiction.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority.
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"Material Contract" means any contract, lease, instrument, guaranty or
license, or other arrangement (other than any of the Transaction Documents),
whether written or oral, to which any Debtor or any of the Subsidiaries is a
party as to which the breach, nonperformance, cancellation or failure to renew
by any party thereto could have a Material Adverse Effect.
"Purchaser" has the meaning given such term in the first paragraph of
this Agreement.
"Permitted Encumbrances" shall have the meaning given such term in the
Purchase Agreement.
"Permitted Factors" means any factor which has been approved by the
Purchasers and which has executed and delivered, and is subject to, a Factoring
Balances Agreement.
"Purchase Money Lien" shall have the meaning given such term in the
Purchase Agreement.
"Secured Obligations" means (a) the full and final payment and/or
performance of all "Obligations" under the Purchase Agreement (as such term is
defined in the Purchase Agreement) and (b) the full and final payment and/or
performance of all Enforcement Costs.
"Third Party" means any landlord, warehousemen, servicer, processor,
bailee and other third parties which may, from time to time, be in the
possession or control of, any Collateral or any property on which any
Collateral is or may be located.
"Third Party Claims" means claims of Third Parties against any Debtor
for rent, storage, maintenance, repair, processing, servicing or bailment in
respect of any Collateral or any property on which any Collateral is or may be
located.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the relevant jurisdiction, as amended from time to time.
"Waiver Agreement" means a Waiver and Agreement substantially in a
form acceptable to the Required Holders, executed and delivered by any Third
Party waiving or subordinating its Third Party Claims, and making certain other
agreements in regard to the Collateral, all on terms satisfactory to the Agent
in all respects.
ARTICLE 1
Section 1.1 As security for the payment of all Secured
Obligations, each Debtor hereby grants to Agent, for the ratable benefit of the
Purchasers, a continuing, general lien upon and security interest and security
title in and to the following described property, wherever located, whether now
existing or hereafter acquired or arising, namely: (a) the Accounts Receivable
Collateral and all amounts payable to any Debtor by a Permitted Factor with
respect to Factored Accounts; (b) the Inventory Collateral; (c) the Equipment
Collateral; (d) the Intangibles Collateral; (e) the Balances Collateral; and
(f) all products and/or proceeds of any and all of the foregoing, including,
without limitation, insurance proceeds.
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Section 1.2 Release. Except as provided in SECTION 3.1.10 below,
the Agent shall have no right or obligation to release and/or terminate this
Agreement, except upon both the performance of this Agreement and the
indefeasible payment and/or performance of all Secured Obligations and the
expiration and termination of any and all commitments or obligations (whether
or not conditional) of the Purchasers to the Debtors. Each of the Purchasers
agrees that it shall notify the Agent in writing promptly upon (i) the
termination of any commitment or other obligations relating to financial
accommodations with respect to the Secured Obligations owed to such Purchaser,
and (ii) the payment in full of the Secured Obligations owed to such Purchaser.
When all Purchasers have so notified the Agent, the Agent shall reasonably
cooperate with the Debtors to provide for such release and/or termination of
this Agreement and the security interests granted herein.
Section 1.3 Financing Statements. Each of the Debtors authorizes
the Agent to file financing statements consistent with this Agreement in such
filing offices as it shall select, and acknowledges that such financing
statement may describe the Collateral as "all personal property" of such
Debtor.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties. Each of the Debtors,
jointly and severally, represents and warrants to the Agent as follows:
2.1.1 Place(s) of Business and Location of Collateral;
Related Information; Jurisdiction of Incorporation. The correct corporate name
and state of organization of each Debtor, address of such Debtor's chief
executive office and principal place of business, each of its other places of
business, each place owned or leased by such Debtor where the Collateral or any
books or records relating thereto are located, and such Debtor's Federal
Identification number are accurately set forth in the Collateral Information
Certificate. Such Debtor is incorporated under the laws of the state indicated
in the Collateral Information Certificate. Each Debtor's state organization
identification number is set forth below:
- ---------------------------------------- ----------------------------------
DEBTOR ORGANIZATIONAL IDENTIFICATION
NUMBER
- ---------------------------------------- ----------------------------------
Crown Crafts, Inc. 7402471
- ---------------------------------------- ----------------------------------
Churchill Weavers, Inc. 0009403
- ---------------------------------------- ----------------------------------
Hamco, Inc. 34195389D
- ---------------------------------------- ----------------------------------
Crown Crafts Infant Products, Inc. 2840837
- ---------------------------------------- ----------------------------------
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2.1.2 Corporate Existence and Power. Such Debtor is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, except where the failure to qualify would not have
or reasonably be expected to cause a Material Adverse Effect, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any such licenses, authorizations, consents and approvals could
not have or reasonably be expected to cause a Material Adverse Effect.
2.1.3 Corporate and Governmental Authorization; No
Contravention. Such Debtor's execution, delivery and performance of this
Agreement, the Notes and the other Transaction Documents (i) are within such
Debtor's corporate powers, (ii) have been duly authorized by all necessary
corporate action, and have been executed on behalf of such Debtor by duly
authorized officers, (iii) require no action by or in respect of or filing
with, any governmental body, agency or official, (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the articles or certificate of incorporation or by-laws of such Debtor or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon the such Debtor or any of its Subsidiaries (excepting any license
agreements or other Intangibles Collateral which operate to restrict the
collateral assignment thereof or the grant of a security interest therein or in
Licensed Inventory or other property licensed thereunder or subject to the
terms thereof, the effect of which restrictions is limited by applicable law),
and (v) do not result in the creation or imposition of any Lien on any asset of
such Debtor or any of its Subsidiaries (except in favor of the Agent).
2.1.4 Binding Agreements. This Agreement constitutes a
valid and binding agreement of such Debtor enforceable in accordance with its
terms, and the Notes and the other Transaction Documents, when executed and
delivered in accordance with the Purchase Agreement, will constitute valid and
binding obligations of such Debtor enforceable in accordance with their
respective terms, provided that the enforceability hereof and thereof is
subject in each case to general principles of equity and to bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights
generally and provided, further, that the enforcement of the Collateral Agent's
security interests in any license agreements or other Intangibles Collateral,
and any Licensed Inventory or other property licensed thereunder or subject to
the terms thereof, is subject to the terms of such license agreements or other
Intangibles Collateral, except to the extent otherwise provided by applicable
law.
2.1.5 Title to Collateral. Such Debtor has good and
marketable title to its properties and assets which are included among or give
rise to the Collateral, subject only to Liens of the Agent pursuant to this
Agreement and the other Transaction Documents and except for Permitted
Encumbrances and any restrictions relating to collateral assignment or transfer
of any license agreement or other Intangibles Collateral which operate to
restrict the collateral assignment thereof or the grant of a security interest
therein or in Licensed Inventory or other property licensed thereunder or
subject to the terms thereof, the effect of which restrictions is limited by
applicable law). Subject to the limitations noted in the immediately preceding
sentence, such Debtor has legal, enforceable and uncontested rights to use
freely such property and assets.
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2.1.6 Bona Fide Rights of Payment; Right to Assign. Each
right of payment constituting a part of the Collateral arises or will arise
under a contract between such Debtor and each Account Debtor, or from the bona
fide sale or delivery of goods to or performance of services for, such Account
Debtor. No Governmental Authority is an Account Debtor with respect to any
portion of the Collateral. Such Debtor has full right, power and authority to
make the assignment pursuant to this Agreement of the Accounts Receivable
Collateral and to grant a security interest in all of the Collateral.
2.1.7 Recitals. The Recitals to this Agreement are true,
accurately reflect the matters set forth herein and are hereby incorporated
into and made a part of this Agreement.
2.1.8 Purchase of Collateral. Such Debtor has not, within
the 12 months period preceding the Closing Date, purchased any of the
Collateral in a bulk transfer or in a transaction which was outside the
ordinary course of the business of such Debtor's seller.
2.1.9 Account Debtor Capacity and Solvency. Each Account
Debtor hereunder (a) had the capacity to contract at the time any contract or
other document giving rise to the account was executed and (b) such Account
Debtor was not and is not "insolvent" as that term is defined in the Purchase
Agreement.
2.1.10 Proceedings with Respect to Accounts. There are no
proceedings or actions which are threatened or pending against any Account
Debtor which are reasonably likely to have a material adverse change in such
Account Debtor's financial condition or the collectibility of such account.
2.1.11 Survival of Representations and Warranties. All
representations and warranties contained in or made under or in connection with
this Agreement shall survive the execution of this Agreement and the incurring
of any particular Secured Obligations.
ARTICLE 3
COVENANTS AND AGREEMENTS OF THE Debtors
Section 3.1 Covenants. So long as any of the Secured Obligations
(or commitments therefor, if any) shall be outstanding, each of the Debtors,
jointly and severally, agrees with the Agent, for itself and the Purchasers, as
follows:
3.1.1 Conduct of Business and Maintenance of Existence,
Compliance with Laws, Etc. Such Debtor will (i) do or cause to be done all
things necessary to preserve and to keep in full force and effect its corporate
existence and material rights and its franchises, trade names, patents,
trademarks and permits which are necessary for the continuance of its business,
and (ii) comply with all applicable Laws and observe the valid requirements of
Governmental Authorities, the noncompliance with or the nonobservance of which
would materially interfere with the performance of its obligations hereunder,
or the Agent's interest in the Collateral.
3.1.2 Business Names and Addresses. Within the previous 5
years, such Debtor has not conducted business under or been legally known by
any name and will not change its name to any other name other than those
disclosed in the Collateral Disclosure Certificate.
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3.1.3 Certain Notices. Such Debtor will notify the Agent:
(a) not less than 30 days prior to (i) any change in the name, state of
organization or corporate structure under which it conducts its business, its
Federal Tax Identification Number or its state organizational identification
number, and (ii) the opening of any new place of business or any change in any
of the places where the books and records concerning the Collateral, or any
part thereof, are kept (and will provide to the Agent prior to any such change
all financing statements requested by it in connection with such new place of
business or location of books and records, as well as any other security
instrument that the Agent may require be executed by such Debtor in order to
constitute a Lien upon any new Collateral that may be located (as permitted
under SECTION 3.1.9 hereof) in said new place of business or books and records)
(but the Agent hereby acknowledges receipt of the notice of the relocation to
Louisiana as contemplated in the Purchase Agreement); and (b) promptly, of (i)
the commencement of any litigation affecting any of the Collateral or the title
thereto or rights therein, other than arising out of disputes with Account
Debtors pertaining to the Collateral, in an aggregate amount not in excess of
$25,000 not covered by insurance, or (ii) the occurrence of any material
casualty or other loss affecting any material portion of the Collateral.
3.1.4 Maintenance of the Collateral; Insurance. Such
Debtor will maintain the Collateral in good working order, saving and excepting
ordinary wear and tear, and will not permit anything to be done to the
Collateral which may materially impair the value or use thereof. The Agent and
each Purchaser, or representatives designated by the Agent or such Purchaser,
respectively, shall be permitted to enter the premises of such Debtor and
examine, audit and inspect the Collateral at any reasonable time and from time
to time without notice. Such Debtor will promptly furnish to the Agent and each
Purchaser all such additional information regarding the Collateral as the Agent
or such Purchaser may from time to time reasonably request. Such Debtor shall
maintain insurance on the Collateral consisting of goods with such companies,
in such amounts and against such risks as are consistent with industry
standards, with loss payable to the Agent as its interests may appear. Such
insurance shall not be cancelable by such Debtor, unless with the prior written
consent of the Agent, or by such Debtor's insurer, unless with at least (i) 10
days advance written notice to the Agent in the event of a cancellation for
nonpayment of premiums or other amounts, or (ii) 30 days advance written notice
to the Agent in all other events.
3.1.5 Recordings and Filings. Such Debtor shall: (a)
execute and deliver all financing documents (including, without limitation,
UCC-1 and UCC-3 statements) required to be filed, registered or recorded in
order to create, in favor of the Agent, a first priority (subject to the
express provisions hereof), perfected Lien in the Collateral, to the extent
such Lien can be perfected under the Uniform Commercial Code, in form and in
sufficient number for filing, registration, and recording in each office in
each jurisdiction in which such filings, registrations and recordations are
required, and (b) deliver such evidence as the Agent may deem satisfactory that
all necessary filing fees and all recording and other similar fees, and all
taxes and other expenses related to such filings, registrations and recordings
will be or have been paid in full.
3.1.6 Defense of Title and Further Assurances. At its
expense such Debtor will defend the title to the Collateral (or any part
thereof), and promptly upon request execute, acknowledge and deliver any
financing statement, renewal, affidavit, assignment, continuation statement,
security agreement, certificate, or other document the Agent may reasonably
require
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in order to perfect, preserve, maintain, continue, protect and/or extend the
Lien granted to the Agent under this Agreement and its priority under the
Uniform Commercial Code. Such Debtor will (i) comply in all material respects
with all license agreements relating to any Collateral and, upon the request of
the Agent, use commercially reasonable efforts to obtain and furnish to the
Agent any consents from licensors to effect the purposes of this Agreement,
(ii) duly execute and/or deliver (or cause to be duly executed and/or
delivered) to the Agent any instrument, agreement, invoice, document, document
of title, dock warrant, dock receipt, warehouse receipt, bill of lading, order,
financing statement, assignment, waiver, Waiver Agreement, consent,
acknowledgment, control agreement or other writing which may be reasonably
necessary to the Agent to carry out the terms of this Agreement and any of the
other Transaction Documents and to perfect its security interest or intended
security interest in and facilitate the collection of the Collateral, the
proceeds thereof, and any other property at any time constituting security or
intended to constitute security to the Agent, (iii) deliver to the Agent in
pledge all instruments evidencing the obligation to pay any of the Collateral
not maintained or pledged with the Agent, and (iv) from time to time do
whatever the Agent may reasonably request by way of obtaining, executing,
delivering, and/or filing financing statements, and other notices and
amendments and renewals thereof, and will take any and all steps and observe
such formalities as the Agent may reasonably request, in order to create and
maintain a valid Lien upon the Collateral, subject to no other Liens, except as
permitted hereby or by the Transaction Documents. The Debtors agree that a
photocopy of a fully executed financing statement shall be sufficient to
satisfy for all purposes the requirements of a financing statement as set forth
in Article 9 of the Uniform Commercial Code. Such Debtor will comply in all
material respects with all federal, state and local laws and regulations
affecting the Collateral.
3.1.7 Security, etc. Such Debtor agrees that the Agent may
at any time take such steps as the Agent deems reasonably necessary to protect
the Agent's Lien upon and interest in, and to preserve the Collateral, whether
at the business premises of such Debtor or elsewhere.
3.1.8 Other Liens. Such Debtor will not permit any Liens
on or with respect to all or any part of the Collateral, except as expressly
permitted hereby and by the Transaction Documents.
3.1.9 Location of Collateral. Except as expressly
permitted elsewhere in this Agreement or except as may be permitted by the
Transaction Documents, without prior written consent of the Agent, such Debtor
will not transfer, or permit the transfer of any of the Collateral except (i)
to a location for which the security interest in favor of the Agent therein
shall remain perfected, (ii) to any other location so long as such Debtor shall
give the Agent written notice thereof and deliver executed financing statements
as reasonably requested by the Agent in connection therewith within 30 days of
such transfer, and (iii) for Collateral with a book value of less than $50,000
to another location.
3.1.10 Disposition of Collateral. Without the prior written
consent of the Agent (acting at the direction of the Required Holders), such
Debtor will not sell, discount, allow credits or allowances, transfer, assign,
extend the time for payment on, convey, lease, assign, transfer or otherwise
dispose of the Collateral, or any part thereof, except, prior to an Event of
Default, (i) sales of inventory, discounts, co-op advertising, credits or
credit allowances and payment extensions in the ordinary course of business in
accordance with the customary business
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practices of such Debtor in effect on the date hereof, (ii) sales of accounts
receivables to CITCSI from time to time so long as the Factoring Balances
Agreement remains in effect, and (iii) as otherwise expressly permitted by the
Transaction Documents. Upon the permitted sale, exchange or other disposition
of any of the Collateral, the Lien created and provided for herein, without
break in continuity and without further formality or act, shall continue in and
attach to any proceeds thereof, including, without limitation, any accounts,
contract rights, general intangibles, shipping documents, documents of title,
bills of lading, warehouse receipts, dock warrants, dock receipts, equipment
and cash or non-cash proceeds, and in the event of any unauthorized sale, shall
continue in the Collateral itself.
3.1.11 Depository Accounts; Collections.
(a) Subject to the terms of the Intercreditor
Agreement and the Senior Debt Documents, simultaneously herewith, the
Debtors shall establish and continually maintain with the Agent one or
more Collateral Reserve Accounts under the sole and exclusive control
of the Agent into which Debtors shall cause each Account Debtor to
remit all cash, checks, drafts, items and other instruments for the
payment of money which it now has or may at any time hereafter receive
in full or partial payment for the Inventory Collateral or otherwise
as proceeds of the Accounts Receivable Collateral; provided, however,
as to Churchill Weavers, Inc., the Agent shall be provided with a
Blocked Account Agreement within four (4) days of closing with
Churchill Weavers, Inc.'s depositary bank or banks, requiring all
balances therein in excess of $100,000 to be transmitted to the Agent
for deposit in a Collateral Reserve Account, with such balances being
transmitted on a weekly basis on each Friday and on any other day on
which the aggregate amount of balances in such account is equal to or
in excess of $100,000. In addition, each Debtor receiving Net Cash
Proceeds of dispositions of assets or of the issuance of Capital Stock
or Redeemable Preferred Stock or the incurrence of Debt for money
borrowed (except Debt secured by Purchase Money Liens), or Net
Casualty/Insurance Proceeds shall (or shall cause such other Person
receiving such cash proceeds to) remit all such cash proceeds to the
Collateral Reserve Account. In the event such items of payment are
inadvertently received by any of the Debtors or any other Person,
whether or not in accordance with the terms of this Agreement, such
Debtor or other Person shall be deemed to hold the same in trust for
the benefit of Agent and promptly forward them to the Agent for
deposit in the Collateral Reserve Account. The Agent will deposit all
such items of payment received from such Account Debtors into the
Collateral Reserve Account promptly upon receipt, and, except as
provided in the Senior Credit Agreement and in any event subject to
the provisions of Section 29 of the Intercreditor Agreement, the Agent
shall apply (or distribute to the Agent for such application) the
proceeds from such items of payment in accordance with the Purchase
Agreement. Net Cash Proceeds of dispositions of assets or of the
issuance of Capital Stock or Redeemable Preferred Stock or the
incurrence of Debt for money borrowed (except Debt secured by Purchase
Money Liens) and Net Casualty/Insurance Proceeds shall be held subject
to the provisions of the Senior Credit Agreement, and any Net Cash
Proceeds or Net Casualty/Insurance Proceeds not required to be paid to
the Agent for the account of the Purchasers shall be paid to the
Debtors on the date such payment is made for the account of the
Purchasers. During the existence of an Event of Default the Agent may
at any time in its sole discretion or if requested in writing by the
Required Holders,
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direct Account Debtors to make payments on the Accounts Receivable
Collateral, or portions thereof, directly to the Agent, and the
Account Debtors are hereby authorized and directed to do so by each
Debtor upon the Agent's direction, and the funds so received shall be
also deposited in the Collateral Reserve Account, or, at the election
of the Agent, upon its receipt thereof, be applied directly to
repayment of the Obligations as set forth in the Purchase Agreement,
subject to Section 29 of the Intercreditor Agreement.
(b) The Debtors shall not open or maintain any
deposit account with any depositary institution (except with the Agent
and subject to the Liens created by this Agreement) unless the
depository institution for such account shall have entered into a
Blocked Account Agreement with the Agent, and the Debtor shall deliver
to the Agent in pledge all certificates of deposit issued by any such
depositary institution. As of the Closing Date, all deposit accounts
maintained by the Debtors with any depositary institutions are listed
on SCHEDULE A attached hereto.
3.1.12 Control of Certain Collateral. No item of Accounts
Receivable Collateral consisting of non-electronic chattel paper has or will be
created without including thereon a legend acceptable to the Agent indicating
that the Agent has a security interest therein, and at the request of the
Agent, it will take such steps as are required to establish "control" in favor
of the Agent under the Uniform Commercial Code in any electronic chattel paper,
investment property, or letter-of-credit rights.
3.1.13 Inventory Returns. If at any time or times hereafter
any Account Debtor returns any Inventory Collateral of such Debtor the shipment
of which generated an account on which such Account Debtor is obligated in
excess of $50,000.00, such Debtor shall notify the Agent of the same
immediately, specifying the reason for such return and the location and
condition of the returned Inventory.
3.1.14 Preservation of Intangibles Collateral. Such Debtor
shall take all reasonably necessary and appropriate measures, taking into
account the value and usefulness of the relevant Intangibles Collateral and the
cost of such measures, to obtain, maintain, protect and preserve the
Intangibles Collateral including, without limitation, registration thereof with
the appropriate state or federal governmental agency or department.
3.1.15 Records Respecting Collateral. All of such Debtor's
records with respect to the Collateral will be kept at its Executive Office and
will not be removed from such address without the prior written consent of
Agent.
3.1.16 Collateral Location Waivers. With respect to each of
the applicable Collateral Locations, such Debtor will obtain such waivers of
lien, estoppel certificates, subordination agreements, or Waiver Agreements as
the Agent may reasonably require to insure the priority of its security
interest in that portion of the Collateral situated at such locations.
3.1.17 Payment of Taxes On and Use of Collateral 3.1.18.
Such Debtor shall timely pay all taxes and other charges against its Collateral
and will not use the Collateral illegally.
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ARTICLE 4
RIGHTS AND REMEDIES UPON DEFAULT
Section 4.1 Rights and Remedies, etc.
4.1.1 General Rights and Remedies. If any Event of Default
is in existence, then, in each and every such case, the Agent may, at its
option exercised from time to time, and at the written direction of the
Required Holders will, subject to and as provided in the Intercreditor
Agreement, at any time thereafter while such Event of Default is continuing,
exercise any rights, powers and remedies available to the Agent under this
Agreement and the Purchase Agreement and applicable Laws.
4.1.2 Enforcement Costs; Application of Proceeds. The
Debtors agree to pay to the Agent all Enforcement Costs paid or incurred by the
Agent, and such agreement shall survive the termination of this Agreement and
the Lien on the Collateral. All Enforcement Costs, together with interest
thereon from the date of any demand therefor until paid in full at a per annum
rate of interest equal at all times to the Default Rate, shall be paid by the
Debtors to the Agent whenever demanded by the Agent.
Any proceeds of the collection of the sale or other disposition of the
Collateral will be applied by the Agent in accordance with the terms of Section
29 of the Intercreditor Agreement. If the sale or other disposition of the
Collateral fails to satisfy all of the Secured Obligations, the Debtors shall
remain liable to the Agent and the Purchasers for any deficiency. Any surplus
from the sale or disposition of the Collateral shall be paid to the Debtors or
to any other party entitled thereto or shall otherwise be paid over in a manner
permitted by law, after payment in full of all Secured Obligations and the
Enforcement Costs related to any such payment.
Section 4.2 Uniform Commercial Code and Other Remedies.
(a) Upon the occurrence of an Event of Default,
the Agent or any representative of Agent, acting at the direction of
the Required Holders, shall have the rights and remedies of a secured
party under the UCC, the Uniform Commercial Code as in effect in any
relevant jurisdiction on the date thereof (regardless of whether the
same has been enacted in the jurisdiction where the rights or remedies
are asserted), and under any other applicable laws, including, without
limitation, the right to require the Debtors to assemble the
Collateral, at the Debtors' expense, and make it available to the
Agent at a place designated by the Agent which is reasonably
convenient to both parties, and enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on
said premises until sold (and if said premises be the property of any
Debtor or any of its Subsidiaries, such Debtor agrees not to charge
the Agent for storage thereof), to take possession of any of the
Collateral or the proceeds thereof, to sell or otherwise dispose of
the same, and the Agent shall have the right to conduct such sales on
the premises of the Debtors, without charge therefor, and such sales
may be adjourned from time to time in accordance with applicable law.
The Agent, acting at the direction of the Required Holders, may sell,
lease or dispose of Collateral for cash, credit, or any combination
thereof, and shall have the right to appoint a receiver of the
Account's Receivable Collateral and the Inventory Collateral or any
part thereof, and the right to
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apply the proceeds therefrom as set forth in the Purchase Agreement.
The Agent shall give the Debtors written notice of the time and place
of any public sale of the Collateral or the time after which any other
intended disposition thereof is to be made. Any written notice of the
sale, disposition or other intended action by the Agent with respect
to the Collateral which is sent by regular mail, postage prepaid, to a
Debtor at the address for such Debtor set forth for notices herein, or
such other address of such Debtor which may from time to time be shown
on the Agent's records, at least 10 days prior to such sale,
disposition or other action, shall constitute reasonable notice to
such Debtor. Expenses of retaking, verifying, restoring, holding,
insuring, collecting, preserving, liquidating, protecting, preparing
for sale or selling, or otherwise disposing of or the like with
respect to the Collateral shall include, in any event, reasonable
attorneys' fees and other legally recoverable collection expenses, all
of which shall constitute a portion of the Enforcement Costs and,
therefore, part of the Secured Obligations.
(b) To the extent permitted by law, the Debtors
hereby waive all rights which the Debtors have or may have under and
by virtue of O.C.G.A. CH. 44-14, including, without limitation, the
right of the Debtors to notice and to a judicial hearing prior to
seizure of any Collateral by the Agent.
(c) Unless and except to the extent expressly
provided for to the contrary herein, the rights of the Agent specified
herein shall be in addition to, and not in limitation of, the Agent's
or Purchaser's rights under the Uniform Commercial Code, or any other
statute or rule of law or equity, or under any other provision of any
of the Transaction Documents, or under the provisions of any other
document, instrument or other writing executed by the Debtors or any
Third Party in favor of the Agent, all of which may be exercised
successively or concurrently.
(d) The Agent is hereby granted a license or
other right to use, without charge, each Debtor's labels, patents,
copyrights, rights of use of any name, trade secrets, tradenames,
trademarks and advertising matter, or any Property of a similar
nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral, and the Debtors' rights under all licenses and
all franchise agreements shall inure to the Agent's benefit.
(e) Neither the Agent nor any Purchaser shall
be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except the Agent for
reasonable care in the custody thereof while any Collateral is in the
Agent's actual possession) or for any diminution in the value thereof,
or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at the
Debtors' sole risk.
(f) Neither the Agent nor any Purchaser shall
be under any obligation to marshal any assets in favor of any of the
Debtors or any other Person or against or in payment of any or all of
the Secured Obligations.
Section 4.3 Power of Attorney. Each Debtor hereby irrevocably
designates and appoints the Agent its true and lawful attorney either in the
name of the Agent or in the name of
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the Debtors, effective upon the occurrence and during the existence of an Event
of Default, to ask for, demand, sue for, collect, compromise, compound,
receive, receipt for and give acquittance for any and all sums owing or which
may become due upon any part of the Collateral or under any insurance
maintained in accordance with the Security Documents and, in connection
therewith, to take any and all actions as the Agent may deem necessary or
desirable in order to realize upon the Collateral or under any insurance
maintained in accordance with the Security Documents, including, without
limitation, power to endorse in the name of the Debtors any checks, drafts,
notes or other instruments received in payment of or on account of the
Collateral or under any insurance maintained in accordance with the Security
Documents, or to sign the respective Debtor's name on any invoice or bill of
lading relating to the Collateral, on notices of assignment, on public records,
on verifications of Collateral and on notices to Account Debtors, or on any
proof of claim in bankruptcy proceeding against an Account Debtor and any other
obligor with respect to the Collateral, to send requests for verification from
Account Debtors, to notify the post office authorities to change the address
for delivery of the respective Debtor's mail to an address designated by the
Agent and to receive, open and dispose of all mail addressed to the respective
Debtor. Notwithstanding the foregoing, the Agent shall not be under any duty to
the Debtors to exercise any such authority or power or in any way be
responsible for the collection of the Collateral or under any insurance
maintained in accordance with the Security Documents. The foregoing power of
attorney, being coupled with an interest, is irrevocable until the Secured
Obligations have been fully satisfied and any commitments therefor terminated.
The Agent may file one or more financing statements disclosing its Lien in any
or all of the Collateral without the respective Debtor's signature appearing
thereon. The Debtors also hereby grants to the Agent a power of attorney to
execute any such financing statement, or amendments and supplements to
financing statements, on behalf of the Debtors without notice thereof to the
respective Debtor, which power of attorney is coupled with an interest and is
irrevocable until the Secured Obligations have been fully satisfied and this
Agreement terminated.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Course of Dealing; Amendment. No course of dealing
between the Debtors, individually or collectively, and the Agent shall be
effective to amend, modify or change any provision of this Agreement and this
Agreement may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Agent (at the direction of the requisite
Purchasers, as required by the Purchase Agreement) and the Debtors. The Agent
shall have the right at all times, subject to the rights of the Purchasers
under the Purchase Agreement and subject to the Intercreditor Agreement, to
enforce the provisions of this Agreement in strict accordance with the terms
hereof and thereof, notwithstanding any conduct or custom on the part of the
Agent in refraining from so doing at any time or times. The failure or delay of
the Agent at any time or times to enforce the rights under such provisions,
strictly in accordance with the same, shall not be construed as having created
a custom in any way or manner contrary to specific provisions of this Agreement
or as having in any way or manner modified or waived the same.
Section 5.2 Waiver, Cumulative Remedies. Subject to the rights
of the Purchasers under the Purchase Agreement and subject to the Intercreditor
Agreement, and the Debtors under
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the Security Documents, the Agent (acting at the direction of the Required
Holders) may, on behalf of the Purchasers:
(a) at any time and from time to time, execute
and deliver to the Debtors a written instrument waiving, on such terms
and conditions as the Agent may specify in such written instrument,
any of the requirements of this Agreement or any Event of Default
hereunder and its consequences, provided, that any such waiver shall
be for such period and subject and limited to such conditions as shall
be specified in any such instrument and to the instance for which the
waiver is given. In the case of any such waiver, the Debtors and the
Agent shall be restored to their former positions prior to such Event
of Default and shall have the same rights as they had hereunder. The
rights, powers and remedies provided in this Agreement are cumulative,
may be exercised concurrently or separately, may be exercised from
time to time and in such order as the Agent shall determine, and are
in addition to, and not exclusive of, rights, powers and remedies
provided by applicable Laws;
(b) proceed against any of the Collateral
without proceeding against the Debtors or other Person obligated under
any of the Secured Obligations;
(c) without reducing or impairing the Secured
Obligations of the Debtors and without notice, release or compromise
with any guarantor or other Person liable for all or any part of the
Secured Obligations;
(d) without reducing or impairing the Secured
Obligations of the Debtors and without notice thereof: (i) fail to
perfect the Lien in any or all Collateral or to release any or all the
Collateral or to accept substitute Collateral, (ii) allow all or any
of the Secured Obligations to arise after the date of this Agreement,
(iii) waive any provision of this Agreement, (iv) exercise or fail to
exercise rights of set-off or other rights, (v) accept partial
payments or extend from time to time the maturity of all or any part
of the Secured Obligations, and (vi) take or fail to take any action
under this Agreement or against any one or more Persons obligated
under the Secured Obligations.
The Debtors hereby waive and release all claims and defenses against the Agent
and the Purchasers and/or with respect to the payment of or the enforcement of
the Secured Obligations and the Agent's rights in the Collateral on account of
any of the foregoing, except as to the Agent's and the Purchasers' gross
negligence or willful misconduct.
Section 5.3 Management and Administration by Agent. The Agent
shall not have any duty to the Debtors to pay for insurance, taxes, or other
charges incurred in the custody, preservation, use or operation of, or in
connection with the management of, any Collateral on which a Lien is granted in
connection with this Agreement; provided, however, that the Agent may (in its
sole discretion) pay such expenses. All such payments shall be part of the
Secured Obligations and shall bear interest payable on demand by the respective
Debtor from the date of any demand therefor until paid in full at the Default
Rate.
Section 5.4 Waiver of Jury Trial; Consent to Jurisdiction. EACH
OF THE DEBTORS (A) AND EACH OF THE PURCHASERS AND THE AGENT IRREVOCABLY WAIVES,
TO
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THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER TRANSACTION
DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (B)
SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE
COURTS THEREOF AND THE UNITED STATES DISTRICT COURTS SITTING THEREIN, FOR THE
ENFORCEMENT OF THIS AGREEMENT, THE NOTES AND THE OTHER TRANSACTION DOCUMENTS,
(C) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY JURISDICTION TO
OBJECT ON ANY BASIS (INCLUDING, WITHOUT LIMITATION, INCONVENIENCE OF FORUM) TO
JURISDICTION OR VENUE WITHIN THE STATE OF GEORGIA FOR THE PURPOSE OF LITIGATION
TO ENFORCE THIS AGREEMENT, THE NOTES OR THE OTHER TRANSACTION DOCUMENTS, AND
(D) AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN THE MANNER PRESCRIBED
IN SECTION 10.01 OF THE PURCHASE AGREEMENT FOR THE GIVING OF NOTICE TO THE
DEBTORS. NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE AGENT FROM
BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST
THE DEBTORS PERSONALLY, AND AGAINST ANY ASSETS OF THE DEBTORS, WITHIN ANY OTHER
STATE OR JURISDICTION.
Section 5.5 Severability. In case any one or more of the
provisions contained in this Agreement, the Notes or any of the other
Transaction Documents should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby and shall be enforced to the greatest extent permitted by law.
Section 5.6 Assignment, Etc. The Agent shall have the right to
divulge to any actual or potential purchaser, assignee, transferee or
participant of the Collateral and/or the Secured Obligations, or any part
thereof all information, reports, financial statements and documents obtained
in connection with this Agreement or otherwise. Notwithstanding anything
contained herein, any confidentiality restriction agreed to by any person shall
continue to be binding upon such Person.
Section 5.7 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the Debtors, individually and collectively, and the
Agent and their respective successors and assigns, except that the Debtors
shall not have the right to assign their rights or obligations hereunder or any
interest herein without the prior written consent of the Agent.
Section 5.8 APPLICABLE LAW. THE DEBTORS, INDIVIDUALLY AND
COLLECTIVELY, AND THE AGENT ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.
Section 5.9 Definitional Provisions. Unless otherwise defined
herein, as used in this Agreement and in any certificate, report or other
document made or delivered pursuant hereto, accounting terms not otherwise
defined herein, and accounting terms only partly defined herein, to the extent
not defined, shall have the respective meanings given to them under generally
accepted United States accounting principles consistently applied to the
Debtors. Unless
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otherwise defined herein, all terms used herein which are defined by the UCC
shall have the same meanings as assigned to them by such adoption of the UCC
unless and to the extent varied by this Agreement. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit references
are references to articles, sections or subsections of, or schedules or
exhibits to, as the case may be, this Agreement unless otherwise specified. The
captions, headings and titles to this Agreement and its sections, subsections
and other parts are only for the convenience of the parties and are not part of
this Agreement. As used herein, the singular number shall include the plural,
the plural the singular and the use of the masculine, feminine or neuter gender
shall include all genders, as the context may require. Reference to this
Agreement or to any one or more of the instruments, agreements or documents
previously, simultaneously or hereafter executed and delivered by the Debtors,
any guarantor and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or otherwise in connection with any
of the Secured Obligations and/or in connection with this Agreement shall mean
the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified.
Section 5.10 Continuing Enforcement of the Transaction Documents.
If, after receipt of any payment of all or any part of the Secured Obligations
of the Debtors to the Agent or any of the Purchasers, the Agent is or any such
Purchasers are compelled or agree, for settlement purposes, to surrender such
payment to any person or entity for any reason, then this Agreement and the
other Security Documents shall continue in full force and effect or be
reinstated, as the case may be. The provisions of this SECTION 5.10 shall
survive the termination of this Agreement and the other Security Documents and
shall be and remain effective notwithstanding the payment and/or performance of
the Secured Obligations, the cancellation of any other Security Documents, the
release of any security interest, lien or encumbrance securing the Secured
Obligations or any other action which the Agent or any of the Purchasers may
have taken in reliance upon its receipt of such payment.
Section 5.11 Subordination to Senior Debt Documents. This
Agreement and the liens and security interests created hereby are subject and
subordinate to the Senior Debt Documents in accordance with and to the extent
set forth in the Intercreditor Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, each of the Debtors has executed and delivered
this Agreement, under seal, as of the day and year first written above.
"DEBTORS"
CROWN CRAFTS, INC. (SEAL)
By:
-------------------------------
Name:
Title:
CHURCHILL WEAVERS, INC. (SEAL)
By:
-------------------------------
Name:
Title:
HAMCO, INC. (SEAL)
By:
-------------------------------
Name:
Title:
CROWN CRAFTS INFANT PRODUCTS,
INC. (SEAL)
By:
-------------------------------
Name:
Title:
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
WACHOVIA BANK, N.A., (SEAL)
as Agent for the
Purchasers
By:
-------------------------------
Name:
Title:
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