LOAN AND SECURITY AGREEMENT
by and among
MJS Acquisition Company
as Borrower
CONGRESS FINANCIAL CORPORATION (SOUTHERN),
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: October 3, 2003
TABLE OF CONTENTS
Page No.
SECTION 1. DEFINITIONS................................................................................1
SECTION 2. CREDIT FACILITIES.........................................................................25
2.1 Loans.........................................................................................25
2.2 Letter of Credit Accommodations...............................................................26
2.3 [Intentionally Omitted].......................................................................29
2.4 Commitments...................................................................................30
SECTION 3. INTEREST AND FEES.........................................................................30
3.1 Interest......................................................................................30
3.2 Fees..........................................................................................31
3.3 Changes in Laws and Increased Costs of Loans..................................................31
SECTION 4. CONDITIONS PRECEDENT......................................................................33
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations.....................33
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.........................36
4.3 Conditions Subsequent to Initial Loans and Letter of Credit Accommodations....................37
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.................................................38
5.1 Grant of Security Interest....................................................................38
5.2 Perfection of Security Interests..............................................................39
SECTION 6. COLLECTION AND ADMINISTRATION.............................................................43
6.1 Borrower's Loan Accounts......................................................................43
6.2 Statements....................................................................................43
6.3 Collection of Accounts........................................................................43
6.4 Payments......................................................................................44
6.5 Authorization to Make Loans...................................................................45
6.6 Use of Proceeds...............................................................................45
6.7 Pro Rata Treatment............................................................................45
6.8 Sharing of Payments, Etc......................................................................46
6.9 Settlement Procedures.........................................................................47
6.10 Obligations Several; Independent Nature of Lenders' Rights....................................49
SECTION 7. COLLATERAL REPORTING AND COVENANTS........................................................49
7.1 Collateral Reporting..........................................................................49
7.2 Accounts Covenants............................................................................50
i
7.3 Inventory Covenants...........................................................................51
7.4 Equipment and Real Property Covenants.........................................................51
7.5 Power of Attorney.............................................................................52
7.6 Right to Cure.................................................................................53
7.7 Access to Premises............................................................................53
SECTION 8. REPRESENTATIONS AND WARRANTIES............................................................53
8.1 Corporate Existence, Power and Authority......................................................53
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.....................54
8.3 Financial Statements; No Material Adverse Change..............................................54
8.4 Priority of Liens; Title to Properties........................................................54
8.5 Tax Returns...................................................................................55
8.6 Litigation....................................................................................55
8.7 Compliance with Other Agreements and Applicable Laws..........................................55
8.8 Environmental Compliance......................................................................55
8.9 Employee Benefits.............................................................................56
8.10 Bank Accounts.................................................................................57
8.11 Intellectual Property.........................................................................57
8.12 Subsidiaries; Affiliates; Capitalization......................................................57
8.13 Labor Disputes................................................................................58
8.14 Restrictions on Subsidiaries..................................................................58
8.15 Material Contracts............................................................................58
8.16 Payable Practices.............................................................................58
8.17 Accuracy and Completeness of Information......................................................59
8.18 Acquisition of Purchased Stock; Merger........................................................59
8.19 Solvency......................................................................................59
8.20 Survival of Warranties; Cumulative............................................................59
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS........................................................60
9.1 Maintenance of Existence......................................................................60
9.2 New Collateral Locations......................................................................60
9.3 Compliance with Laws, Regulations, Etc........................................................60
9.4 Payment of Taxes and Claims...................................................................61
9.5 Insurance.....................................................................................62
ii
9.6 Financial Statements and Other Information....................................................62
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.......................................64
9.8 Encumbrances..................................................................................65
9.9 Indebtedness..................................................................................66
9.10 Loans, Investments, Etc.......................................................................67
9.11 Dividends and Redemptions.....................................................................69
9.12 Transactions with Affiliates..................................................................69
9.13 Compliance with ERISA.........................................................................70
9.14 End of Fiscal Years; Fiscal Quarters..........................................................70
9.15 Change in Business............................................................................70
9.16 Limitation of Restrictions Affecting Subsidiaries.............................................70
9.17 Financial Covenants...........................................................................71
9.18 License Agreements............................................................................71
9.19 After Acquired Real Property..................................................................72
9.20 Costs and Expenses............................................................................72
9.21 Further Assurances............................................................................73
SECTION 10. EVENTS OF DEFAULT AND REMEDIES............................................................73
10.1 Events of Default.............................................................................73
10.2 Remedies......................................................................................75
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW..............................79
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.........................79
11.2 Waiver of Notices.............................................................................80
11.3 Amendments and Waivers........................................................................80
11.4 Waiver of Counterclaims.......................................................................82
11.5 Indemnification...............................................................................82
SECTION 12. THE AGENT.................................................................................83
12.1 Appointment, Powers and Immunities............................................................83
12.2 Reliance by Agent.............................................................................83
12.3 Events of Default.............................................................................84
12.4 Congress in its Individual Capacity...........................................................84
12.5 Indemnification...............................................................................85
iii
12.6 Non-Reliance on Agent and Other Lenders.......................................................85
12.7 Failure to Act................................................................................85
12.8 Additional Loans..............................................................................85
12.9 Concerning the Collateral and the Related Financing Agreements................................86
12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.................86
12.11 Collateral Matters............................................................................87
12.12 Agency for Perfection.........................................................................88
12.13 Successor Agent...............................................................................88
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS..........................................................89
13.1 Term..........................................................................................89
13.2 Interpretative Provisions.....................................................................91
13.3 Notices.......................................................................................92
13.4 Partial Invalidity............................................................................93
13.5 Successors....................................................................................93
13.6 Assignments; Participations...................................................................93
13.7 Entire Agreement..............................................................................95
13.8 Counterparts, Etc.............................................................................95
iv
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Guarantee
Exhibit C Information Certificate
Exhibit D Seller Note
Exhibit E Form of Borrowing Base Certificate
Exhibit F Form of Compliance Certificate
Schedule 1.79 Real Estate
Schedule 8.2 Location of Records
Schedule 8.4 Permitted Liens
Schedule 8.6 Litigation
Schedule 8.8 Environmental Compliance
Schedule 8.9 ERISA
Schedule 8.10 Bank Accounts
Schedule 8.11 Intellectual Property
Schedule 8.12 Subsidiaries and Affiliates
Schedule 8.13 Labor Disputes
Schedule 8.15 Material Contracts
Schedule 9.9 Permitted Indebtedness
Schedule 9.10 Loans and Advances
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated October 3, 2003 (this
"Agreement") is entered into by and among MJS ACQUISITION COMPANY, a North
Carolina corporation ("Borrower"), the parties hereto from time to time as
lenders, whether by execution of this Agreement or an Assignment and Acceptance
(each individually, a "Lender" and collectively, "Lenders"), and CONGRESS
FINANCIAL CORPORATION (SOUTHERN), a Georgia corporation, in its capacity as
agent for Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Borrower has entered into a certain Stock Purchase Agreement
(as defined herein) with Delta Apparel, Inc., a Georgia corporation, M. J. Soffe
Co., a North Carolina corporation ("Target") and the shareholders of Target,
pursuant to which Borrower shall purchase the outstanding stock of Target by
making payment to such shareholders in the form of cash and a subordinated
secured promissory note; and
WHEREAS, upon consummating the Stock Purchase Agreement, in part with
the proceeds of the initial loans to be made hereunder, Borrower and Target
shall enter into a plan of merger pursuant to which Borrower shall emerge as the
surviving corporation and simultaneously therewith change its name to "M. J.
Soffe Co.";
WHEREAS, Borrower has requested that Agent and Lenders enter into
financing arrangements with Borrower pursuant to which Lenders may make loans
and provide other financial accommodations to Borrower; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrower on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1. "Accounts" shall mean all present and future rights of Borrower to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument, (a) for property that has been
or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be rendered, (c) for a secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.2. "Additional Consideration" has the meaning set forth in the Stock
Purchase Agreement as in effect on the Agreement Date.
1.3. "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.4. "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements,
prepaid assets, deferred tax assets and other intangible assets), calculating
the book value of inventory for this purpose on a first-in-first-out basis,
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (b) the aggregate amount of the Indebtedness
and other liabilities of such Person and its Subsidiaries (including tax and
other proper accruals).
1.5. "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, and (b) any
Person of which such Person beneficially owns or holds five (5%) percent or more
of any class of Voting Stock or in which such Person beneficially owns or holds
five (5%) percent or more of the equity interests, and (c) any director or
executive officer of such Person. For the purposes of this definition, the term
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise.
-2-
1.6. "Agent" shall mean Congress Financial Corporation (Southern), in
its capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.
1.7. "Agent Payment Account" shall mean account no. 5000000030318 of
Agent at Wachovia Bank, National Association, or such other account of Agent as
Agent may from time to time designate to Borrower as the Agent Payment Account
for purposes of this Agreement and the other Financing Agreements.
1.8. "Agreement Date" shall mean October 3, 2003.
1.9. "Annual Financial Statements" shall have the meaning set forth in
Section 9.6(a)(iii) hereof.
1.10. "Applicable Margin" shall mean two and one-half percent (2.50%).
1.11. "Articles of Merger" shall mean those articles of merger to be
filed with the Secretary of State of the State of North Carolina with respect to
the merger of Borrower and Target, in form and substance satisfactory to Agent.
1.12. "Assignment and Acceptance" shall mean an Assignment and
Acceptance substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.6
hereof.
1.13. "Average Daily Balance" shall have the meaning set forth in
Section 3.2(b) hereof.
1.14. "Blocked Accounts" shall have the meaning set forth in Section
6.3(a) hereof.
1.15. "Borrowing Base" shall mean, at any time, the amount equal to:
(a) the sum of:
(i) eighty-five (85%) percent of the Net Amount of the
Eligible Accounts, plus
(ii) the lesser of:
(1) the Inventory Loan Limit, or
(2) the sum of:
(A) the lesser of (x) sixty percent (60%) of the
Value of Eligible Inventory consisting of
finished goods or (y) eighty-five percent (85%)
of the Net Orderly Liquidation Value of such
Eligible Inventory consisting of finished goods;
plus
-3-
(B) the lesser of (x) up to fifty-five percent
(55%) of the Value of Eligible Inventory
consisting of raw materials (including yarn)
for finished goods or (y) eighty-five percent
(85%) of the Net Orderly Liquidation Value of
such Eligible Inventory consisting of raw
materials (including yarn) for finished goods,
plus
(C) the lesser of (x) forty percent (40%) of the
Value of Eligible Inventory consisting of uncut
greige goods or (y) eighty-five percent (85%)
of the Net Orderly Liquidation Value of such
Eligible Inventory consisting of uncut greige
goods, plus
(iii) to the extent greater than zero, the lesser of:
(1) (A) the Fixed Asset Loan Limit, minus
(B) the sum of the Excess Cash Flow Recapture
Amount, if any, for the fiscal year ended June
30, 2004, plus the Excess Cash Flow Recapture
Amount, if any, for each fiscal year thereafter
on a cumulative basis, minus
(C) the Fixed Asset Loan Amortization Amount, or
(2) the sum of:
(A) eighty-five percent (85%) of the appraised Net
Orderly Liquidation Value of Eligible
Equipment determined from time to time by a
qualified appraiser acceptable to Agent, plus
(B) sixty percent (60%) of the appraised fair
market value of Eligible Real Property
determined from time to time by a qualified
appraiser acceptable to Agent, minus
(C) the Fixed Asset Loan Amortization Amount,
minus
(b) Reserves.
For purposes only of applying the Inventory Loan Limit, Agent may treat
the then undrawn amounts of outstanding Letter of Credit Accommodations
for the purpose of purchasing Eligible Inventory as Loans to the extent
Agent is in effect basing the issuance of the Letter of Credit
Accommodations on the Value of the Eligible Inventory being purchased
with such Letter of Credit Accommodations. In determining the actual
amounts of such Letter of Credit Accommodations to be so treated for
purposes of the sublimit, the outstanding Loans and Reserves shall be
attributed first to any components of the lending formulas set forth
above that are not subject to such sublimit, before being attributed to
the components of the lending formulas subject to such sublimit. The
amounts of Eligible Inventory shall, at Agent's option, be determined
based on the lesser of the amount of Inventory set forth in the general
ledger of Borrower or the perpetual inventory record maintained by
Borrower.
-4-
1.16. "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of Georgia, and a day on which
Agent is open for the transaction of business, except that if a determination of
a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
1.17. "Capital Expenditures" shall mean, with respect to any Person,
all expenditures made and liabilities incurred for the acquisition of assets
which are not, in accordance with GAAP, treated as expense items for such Person
in the year made or incurred or as a prepaid expense applicable to a future year
or years.
1.18. "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.19. "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.20. "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof; provided, that, the full faith
and credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers' acceptances with a maturity of one hundred
eighty (180) days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $250,000,000; (c) commercial paper (including variable rate
demand notes) with a maturity of one hundred eighty (180) days or less issued by
a corporation (except an Affiliate of Borrower) organized under the laws of any
State of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $250,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one hundred eighty (180)
or less from the date of acquisition; provided, that, the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.
-5-
1.21. "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of Borrower or any Guarantor to any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7
hereof; (b) the liquidation or dissolution of Borrower or any Guarantor or the
adoption of a plan by the stockholders of Borrower or any Guarantor relating to
the dissolution or liquidation of Borrower or any Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for Permitted
Holder, of beneficial ownership, directly or indirectly, of a majority of the
voting power of the total outstanding Voting Stock of Borrower or any Guarantor
or the Board of Directors of Borrower or any Guarantor; (d) during any period of
two (2) consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Borrower or any Guarantor (together with
any new directors who have been appointed by Permitted Holder, or whose
nomination for election by the stockholders of Borrower or such Guarantor, as
the case may be, was approved by a vote of at least sixty-six and two-thirds (66
?%) percent of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of Borrower then still in office; (e) the failure of
Permitted Holder to own directly or indirectly one hundred (100%) percent of the
voting power of the total outstanding Voting Stock of Borrower.
1.22. "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.23. "Collateral" shall have the meaning set forth in Section 5.1 hereof.
1.24. "Collateral Access Agreement" shall mean an agreement in writing, in form
and substance satisfactory to Agent, from any lessor of premises to Borrower, or
any other person to whom any Collateral (including Inventory, Equipment, bills
of lading or other documents of title) is consigned or who has custody, control
or possession of any such Collateral or is otherwise the owner or operator of
any premises on which any of such Collateral is located, pursuant to which such
lessor, consignee or other person, inter alia, acknowledges the first priority
security interest of Agent in such Collateral, agrees to waive any and all
claims such lessor, consignee or other person may, at any time, have against
such Collateral, whether for processing, storage or otherwise, and agrees to
permit Agent access to, and the right to remain on, the premises of such lessor,
consignee or other person so as to exercise Agent's rights and remedies and
otherwise deal with such Collateral and in the case of any consignee or other
person who at any time has custody, control or possession of any Collateral,
acknowledges that it holds and will hold possession of the Collateral for the
benefit of Agent and Lenders and agrees to follow all instructions of Agent with
respect thereto.
1.25. "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.6 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
-6-
1.26. "Congress" shall mean Congress Financial Corporation (Southern),
a Georgia corporation, in its individual capacity, and its successors and
assigns.
1.27. "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of Borrower pursuant to Sections
2.1 and 2.2 hereof.
1.28. "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.29. "Defaulting Lender" shall have the meaning set forth in Section
6.9(d) hereof.
1.30. "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent,
Borrower with a deposit account at any bank and the bank at which such deposit
account is at any time maintained which provides that such bank will comply with
instructions originated by Agent directing disposition of the funds in the
deposit account without further consent by Borrower and such other terms and
conditions as Agent may reasonably require, including as to any such agreement
with respect to any Blocked Account, providing that all items received or
deposited in the Blocked Accounts are the property of Agent, that the bank has
no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis to the Agent Payment Account all funds received or
deposited into the Blocked Accounts.
1.31. "EBITDA" shall mean, as to any Person, with respect to any
period, an amount equal to: (a) the Net Income of such Person and its
Subsidiaries for such period on a consolidated basis determined in accordance
with GAAP, plus (b) to the extent deducted in the computation of Net Income, (i)
depreciation, amortization and other non-cash charges (including, but not
limited to, imputed interest and deferred compensation) for such period, all in
accordance with GAAP, plus (ii) the Interest Expense for such period, plus (iii)
charges for Federal, Provincial, State, district, municipal, local and foreign
income taxes.
1.32. "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Agent based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery
of goods by Borrower or rendition of services by Borrower in the ordinary course
of its business which transactions are completed in accordance with the terms
and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after the
due date for such Accounts or ninety (90) days after the date of the original
invoice for such Accounts (or such longer period of time for certain account
debtors of Borrower which are approved by Agent in its sole discretion on a
case-by-case basis);
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
-7-
(d) such Accounts do not arise from (i) sales on consignment, (ii)
guaranteed sale, (iii) sale and return, (iv) sale on approval, or (v) other
terms under which payment by the account debtor may be conditional or
contingent;
(e) the chief executive office or principal place of business of the
account debtor with respect to such Accounts is located in the United States of
America, its territories or possessions or Canada (provided, that, at any time
promptly upon Agent's request, Borrower shall execute and deliver, or cause to
be executed and delivered, such other agreements, documents and instruments as
may be required by Agent to perfect the security interests of Agent in those
Accounts of an account debtor with its chief executive office or principal place
of business in Canada in accordance with the applicable laws of the Province of
Canada in which such chief executive office or principal place of business is
located and take or cause to be taken such other and further actions as Agent
may request to enable Agent as secured party with respect thereto to collect
such Accounts under the applicable Federal or Provincial laws of Canada) or, at
Agent's option, if the chief executive office and principal place of business of
the account debtor with respect to such Accounts is located other than in the
United States of America or Canada, then if either: (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Agent and payable only in the United States of America and
in U.S. dollars, sufficient to cover such Account, in form and substance
reasonably satisfactory to Agent and if required by Agent, the original of such
letter of credit has been delivered to Agent or Agent's agent and the issuer
thereof, and Borrower has complied with the terms of Section 5.2(h) hereof with
respect to the assignment of the proceeds of such letter of credit to Agent or
naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii)
such Account is subject to credit insurance payable to Agent issued by an
insurer and on terms and in an amount acceptable to Agent, or (iii) such Account
is otherwise acceptable in all respects to Agent (subject to such lending
formula with respect thereto as Agent may determine);
(f) such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon Borrower's satisfactory completion of any further performance under the
agreement giving rise thereto), bill and hold invoices or retainage invoices,
except as to bill and hold invoices, if Agent shall have received an agreement
in writing from the account debtor, in form and substance reasonably
satisfactory to Agent, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and is not owed any amounts that may give rise
to any right of setoff or recoupment against such Accounts (but the portion of
the Accounts of such account debtor in excess of the amount at any time and from
time to time owed by Borrower to such account debtor or claimed owed by such
account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
-8-
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement that are subject to an intercreditor agreement in
form and substance reasonably satisfactory to Agent between the holder of such
security interest or lien and Agent;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower or any Guarantor;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, (x) the Federal
Assignment of Claims Act of 1940, as amended or any similar State or local law,
if applicable, has been complied with in a manner satisfactory to Agent or (y)
Agent has approved such Account in its sole discretion on a case-by-case basis;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might evidence
or result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any instrument
or chattel paper;
(n) the aggregate amount of such Accounts owing by a single account
debtor or its Affiliates do not constitute more than twenty (20%) percent of the
aggregate amount of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of such percentage may be deemed Eligible Accounts);
(o) such Accounts are not owed by an account debtor who has Accounts
ineligible under clause (b) above which constitute more than fifty (50%) percent
of the total Accounts of such account debtor;
(p) the account debtor is not located in a state requiring the filing
of a Notice of Business Activities Report or similar report in order to permit
Borrower to seek judicial enforcement in such State of payment of such Account,
unless Borrower has qualified to do business in such state or has filed a Notice
of Business Activities Report or equivalent report for the then current year or
such failure to file and inability to seek judicial enforcement is capable of
being remedied without any material delay or material cost;
(q) such Accounts are owed by account debtors whose total indebtedness
to Borrower does not exceed the credit limit with respect to such account
debtors as determined by Borrower from time to time substantially consistent
with the current practices of Borrower as of the date hereof by more than twenty
percent (20%) and is acceptable to Agent (but the portion of the Accounts not in
excess of such credit limit may be deemed Eligible Accounts); and
-9-
(r) such Accounts are owed by account debtors deemed creditworthy at
all times by Borrower consistent with its current practices and who are
reasonably acceptable to Agent.
The criteria for Eligible Accounts set forth above may only be changed
and any new criteria for Eligible Accounts may only be established by
Agent in good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition
or other circumstance existing on the date hereof to the extent Agent
has no written notice thereof from Borrower prior to the date hereof,
in either case under clause (i) or (ii) which adversely affects or
could reasonably be expected to adversely affect the Accounts in the
good faith determination of Agent. Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.
1.33. "Eligible Equipment" shall mean Equipment owned or operated in
the ordinary course of the business of Borrower, in each case which is
acceptable to Agent based on the criteria set forth below. In general, Eligible
Equipment shall not include (a) components which are not part of operating
Equipment; (b) Equipment which is uninsured, damaged, obsolete, in disrepair or
under repair; (c) spare parts for Equipment; (d) Equipment at premises other
than those owned and controlled by Borrower, except any Equipment which would
otherwise be deemed Eligible Equipment that is not located at premises owned and
operated by Borrower may nevertheless be considered Eligible Equipment: (i) as
to locations which are leased by Borrower if Agent shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor or if Agent shall
not have received a Collateral Access Agreement (in a form reasonably acceptable
to Agent), Agent may, at its option, nevertheless consider Equipment at such
location to be Eligible Equipment to the extent Agent shall have established
such Reserves in respect of amounts at any time payable by Borrower to the owner
and lessor thereof as Agent shall determine, and (ii) as to locations owned and
operated by a third person, (A) if Agent shall have received a Collateral Access
Agreement from such owner and operator with respect to such location, duly
authorized, executed and delivered by such owner and operator or if Agent shall
not have received a Collateral Access Agreement (in a form reasonably acceptable
to Agent), Agent may, at its option, nevertheless consider Equipment at such
location to be Eligible Equipment to the extent Agent shall have established
such Reserves in respect of amounts at any time payable by Borrower to the owner
and operator thereof as Agent shall determine, and (B) in addition, as to
locations owned and operated by a third person, Agent shall have received, if
required by Agent: (1) UCC-1 financing statements between the owner and
operator, as consignee or bailee and Borrower, as consignor or bailor, in form
and substance satisfactory to Agent, which are duly assigned to Agent and (2) a
written notice to any lender to the owner and operator of the first priority
security interest in such Equipment of Agent; (e) Equipment subject to a
security interest or lien in favor of any Person other than Agent except those
permitted in this Agreement (but without limiting the right of Agent to
establish any Reserves with respect to amounts secured by such security interest
or lien in favor of any Person even if permitted herein); (f) Equipment which is
not subject to the first priority, valid and perfected security interest of
Agent; (g) Equipment which has become part of, or affixed to, any Real Property
(other than Eligible Real Property) and (h) Equipment located outside the United
States of America. The criteria for Eligible Equipment set forth above may only
be changed and any new criteria for Eligible Equipment may only be established
by Agent in good faith based on either: (i) an event, condition or other
-10-
circumstance arising after the date hereof; or (ii) an event, condition or other
circumstance existing on the date hereof to the extent Agent has no written
notice thereof from Borrower prior to the date hereof, in either case under
clause (i) or (ii) which adversely affects or could reasonably be expected to
adversely affect the Equipment in the good faith determination of Agent. Any
Equipment which is not Eligible Equipment shall nevertheless be part of the
Collateral.
1.34. "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and raw
materials and works in process for such finished goods, in each case which are
acceptable to Agent based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) findings or work-in-process (except for uncut
greige goods which are not in any production process, including without
limitation, dye and finishing); (b) components which are not part of finished
goods; (c) spare parts for Equipment; (d) packaging and shipping materials; (e)
supplies used or consumed in Borrower's business; (f) Inventory at premises
other than those owned and controlled by Borrower, except any Inventory which
would otherwise be deemed Eligible Inventory that is not located at premises
owned and operated by Borrower may nevertheless be considered Eligible
Inventory: (i) as to locations which are leased by Borrower if Agent shall have
received a Collateral Access Agreement from the owner and lessor of such
location, duly authorized, executed and delivered by such owner and lessor or if
Agent shall not have received a Collateral Access Agreement (in a form
reasonably acceptable to Agent), Agent may, at its option, nevertheless consider
Inventory at such location to be Eligible Inventory to the extent Agent shall
have established such Reserves in respect of amounts at any time payable by
Borrower to the owner and lessor thereof as Agent shall determine, and (ii) as
to locations owned and operated by a third person, (A) if Agent shall have
received a Collateral Access Agreement from such owner and operator with respect
to such location, duly authorized, executed and delivered by such owner and
operator or if Agent shall not have received a Collateral Access Agreement (in a
form reasonably acceptable to Agent), Agent may, at its option, nevertheless
consider Inventory at such location to be Eligible Inventory to the extent Agent
shall have established such Reserves in respect of amounts at any time payable
by Borrower to the owner and operator thereof as Agent shall determine, and (B)
in addition, as to locations owned and operated by a third person, Agent shall
have received, if required by Agent: (1) UCC-1 financing statements between the
owner and operator, as consignee or bailee and Borrower, as consignor or bailor,
in form and substance satisfactory to Agent, which are duly assigned to Agent
and (2) a written notice to any lender to the owner and operator of the first
priority security interest in such Inventory of Agent; (g) Inventory subject to
a security interest or lien in favor of any Person other than Agent except those
permitted in this Agreement (but without limiting the right of Agent to
establish any Reserves with respect to amounts secured by such security interest
or lien in favor of any Person even if permitted herein); (h) bill and hold
goods; (i) unserviceable, obsolete or slow moving Inventory or Inventory unsold
within one (1) year of its production; (j) Inventory which is not subject to the
first priority, valid and perfected security interest of Agent; (k) returned,
damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment and (m) Inventory located outside the United States of America. The
criteria for Eligible Inventory set forth above may only be changed and any new
criteria for Eligible Inventory may only be established by Agent in good faith
-11-
based on either: (i) an event, condition or other circumstance arising after the
date hereof, or (ii) an event, condition or other circumstance existing on the
date hereof to the extent Agent has no written notice thereof from Borrower
prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the
Inventory in the good faith determination of Agent. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
1.35. "Eligible Real Property" shall mean Real Property of Borrower
owned in fee subject to a Mortgage in favor of Agent; provided, however, that
Eligible Real Property shall not include (a) Real Property subject to pending or
threatened (in writing to Borrower) condemnation by any Governmental Authority
or any pending or threatened (in writing to Borrower) enforcement action by any
Governmental Authority with respect to the environmental condition of such Real
Property; (b) Real Property subject to a security interest or lien in favor of
any Person other than Agent except those permitted in this Agreement (but
without limiting the right of Agent to establish any Reserves with respect to
amounts secured by such security interest or lien in favor of any Person even if
permitted herein); (c) Real Property which is not subject to the first priority,
valid and perfected security interest of Agent; (d) Real Property with respect
to which improvements thereon are uninsured and (e) Real Property located
outside the United States of America. The criteria for Eligible Real Property
set forth above may only be changed and any new criteria for Eligible Real
Property may only be established by Agent in good faith based on either: (i) an
event, condition or other circumstance arising after the date hereof; or (ii) an
event, condition or other circumstance existing on the date hereof to the extent
Agent has no written notice thereof from Borrower prior to the date hereof, in
either case under clause (i) or (ii) which adversely affects or could reasonably
be expected to adversely affect the Real Property in the good faith
determination of Agent. Any Real Property which is not Eligible Real Property
shall nevertheless be part of the Collateral.
1.36. "Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an institutional Affiliate of
such investment advisor, and in each case is approved by Agent; and (d) any
other commercial bank, financial institution or institutional "accredited
investor" (as defined in Regulation D under the Securities Act of 1993) approved
by Agent; provided, that, neither Borrower nor any Guarantor nor any Affiliate
of Borrower or any Guarantor shall qualify as an Eligible Transferee and (ii) no
Person to whom any Indebtedness which is in any way subordinated in right of
payment to any other Indebtedness of Borrower or any Guarantor shall qualify as
an Eligible Transferee, except as Agent may otherwise specifically agree.
1.37. "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
-12-
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, including, but not
limited to, the Natural Resources and Environmental Protection Act, MCLA 324.101
et seq. and (iii) any common law or equitable doctrine that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
1.38. "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment and computer hardware and software (whether owned or
licensed, and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.39. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.40. "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.41. "ERISA Event" shall mean (a) any "reportable event", as defined
in Section 4043(c) of ERISA or the regulations issued thereunder, with respect
to a Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be liable;
(f) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a
Multiemployer Plan or a cessation of operations which is treated as such a
withdrawal or notification that a Multiemployer Plan is in reorganization; (g)
the filing of a notice of intent to terminate, the treatment of a Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (i) the imposition of any liability under Title
IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due
but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
-13-
Affiliate in excess of $1,000,000 and (j) any other event or condition with
respect to a Plan including any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of Borrower in excess of $1,000,000.
1.42. "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Agent) on or
about 9:00 a.m. (Atlanta, Georgia time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Loans requested by and available to
Borrower in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrower.
1.43. "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.44. "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.45. "Excess Availability" shall mean (a) the lesser of: (i) the
Borrowing Base and (ii) the Maximum Credit, minus (b) the sum of: (i) the amount
of all then outstanding and unpaid Obligations, plus (ii) the aggregate amount
of all then outstanding and unpaid trade payables and other obligations of
Borrower which are more than sixty (60) days past due as of such time, plus
(iii) the amount of checks issued by Borrower to pay trade payables and other
obligations which are more than sixty (60) days past due as of such time, but
not yet sent.
1.46. "Excess Cash Flow Recapture Amount" shall mean with respect to
each fiscal year of Borrower ending on or after June 30, 2004, an amount equal
to such percentage of Borrower's Net Income (to the extent positive) for such
fiscal year as may be determined by Agent in its reasonable discretion, (not to
exceed forty percent (40%) of Borrower's Net Income for any fiscal year) after
receipt and review by Agent of the Annual Financial Statements for such fiscal
year.
1.47. "Excess Closing Availability" shall mean the amount, as
determined by Agent, calculated at any time, equal to: (a) the lesser of: (i)
the Borrowing Base (without regard to any Reserves) and (ii) the Maximum Credit,
minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, plus (ii) the amount of all Reserves, plus (iii) the aggregate
amount of all then outstanding and unpaid trade payables and other obligations
of Borrower which are outstanding, as of such time, more than thirty (30) days
past due, (iv) without duplication, the amount of checks issued by Borrower to
pay trade payables and other obligations which are more than thirty (30) days
past due as of such time, but not yet cleared or paid by the bank, plus (v) all
transaction fees associated with the Purchase Agreements and the execution of
this Agreement not paid on the date hereof.
-14-
1.48. "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.49. "Financing Agreements" shall mean, collectively, this Agreement,
the Guarantee, the Intercreditor Agreement, the Pledge Agreement, the
Subordination Agreement, the Mortgages and all notes, guarantees, security
agreements, deposit account control agreements, investment property control
agreements, pledge agreements, subordination agreements, intercreditor
agreements, and all other agreements, documents and instruments now or at any
time hereafter executed and/or delivered by Borrower or any Obligor in
connection with this Agreement.
1.50. "Fixed Asset Loan Amortization Amount" shall mean an amount equal
to (a) from and after November 1, 2003 through November 30, 2003, $118,055, plus
(b) from and after the first day of each month commencing December 1, 2003 and
through the last day of each such month, the product of: (i) $118,055 multiplied
by (ii) the cumulative number of months that have elapsed since November 1,
2003.
1.51. "Fixed Asset Loan Limit" means $8,500,000.
1.52. "Fixed Charge Coverage Ratio" shall mean, with respect to
Borrower and its Subsidiaries, on a consolidated basis, for any period of
determination, the ratio of (a) EBITDA during such period to (b) Fixed Charges
of Borrower and its Subsidiaries for the same period.
1.53. "Fixed Charges" for any period shall mean the sum of, without
duplication, (a) all Interest Expense, (b) all Capital Expenditures, (c) all
regularly scheduled principal payments of Indebtedness for borrowed money
(including, without limitation, all principal payments under the Seller Note but
excluding payments of Additional Consideration) and Indebtedness with respect to
Capital Leases, and (d) an amount equal to the product of: (i) $118,055
multiplied by (ii) the cumulative number of months that elapsed during such
period of determination.
1.54. "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.17 hereof and for purposes of calculating "Net Income"
as defined in this Agreement, until such time as Borrower notifies Agent of a
change in GAAP that would have a material effect on the calculation of Net
Income or the covenants set forth in Section 9.17 and Borrower and Agent
mutually agree on the treatment of such change or the recalculation of such
covenant, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the most
recent audited financial statements delivered to Agent prior to the date hereof.
1.55. "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
-15-
1.56. "Guarantee" shall mean, individually, the guarantee executed by a
Guarantor substantially in the form of Exhibit B and "Guarantees" shall
collectively refer to all such guarantees, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
1.57. "Guarantors" shall mean, collectively, each of (a) Parent, and
(b) SAIM, together with their successors and assigns.
1.58. "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials or wastes, including hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.59. "Hedging Obligations" shall mean, with respect to any Person, the
obligations and liabilities of such Person under any of the following agreements
or arrangements to the extent that the primary purpose thereof is the reduction
of risk for fluctuations in interest rates or currency values relating to its
customary business and not for speculative purposes: (a) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements and
(b) other agreements or arrangements designed to protect such person against
fluctuations in interest rates or currency values.
1.60. "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time; (h)
-16-
all obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments; (i) Hedging
Obligations; and (j) all obligations of such Person with respect to earn-out,
return rate or other contingent obligations arising out of acquisition or
acquisition-related agreements.
1.61. "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit C hereto containing material information with
respect to Borrower. its business and assets provided by or on behalf of
Borrower to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.62. "Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the date hereof, between Agent and Parent Revolving
Agent, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
1.63. "Intellectual Property" shall mean Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service mark
applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to computer software
programs, in whatever form created or maintained.
1.64. "Interest Expense" shall mean, for any period, as to any Person,
as determined in accordance with GAAP, (a) the total interest expense of such
Person, whether paid or accrued during such period (including the interest
component of Capital Leases for such period), but excluding interest paid in
property other than cash and any other interest expense not payable in cash,
minus (b) any net payments in an aggregate amount not to exceed $20,000 for any
fiscal quarter received by such Person during such period as interest income in
respect of its investments in cash.
1.65. "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
-17-
1.66. "Interest Rate" shall mean,
(a) Subject to clause (b) of this definition below:
(i) as to Prime Rate Loans, a rate equal to the Prime
Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to the
Adjusted Eurodollar Rate (in each case, based on the
Eurodollar Rate applicable for the Interest Period selected by
Borrower as in effect two (2) Business Days after the date of
receipt by Agent of the request of Borrower for such
Eurodollar Rate Loans in accordance with the terms hereof,
whether such rate is higher or lower than any rate previously
quoted to Borrower) plus the Applicable Margin.
(b) Notwithstanding anything to the contrary contained in
clause (a) of this definition, the Interest Rate otherwise applicable
shall be increased by two (2.0%) percent per annum, at Agent's option,
without notice to Borrower, or any of them, (i) for the period (A) from
and after the effective date of termination or non-renewal hereof until
Agent has received full and final payment in immediately available
funds, cash of all outstanding and unpaid Obligations and cash
collateral in the amounts and on the terms required under Section 13.1
hereof for the Letter of Credit Accommodations) and (B) from and after
the date of the occurrence of any Event of Default for so long as such
Event of Default is continuing, as determined by Agent and (ii) on
Loans at any time outstanding in excess of the Borrowing Base (whether
or not such excess(es) arise or are made with or without Agent's
knowledge or consent and whether made before or after an Event of
Default).
1.67. "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by Borrower
as lessor; (b) are held by Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by Borrower under a contract of service;
or (d) consist of raw materials, work in process, finished goods or materials
used or consumed in its business.
1.68. "Inventory Loan Limit" shall mean $20,000,000.
1.69. "Investment Property Control Agreement" shall mean an agreement
in writing, in form and substance satisfactory to Agent, by and among Agent,
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of Borrower
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Agent, that it will comply with entitlement orders originated by Agent with
respect to such investment property, or other instructions of Agent, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Agent, in each case, without the further consent of Borrower and
including such other terms and conditions as Agent may require.
1.70. "Lenders" shall mean the financial institutions who are
signatories hereto as Lenders and other persons made a party to this Agreement
as a Lender in accordance with Section 13.6 hereof, and their respective
-18-
successors and assigns; each sometimes being referred to herein individually as
a "Lender".
1.71. "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent for the account of Borrower or (b)
with respect to which Agent has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer;
sometimes being referred to herein individually as a "Letter of Credit
Accommodation".
1.72. "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.73. "Loans" shall mean the loans now or hereafter made by or on
behalf of any Lender or by Agent for the benefit of Borrower on a revolving
basis (involving advances, repayments and readvances) as set forth in Section
2.1 hereof.
1.74. "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance, prospects or operations of
Parent and its Subsidiaries, taken as a whole, or (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements
creating or evidencing Indebtedness of Borrower to Agent or Lenders or granting
in favor of Agent any collateral security therefor; (c) the legality, validity,
enforceability, perfection or priority of the security interests and liens of
Agent upon any Collateral; (d) the Collateral or its value; (e) the ability of
Borrower to repay the Obligations or of Borrower to perform its obligations
under this Agreement or any of the other Financing Agreements as and when to be
performed; or (f) the ability of Agent or any Lender to enforce the Obligations
or realize upon the Collateral or otherwise with respect to the rights and
remedies of Agent and Lenders under this Agreement or any of the other Financing
Agreements.
1.75. "Material Contract" shall mean (a) the Purchase Agreements, (b)
any contract or other agreement (other than the Financing Agreements), written
or oral, of Borrower involving monetary liability of or to any Person in an
amount in excess of $1,000,000, and (c) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which
Borrower is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a Material Adverse Effect.
1.76. "Maximum Credit" shall mean the amount of $38,500,000 subject to
increase as set forth in Section 2.1(d) hereof.
1.77. "Merger" shall mean the merger of Target with and into Borrower
with Borrower as the surviving corporation pursuant to the terms of the Merger
Documents.
1.78. "Merger Documents" shall mean any all agreements, documents,
instruments, consents, shareholder approvals and resolutions, required to
consummate, or otherwise relating to the Merger, including without limitation
the Articles of Merger, as the same now exist or may hereafter be amended or
modified with the consent of Agent.
1.79. "Mortgages" shall mean, individually and collectively, each of
the mortgages, deeds to secure debt, deeds of trust or similar agreements
granting to Agent a lien on the Real Property set forth on Schedule 1.79 (as the
-19-
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced).
1.80. "Multiemployer Plan" shall mean a "multi employer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any time during the
current year or the immediately preceding six (6) years contributed to by
Borrower or any ERISA Affiliate.
1.81. "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.82. "Net Income" shall mean, with respect to any Person, for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary, one-time or non-recurring gains) after
deducting all charges which should be deducted before arriving at the net income
(loss) for such period and after deducting the Provision for Taxes for such
period, all as determined in accordance with GAAP; provided, that, (a) the net
income of any Person that is not a wholly-owned Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid or payable to such Person or a
wholly-owned Subsidiary of such Person; (b) the effect of any change in
accounting principles adopted by such Person or its Subsidiaries after the date
hereof shall be excluded; and (c) the net income (if positive) of any
wholly-owned Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such wholly-owned Subsidiary to such
Person or to any other wholly-owned subsidiary of such Person is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such wholly-owned Subsidiary shall be excluded. For the purpose of this
definition, net income excludes any gain (but not loss) together with any
related Provision for Taxes for such gain (but not loss) realized upon the sale
or other disposition of any assets that are not sold in the ordinary course of
business (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or of any Capital Stock of such Person or a Subsidiary
of such Person and any net income realized as a result of changes in accounting
principles or the application thereof to such Person.
1.83. "Net Orderly Liquidation Value" means with respect to Borrower's
Equipment and Inventory, the value that is estimated to be recoverable in an
orderly liquidation of such Equipment or Inventory net of estimated liquidation
expenses as determined from time to time by a qualified appraisal company
selected by Agent.
1.84. "Obligations" shall mean (a) any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Agent or any Lender and/or any
of their Affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
-20-
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, or secured or unsecured and
(b) for purposes only of Sections 5 and 6.4(a) hereof, any and all Hedging
Obligations owing by Borrower to Agent or any Affiliate of Agent.
1.85. "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantors) other than Borrower.
1.86. "Parent" shall mean Delta Apparel, Inc., a Georgia corporation.
1.87. "Parent Revolving Agent" shall mean Congress in its capacity as
agent under the Parent Revolving Loan Agreement, and any successor or assignee
thereof.
1.88. "Parent Revolving Loan Agreement" shall mean that certain Amended
and Restated Loan and Security Agreement dated as of the date hereof, among
Parent, Parent Revolving Agent and the "Lenders" (as defined therein) party
thereto from time to time, as amended, restated, supplemented or otherwise
modified from time to time.
1.89. "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.6 of this Agreement governing participations.
1.90. "Permitted Holder" shall mean Parent.
1.91. "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.92. "Plan" shall mean an employee benefit plan (as defined in Section
3(3) of ERISA) which Borrower sponsors, maintains, or to which it makes, is
making, or is obligated to make contributions, or in the case of a Multiemployer
Plan has made contributions at any time during the immediately preceding six (6)
plan years.
1.93. "Pledge Agreement" shall mean that certain Stock Pledge Agreement
by Parent and Borrower in favor of Congress, in its capacity as Agent and in its
capacity as Parent Revolving Agent, dated as of the Agreement Date, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
1.94. "Prime Rate" shall mean the rate from time to time publicly
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank.
-21-
1.95. "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.96. "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments
of Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.6 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.97. "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, provincial, county
or local, and whether foreign or domestic, that are paid or payable by any
Person in respect of any period in accordance with GAAP.
1.98. "Purchase Agreements" shall mean, individually and collectively,
the Stock Purchase Agreement, the Seller Note, and the Related Agreements (as
defined in the Stock Purchase Agreement), as all of the foregoing now exist and
as amended to the extent permitted herein.
1.99. "Purchased Stock" shall mean all of the issued and outstanding
shares of common stock of M. J. Soffe Co., a North Carolina corporation.
1.100. "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgages.
1.101. "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all
amounts at any time payable to Borrower in respect of the sale or other
disposition by Borrower of any Account or other obligation for the payment of
money; (c) all interest, fees, late charges, penalties, collection fees and
other amounts due or to become due or otherwise payable in connection with any
Account; (d) all payment intangibles of Borrower, letters of credit,
indemnities, guarantees, security or other deposits and proceeds thereof issued
payable to Borrower or otherwise in favor of or delivered to Borrower in
connection with any Account; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations
owing to Borrower, whether from the sale and lease of goods or other property,
licensing of any property (including Intellectual Property or other general
intangibles), rendition of services or from loans or advances by Borrower or to
or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of Borrower) or otherwise associated with any
Accounts, Inventory or general intangibles of Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
-22-
payable to Borrower from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which Borrower is a beneficiary).
1.102. "Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.103. "Reference Bank" shall mean Wachovia Bank, National Association,
or such other bank as Agent may from time to time designate.
1.104. "Register" shall have the meaning set forth in Section 13.6(b)
hereof.
1.105. "Renewal Date" shall have the meaning set forth in Section
13.1(a) hereof.
1.106. "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of
the aggregate of the Commitments of all Lenders, or if the Commitments shall
have been terminated, Lenders to whom at least sixty-six and two-thirds (66
2/3%) percent of the then outstanding Obligations are owing.
1.107. "Reserves" shall mean as of any date of determination, such
amounts as Agent may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks arising after
or unknown to Agent as of the Closing Date, which, as determined by Agent in
good faith, adversely affect, or would have a reasonable likelihood of adversely
affecting, either (i) the Collateral or any other property which is security for
the Obligations or its value or (ii) the assets, business or financial condition
of Borrower or any Obligor, or (iii) the security interests and other rights of
Agent or any Lender in the Collateral (including the enforceability, perfection
and priority thereof) or (b) to reflect Agent's good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower
or any Obligor to Agent is or may have been incomplete, inaccurate or misleading
in any material respect or (c) to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof, (d) to reflect expenses or
costs incurred by Borrower with respect to cooperative advertising, (e) in the
amount of any Hedging Obligations of Borrower owed to Agent or any Affiliate of
Agent or (f) in respect of any state of facts which Agent determines in good
faith constitutes a Default or an Event of Default. Without limiting the
generality of the foregoing, Reserves may be established to reflect that
dilution with respect to the Accounts (based on the ratio of the aggregate
amount of non-cash reductions in Accounts for any period to the aggregate dollar
amount of the sales of Borrower for such period) as calculated by Agent for any
period is or is reasonably anticipated to be greater than five (5%) percent. To
the extent Agent may revise the lending formulas used to determine the Borrowing
Base or establish new criteria or revise existing criteria for Eligible Accounts
-23-
or Eligible Inventory so as to address any circumstances, condition, event or
contingency in a manner satisfactory to Agent, Agent shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Agent
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such reserve as determined by Agent in good faith.
1.108. "SAIM" shall mean SAIM, LLC, a North Carolina limited liability
company.
1.109. "Sellers" shall mean collectively, James F. Soffe, John D. Soffe
and Anthony M. Cimaglia, and their respective heirs, executors, successors and
assigns.
1.110. "Seller Note" means that certain Promissory Note dated as of the
date hereof in the original principal amount of $8,000,000 executed and
delivered by Borrower in favor of Sellers in effect on the date hereof and as
amended in compliance with the terms hereof. A true and correct copy of the
Seller Note as in effect on the date hereof is annexed hereto as Exhibit D.
1.111. "Solvent" shall mean, at any time with respect to any Person,
that at such time such Person (a) is able to pay its debts as they mature and
has (and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a
fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.112. "Special Agent Advances" shall have the meaning set forth in
Section 12.11(a) hereof.
1.113. "Stock Purchase Agreement" means the Amended and Restated Stock
Purchase Agreement, dated as of October 3, 2003, among Parent, Borrower, Target
and Sellers.
1.114. "Subordination Agreement" shall mean that certain Subordination
Agreement, dated as of the date hereof, among Congress, in its capacity as Agent
and in its capacity as Parent Revolving Agent, Borrower, Parent and Sellers, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.
1.115. "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
-24-
1.116. "Target" shall mean M. J. Soffe Co., a North Carolina
corporation.
1.117. "UCC" shall mean the Uniform Commercial Code as in effect in the
State of Georgia, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of Georgia on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise determine).
1.118. "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
1.119. "Voting Stock" shall mean with respect to any Person, (a) one
(1) or more classes of Capital Stock of such Person having general voting powers
to elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained herein, each
Lender severally (and not jointly) agrees to fund its Pro Rata Share of Loans to
Borrower from time to time in amounts requested by Borrower up to the amount
outstanding at any time equal to the lesser of: (i) the Borrowing Base or (ii)
the Maximum Credit at such time. Except as otherwise provided herein or
permitted hereunder, (x) the aggregate principal amount of the sum of the Loans
and Letter of Credit Accommodations outstanding at any time to Borrower shall
not exceed the lesser of the Borrowing Base or the Maximum Credit, and (y) the
aggregate principal amount of the Loans outstanding at any time to Borrower
based on the Eligible Inventory of Borrower shall not exceed the Inventory Loan
Limit.
(b) Agent may, in its discretion, from time to time, upon not less than
five (5) days' prior notice to Borrower, reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Agent determines that: (i) the
number of days of the turnover of the Inventory for any period has changed or
(ii) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, including any decrease attributable to a change in the nature,
quality or mix of the Inventory. The amount of any decrease in the lending
formula shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Agent in good
-25-
faith. In determining whether to reduce the lending formula(s), Agent may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) In the event that (i) the aggregate principal amount of the Loans
and Letter of Credit Accommodations outstanding at any time exceeds the lesser
of the Maximum Credit or the Borrowing Base, or (ii) the aggregate amount of the
outstanding Letter of Credit Accommodations exceeds the sublimit for Letter of
Credit Accommodations set forth in Section 2.2(e), such event shall not limit,
waive or otherwise affect any rights of Agent or Lenders in such circumstances
or on any future occasions and Borrower shall, upon demand by Agent, which may
be made at any time or from time to time, immediately repay to Agent the entire
amount of any such excess(es) for which payment is demanded.
(d) The Maximum Credit may be permanently increased, one time only, by
$2,500,000 to $41,000,000, upon the written request of Borrower to Agent and
Lenders. Such request shall be irrevocable and shall become effective three (3)
Business Days after such request is received by Agent, provided, that, as of the
proposed effective date of any such increase, Agent has determined that no Event
of Default or any act, condition or event which with notice or passage of time
or both, would constitute an Event of Default, shall exist or have occurred. To
the extent any such increase becomes effective, the Maximum Credit shall be
automatically deemed increased by $2,500,000 and each Lender's Commitment shall
be deemed to automatically increase by its Pro Rata Share of the increased
amount.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrower, Agent agrees, for the ratable risk of each Lender
according to its Pro Rata Share, to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Agent and the issuer thereof. Any payments made by or on behalf of
Agent or any Lender to any issuer thereof and/or related parties in connection
with the Letter of Credit Accommodations shall constitute additional Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate equal
to two and one-half (2 1/2%) percent per annum, on the daily outstanding balance
of the Letter of Credit Accommodations for the immediately preceding month (or
part thereof), payable in arrears as of the first day of each succeeding month,
except that Agent may, and upon the written direction of Required Lenders shall,
require Borrower to pay to Agent for the ratable benefit of Lenders such letter
of credit fee, at a rate equal to four and one-half (4 1/2%) percent per annum
on such daily outstanding balance for: (i) the period from and after the date of
termination or non-renewal hereof until Agent and Lenders have received full and
final payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
-26-
determined by Agent. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c) Borrower shall give Agent two (2) Business Days' prior written
notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. Borrower shall
attach to such notice the proposed terms of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Agent: (i) Borrower shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in such
manner as such proposed issuer may require, an application, in form and
substance satisfactory to such proposed issuer and Agent, for the issuance of
the Letter of Credit Accommodation and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed Letter of
Credit Accommodation shall be satisfactory to Agent and such proposed issuer,
(ii) as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit Accommodation, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit Accommodation refrain
from, the issuance of letters of credit generally or the issuance of such
Letters of Credit Accommodation; and (iii) the Excess Availability prior to
giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent minus the then applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Agent estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Agent with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
-27-
(e) Except in Agent's discretion, with the consent of all Lenders, the
amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Agent in connection therewith
shall not at any time exceed $7,500,000 in the aggregate.
(f) Borrower shall indemnify and hold Agent and Lenders harmless from
and against any and all losses, claims, damages, liabilities, costs and expenses
which Agent or any Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation, Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Agent and Lenders
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrower, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation, except for the
gross negligence or willful misconduct of Agent or any Lender as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction.
The provisions of this Section 2.2(f) shall survive the payment of Obligations
and the termination or non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of Credit
Accommodations, Borrower shall, at Agent's request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver them to Agent and/or subject to Agent's order, and
if they shall come into Borrower's possession, to deliver them, upon Agent's
request, to Agent in their original form. Borrower shall also, at Agent's
request, designate Agent as the consignee on all bills of lading and other
negotiable and non-negotiable documents.
(h) Borrower hereby irrevocably authorizes and directs any issuer of a
Letter of Credit Accommodation to name Borrower as the account party therein and
to deliver to Agent all instruments, documents and other writings and property
received by issuer pursuant to the Letter of Credit Accommodations and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Agent or any
Lender in any manner. Agent and Lenders shall have no liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Agent or any Lender unless Agent has duly executed and delivered to such issuer
the application or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. Borrower shall be bound by any
interpretation made in good faith by Agent, or any other issuer or correspondent
under or in connection with any Letter of Credit Accommodation or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of Borrower. Agent shall have the sole and
exclusive right and authority to, and Borrower shall not: (i) at any time an
Event of Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any instructions
as to acceptance or rejection of any documents or goods or (C) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, and (ii) at all times, (A) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
-28-
documents, and (B) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral.
Agent may take such actions either in its own name or in Borrower's name.
(i) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Agent for the ratable benefit of
Lenders. Any duties or obligations undertaken by Agent to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement by Agent in favor of any issuer or correspondent to the extent
relating to any Letter of Credit Accommodation, shall be deemed to have been
undertaken by Borrower to Agent for the ratable benefit of Lenders and to apply
in all respects to Borrower.
(j) Immediately upon the issuance or amendment of any Letter of Credit
Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(k) Borrower is irrevocably and unconditionally obligated, without
presentment, demand or protest, to pay to Agent any amounts paid by an issuer of
a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that Borrower fails to pay Agent on the date
of any payment under a Letter of Credit Accommodation in an amount equal to the
amount of such payment, Agent (to the extent it has actual notice thereof) shall
promptly notify each Lender of the unreimbursed amount of such payment and each
Lender agrees, upon one (1) Business Day's notice, to fund to Agent the purchase
of its participation in such Letter of Credit Accommodation in an amount equal
to its Pro Rata Share of the unpaid amount. The obligation of each Lender to
deliver to Agent an amount equal to its respective participation pursuant to the
foregoing sentence is absolute and unconditional and such remittance shall be
made notwithstanding the occurrence or continuance of any Event of Default, the
failure to satisfy any other condition set forth in Section 4 or any other event
or circumstance. If such amount is not made available by a Lender when due,
Agent shall be entitled to recover such amount on demand from such Lender with
interest thereon, for each day from the date such amount was due until the date
such amount is paid to Agent at the interest rate then payable by Borrower in
respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a)
hereof.
2.3 [Intentionally Omitted].
-29-
2.4 Commitments. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended in
accordance with the provisions hereof.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Agent, for the benefit of Lenders, interest
on the outstanding principal amount of the Loans at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate Loans or may
request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any
existing Eurodollar Rate Loans continue for an additional Interest Period. Such
request from Borrower shall specify the amount of the Eurodollar Rate Loans or
the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or
the amount of the Eurodollar Rate Loans to be continued (subject to the limits
set forth below) and the Interest Period to be applicable to such Eurodollar
Rate Loans. Subject to the terms and conditions contained herein, two (2)
Business Days after receipt by Agent of such a request from Borrower, such
Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Default or Event of Default shall exist or have
occurred and be continuing, (ii) no party hereto shall have sent any notice of
termination or non-renewal of this Agreement, (iii) Borrower shall have complied
with such customary procedures as are established by Agent and specified by
Agent to Borrower from time to time for requests by Borrower for Eurodollar Rate
Loans, (iv) no more than four (4) Interest Periods may be in effect at any one
time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount
not less than $3,000,000 or an integral multiple of $1,000,000 in excess
thereof, (vi) the maximum amount of the Eurodollar Rate Loans at any time
requested by Borrower shall not exceed the amount equal to ninety (90%) percent
of the lowest principal amount of the Loans which it is anticipated will be
outstanding during the applicable Interest Period, in each case as determined by
Agent (but with no obligation of Agent to make such Loans), and (vii) Agent and
each Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Agent and such Lender and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by
Borrower. Any request by a Borrower for Eurodollar Rate Loans or to convert
Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar
Rate Loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Agent and Lenders shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent and Lenders had purchased such
deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
two (2) Business Days prior to such last day in accordance with the terms
-30-
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent
to convert to Prime Rate Loans in the event that this Agreement shall terminate
or not be renewed. Borrower shall pay to Agent, for the benefit of Lenders, upon
demand by Agent (or Agent may, at its option, charge any loan account of
Borrower) any amounts required to compensate any Lender or participant with
Lender for any loss (including loss of anticipated profits), cost or expense
incurred by such person, as a result of the conversion of Eurodollar Rate Loans
to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Agent, for the account of
Lenders, monthly in arrears not later than the first day of each calendar month
and shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no event
shall charges constituting interest payable by Borrower to Agent and Lenders
exceed the maximum amount or the rate permitted under any applicable law or
regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2 Fees. Borrower agrees to pay to Agent the following non-refundable
fees as follows:
(a) the fees set forth in that certain fee letter agreement dated as of
the date hereof between Borrower and Agent; and
(b) on the first day of each month in arrears for the benefit of
Lenders, an unused line fee at a rate equal to one quarter of one percent
(0.250%) per annum calculated upon the amount by which $30,000,000 exceeds the
average daily principal balance of the outstanding Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) (the
"Average Daily Balance") while this Agreement is in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be payable
on the first day of each month in arrears and shall be fully earned when due;
provided, however, that from and after the date that (i) the difference of (A)
the Average Daily Balance minus (B) the amount of availability generated by
clause (a)(iii) of the Borrowing Base, exceeds (ii) $30,000,000, such fee shall
be calculated upon the amount by which the Maximum Credit exceeds the Average
Daily Balance.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to any Lender or
any banking or financial institution from whom any Lender borrows funds or
obtains credit (a "Funding Bank"), or (ii) a Funding Bank or any Lender complies
with any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or any Lender determines 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 has or would have the effect described
below, or a Funding Bank or any Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
-31-
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on any
Lender's capital as a consequence of its obligations hereunder to a level below
that which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank's or such Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, and the result of any of the foregoing events
described in clauses (i), (ii) or (iii) is or results in an increase in the cost
to such Lender of funding or maintaining the Loans or the Letter of Credit
Accommodations or its Commitment, then Borrower shall from time to time upon
demand by such Lender pay to such Lender additional amounts sufficient to
indemnify such Lender against such increased cost on an after-tax basis (after
taking into account applicable deductions and credits in respect of the amount
indemnified). A certificate as to the amount of such increased cost shall be
submitted to Borrower by such Lender and shall be conclusive, absent manifest
error.
(b) If prior to the first day of any Interest Period, (i) Agent shall
have determined in good faith (which determination shall be conclusive and
binding upon Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, (ii) Agent determines that the
Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to Agent of making or maintaining
Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in
the principal amounts of the Eurodollar Rate Loans to which such Interest Period
is to be applicable are not generally available in the London interbank market,
Agent shall give telecopy or telephonic notice thereof to Borrower as soon as
practicable thereafter, and will also give prompt written notice to Borrower
when such conditions no longer exist. If such notice is given (A) any Eurodollar
Rate Loans requested to be made on the first day of such Interest Period shall
be made as Prime Rate Loans, (B) any Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Rate Loans
shall be converted to or continued as Prime Rate Loans and (C) each outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Prime Rate Loans. Until such notice has been
withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued
as such, nor shall Borrower have the right to convert Prime Rate Loans to
Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for any Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Loan Agreement, (i) such Lender shall promptly give written
notice of such circumstances to Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of such Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such
and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for such Lender
-32-
to make or maintain Eurodollar Rate Loans, such Lender shall then have a
commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Prime Rate Loans on the respective last days
of the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar Rate
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 3.3(d) below.
(d) Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from any loss or expense which Agent or Lenders may sustain or
incur as a consequence of (i) default by Borrower in making a borrowing of,
conversion into or extension of Eurodollar Rate Loans after Borrower has given a
notice requesting the same in accordance with the provisions of this Loan
Agreement, (ii) default by Borrower in making any prepayment of a Eurodollar
Rate Loan after Borrower has given a notice thereof in accordance with the
provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar
Rate Loans on a day which is not the last day of an Interest Period with respect
thereto. With respect to Eurodollar Rate Loans, such indemnification may include
an amount equal to the excess, if any, of (A) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
extended, for the period from the date of such prepayment or of such failure to
borrow, convert or extend to the last day of the applicable Interest Period (or,
in the case of a failure to borrow, convert or extend, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Rate Loans provided for herein over (B) the
amount of interest (as determined by such Agent or Lender) which would have
accrued to Agent or Lender on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank Eurodollar market. This
covenant shall survive the termination or non-renewal of this Loan Agreement and
the payment of the Obligations
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Agent and
Lenders making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Agent shall have received, in form and substance satisfactory to
Agent, evidence that the Purchase Agreements and Merger Documents have been duly
executed and delivered by and to the appropriate parties thereto and shall have
received true and correct copies thereof;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Agent, and Agent shall have received all information and copies
of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
articles or certificate of incorporation or articles of organization, as the
case may be, of Borrower and each Guarantor certified by the Secretary of State
(or equivalent Governmental Authority) which shall set forth the same complete
corporate name of Borrower or such Guarantor as is set forth herein and such
-33-
document as shall set forth the organizational identification number of Borrower
or such Guarantor, if one is issued in its jurisdiction of incorporation);
(c) no material adverse change in the business, assets or prospects of
Parent and its Subsidiaries, taken as a whole, shall have occurred;
(d) Agent shall have completed a field review of the Records and such
other information with respect to the Collateral and business, operations and
assets of Borrower, Guarantors and Target as Agent may require to determine the
amount of Loans available to Borrower (including, without limitation, current
perpetual inventory records and/or roll-forwards of Accounts and Inventory of
Borrower and Target through the date of closing and test counts of the Inventory
in a manner satisfactory to Agent, together with such supporting documentation
as may be necessary or appropriate, and other documents and information that
will enable Agent to accurately identify and verify the Collateral), the results
of which in each case shall be satisfactory to Agent, not more than three (3)
Business Days prior to the date hereof;
(e) Agent shall have received, in form and substance satisfactory to
Agent, all consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements by
owners and lessors of leased premises of Borrower and by processors and
warehouses at which Collateral is located;
(f) the Excess Closing Availability as determined by Agent, as of the
date hereof, shall be not less than $4,000,000 after giving effect to the
initial Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
(g) Agent shall have received, in form and substance satisfactory to
Agent, Deposit Account Control Agreements by and among Agent, Borrower and each
bank where Borrower has a deposit account, in each case, duly authorized,
executed and delivered by such bank and Borrower (or Agent shall be the bank's
customer with respect to such deposit account as Agent may specify);
(h) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral (including, without limitation, all assets of
Target upon consummation of the Merger), other than Liens permitted under this
Agreement;
(i) Agent shall have received and reviewed lien and judgment search
results for the jurisdiction of incorporation or organization of Borrower, each
Guarantor and Target, the jurisdiction of the chief executive office of
Borrower, each Guarantor and Target and all jurisdictions in which assets of
Borrower, each Guarantor and Target are located, which search results shall be
in form and substance satisfactory to Agent;
-34-
(j) Agent shall have received the stock certificates representing all
of the issued and outstanding shares of the Capital Stock of Borrower and owned
by Borrower, to the extent that the equity interest that constitutes such
Capital Stock is certificated, in each case together with stock powers duly
executed in blank with respect thereto;
(k) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
(l) Agent shall have received, in form and substance satisfactory to
Agent, such opinion letter of counsel(s) to Borrower, Guarantors and Target with
respect to the Purchase Agreements, the effectiveness of the Merger, the
Financing Agreements and the security interests and liens of Agent and Lenders
with respect to the Collateral and such other matters as Agent may request;
(m) Agent shall have received, in form and substance satisfactory to
Agent, a pro forma balance sheet of Borrower, prepared on a consolidating basis,
reflecting the initial transactions contemplated hereunder, including, but not
limited to, (i) the consummation of the acquisition of the Purchased Stock by
Borrower from Sellers and the other transactions contemplated by the Purchase
Agreements and the Merger and (ii) the Loans and Letter of Credit Accommodations
provided by Agent to Borrower on the date hereof and the use of the proceeds of
the initial Loans as provided herein, accompanied by a certificate, dated of
even date herewith, of the chief financial officer of Borrower, stating that
such pro forma balance sheet, subject to post-closing adjustments, represents
the reasonable, good faith opinion of such officer as to the subject matter
thereof as of the date of such certificate;
(n) Agent shall have received, in form and substance satisfactory to
Agent, evidence that Borrower has received a cash contribution or advance of not
less than $20,000,000 and such proceeds have been applied to the cash portion of
the purchase price of the Purchased Stock payable pursuant to the Stock Purchase
Agreement;
(o) Agent shall have received evidence, in form and substance
satisfactory to Agent, that all conditions precedent to the consummation of the
purchase of Purchased Stock by Borrower shall have been satisfied except payment
of the purchase price therefor, and that upon the making of the initial Loans
hereunder, Borrower shall own the Purchased Stock and the Merger shall be
consummated;
(p) Agent shall have received a valuation and/or appraisal of the
trademarks of Target, the results of which shall be satisfactory to Agent;
(q) Agent shall have received, in form and substance satisfactory to
Agent, a valid and effective mortgagee's title insurance policy issued by a
company and agent acceptable to Agent (i) insuring the priority, amount and
sufficiency of the Mortgages, (ii) insuring against matters that would be
disclosed by surveys and (iii) containing any endorsements, assurances or
affirmative coverage requested by Agent for protection of its interests;
-35-
(r) Agent shall have received surveys with respect to the Real Property
located in Fayetteville, North Carolina subject to the Mortgages, and such
surveys shall be satisfactory in form and substance to Agent;
(s) Agent shall have received the appraisals of the Equipment and Real
Property of Target, the results of which shall be satisfactory to Agent;
(t) Agent shall have received, in form and substance satisfactory to
Agent, a copy of the Seller Note;
(u) to the extent such consent shall not be expressly set forth in the
Purchase Agreements, Agent shall have received, in form and substance
satisfactory to Agent, the agreement of Sellers consenting to the collateral
assignment by Borrower or any Obligor to Agent of all of Borrower's and such
Obligor's rights and remedies and claims for damages and other relief under the
Purchase Agreements and granting Agent such other rights as Agent may require,
duly authorized, executed and delivered by Sellers;
(v) Agent shall have received a duly executed copy of the Parent
Revolving Loan Agreement and evidence of the satisfaction of all conditions
precedent to the effective thereof;
(w) Agent shall have received an accounts payable report for Target and
Borrower as of the Agreement Date, in form acceptable to Agent; and
(x) the other Financing Agreements (including, without limitation, the
Guarantee, the Intercreditor Agreement, the Pledge Agreement, and the
Subordination Agreement) and all instruments and documents hereunder and
thereunder shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
the making of Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements 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 date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letter of Credit
-36-
Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
has a reasonable likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
4.3 Conditions Subsequent to Initial Loans and Letter of Credit
Accommodations. The obligation of Lenders to continue to make Loans or extend
credit hereunder is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrower to so perform or cause to be performed constituting an Event of
Default):
(a) within 21 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent surveys with respect
to the Real Property located in Bladenboro, North Carolina and Rowland, North
Carolina, each in form and substance satisfactory to Agent, together with
evidence of the removal of any survey exceptions with respect to the title
insurance policies relating to such Real Property; and
(b) within 30 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent a Deposit Account
Control Agreement, executed by Borrower and First Citizens Bank, duly
authorized, executed and delivered by such bank and Borrower; and
(c) within 30 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent agreements relating
to credit card services, each of which is between Borrower and each Person that
collects credit card receivables on behalf of Borrower; and
(d) within 30 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent Deposit Account
Control Agreements, executed by Borrower and Bank of America, N.A., in each case
duly authorized, executed and delivered by such bank and Borrower or, within 90
days of the Agreement Date, Borrower shall (i) deliver evidence of the closure
of its accounts with Bank of America, N.A., (ii) establish new accounts at a
bank or banks other than Bank of America, N.A. and (iii) deliver to Agent
Deposit Account Control Agreements, executed by Borrower and such other bank or
banks, duly authorized, executed and delivered by such bank or banks and
Borrower with respect to such accounts; and
(e) within 45 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent evidence of the
closure of the following accounts:
(i) Fifth Third - account number 2679947 (collection account,
Lansing, Michigan),
(ii) First National - account number 81906 (collection
account; Kansas City, Missouri), and
-37-
(iii) Bank of America, N.A. - account number 50064856
(disbursement account; insurance and clearing; Fayetteville, North
Carolina); and
(f) within 60 days of the Agreement Date (or such longer period as
Agent approves in writing), Borrower shall deliver to Agent additional
information with respect to Borrower's disclosures set forth on Schedule 8.9
hereto as Agent may request and thereafter take such corrective action with
respect thereto as Agent shall reasonably request.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of
all Obligations, Borrower hereby grants to Agent a continuing security interest
in, a lien upon, and a right of set off against, and hereby assigns to Agent,
for itself and the ratable benefit of Lenders, as security, all personal and
real property and fixtures and interests in property and fixtures of Borrower,
whether now owned or hereafter acquired or existing, and wherever located
(together with all other collateral security for the Obligations at any time
granted to or held or acquired by Agent or any Lender, collectively, the
"Collateral") including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper including, without limitation, all tangible and
electronic chattel paper;
(f) all instruments including, without limitation, all promissory
notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar instruments
and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
-38-
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of Borrower now or hereafter held or received by or
in transit to Agent, any Lender or its Affiliates or at any other depository or
other institution from or for the account of Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;
(l) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
Subject to the restrictions on the incurrence of purchase money
Indebtedness in Section 9.9(b) hereof but notwithstanding anything to the
contrary contained in clause (c) above, the types or items of Collateral
described in such clause shall not include any Equipment purchased with the
proceeds of such purchase money Indebtedness which is, or at the time of
Borrower's acquisition thereof shall be, subject to a purchase money lien or
security interest (including capitalized or finance leases) permitted under
Section 9.8 hereof if: (a) the valid grant of a security interest or lien to
Agent, for itself and the ratable benefit of Lenders, in such item of Equipment
is prohibited by the terms of the agreement between Borrower and the holder of
such purchase money lien or security interest and the consent of such holder to
Agent's lien has not been or is not waived, or the consent of such holder has
not been or is not otherwise obtained, or under applicable law such prohibition
cannot be waived and (b) the purchase money lien on such item of Equipment is or
shall become and remain valid and perfected.
5.2 Perfection of Security Interests.
(a) Borrower irrevocably and unconditionally authorizes Agent (or its
agent) to file at any time and from time to time such financing statements with
respect to the Collateral naming Agent or its designee as the secured party and
Borrower as debtor, as Agent may require, and including any other information
with respect to Borrower or otherwise required by part 5 of Article 9 of the
Uniform Commercial Code of such jurisdiction as Agent may determine, together
with any amendment and continuations with respect thereto, which authorization
shall apply to all financing statements filed on, prior to or after the date
hereof. Borrower hereby ratifies and approves all financing statements naming
Agent or its designee as secured party and Borrower as debtor with respect to
the Collateral (and any amendments with respect to such financing statements)
filed by or on behalf of Agent prior to the date hereof and ratifies and
confirms the authorization of Agent to file such financing statements (and
amendments, if any). Borrower hereby authorizes Agent to adopt on behalf of
Borrower any symbol required for authenticating any electronic filing. In the
-39-
event that the description of the collateral in any financing statement naming
Agent or its designee as the secured party and Borrower as debtor includes
assets and properties of Borrower that do not at any time constitute Collateral,
whether hereunder, under any of the other Financing Agreements or otherwise, the
filing of such financing statement shall nonetheless be deemed authorized by
Borrower to the extent of the Collateral included in such description and it
shall not render the financing statement ineffective as to any of the Collateral
or otherwise affect the financing statement as it applies to any of the
Collateral. In no event shall Borrower at any time file, or permit or cause to
be filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Agent or its designee as secured party and Borrower as debtor.
(b) Borrower does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, Borrower
shall promptly notify Agent thereof in writing. Promptly upon the receipt
thereof by or on behalf of Borrower (including by any agent or representative),
Borrower shall deliver, or cause to be delivered to Agent, all tangible chattel
paper and instruments that Borrower has or may at any time acquire, accompanied
by such instruments of transfer or assignment duly executed in blank as Agent
may from time to time specify, in each case except as Agent may otherwise agree.
At Agent's option, Borrower shall, or Agent may at any time on behalf of
Borrower, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Agent with the following
legend referring to chattel paper or instruments as applicable: "This [chattel
paper][instrument] is subject to the security interest of Congress Financial
Corporation (Southern), as Agent and any sale, transfer, assignment or
encumbrance of this [chattel paper][instrument] violates the rights of such
secured party."
(c) In the event that Borrower shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record" (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction) Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent's request,
Borrower shall take, or cause to be taken, such actions as Agent may request to
give Agent control of such electronic chattel paper under Section 9-105 of the
UCC and control of such transferable record under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction.
(d) Borrower does not have any deposit accounts as of the date hereof,
except as set forth in the Information Certificate. Borrower shall not, directly
or indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (i) Agent shall
have received not less than five (5) Business Days prior written notice of the
intention of Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom Borrower is dealing and the purpose of the account, (ii) the bank where
such account is opened or maintained shall be acceptable to Agent, and (iii) on
or before the opening of such deposit account, Borrower shall as Agent may
-40-
specify either (A) deliver to Agent a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by
Borrower and the bank at which such deposit account is opened and maintained or
(B) arrange for Agent to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Agent. The terms of this
subsection (d) shall not apply to deposit accounts specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of Borrower's salaried employees.
(e) Borrower does not own or hold, directly or indirectly, beneficially
or as record owner or both, any investment property, as of the date hereof, or
have any investment account, securities account, commodity account or other
similar account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in the Information Certificate.
(f) In the event that Borrower shall be entitled to or shall at any
time after the date hereof hold or acquire any certificated securities, Borrower
shall promptly endorse, assign and deliver the same to Agent, accompanied by
such instruments of transfer or assignment duly executed in blank as Agent may
from time to time specify. If any securities, now or hereafter acquired by
Borrower are uncertificated and are issued to Borrower its nominee directly by
the issuer thereof, Borrower shall immediately notify Agent thereof and shall as
Agent may specify, either (A) cause the issuer to agree to comply with
instructions from Agent as to such securities, without further consent of
Borrower or such nominee, or (B) arrange for Agent to become the registered
owner of the securities.
(g) Borrower shall not, directly or indirectly, after the date hereof
open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of Borrower to open
or establish such account which notice shall specify in reasonable detail and
specificity reasonably acceptable to Agent the name of the account, the owner of
the account, the name and address of the securities intermediary or commodity
intermediary at which such account is to be opened or established, the
individual at such intermediary with whom Borrower is dealing and the purpose of
the account, (B) the securities intermediary or commodity intermediary (as the
case may be) where such account is opened or maintained shall be reasonably
acceptable to Agent, and (C) on or before the opening of such investment
account, securities account or other similar account with a securities
intermediary or commodity intermediary, Borrower shall as Agent may specify
either (1) execute and deliver, and cause to be executed and delivered to Agent,
an Investment Property Control Agreement with respect thereto duly authorized,
executed and delivered by Borrower and such securities intermediary or commodity
intermediary or (2) arrange for Agent to become the entitlement holder with
respect to such investment property on terms and conditions acceptable to Agent.
(h) Borrower is not the beneficiary or otherwise entitled to any right
to payment under any letter of credit, banker's acceptance or similar instrument
as of the date hereof, except as set forth in the Information Certificate. In
the event that Borrower shall be entitled to or shall receive any right to
payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
-41-
Borrower shall promptly notify Agent thereof in writing. Borrower shall
immediately, as Agent may specify, either (i) deliver, or cause to be delivered
to Agent, with respect to any such letter of credit, banker's acceptance or
similar instrument, the written agreement of the issuer and any other nominated
person obligated to make any payment in respect thereof (including any
confirming or negotiating bank), in form and substance satisfactory to Agent,
consenting to the assignment of the proceeds of the letter of credit to Agent by
Borrower and agreeing to make all payments thereon directly to Agent or as Agent
may otherwise direct or (ii) cause Agent to become, at Borrower's expense, the
transferee beneficiary of the letter of credit, banker's acceptance or similar
instrument (as the case may be).
(i) Borrower has no commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
shall at any time after the date hereof have any commercial tort claims,
Borrower shall promptly notify Agent thereof in writing, which notice shall (i)
set forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by Borrower to Agent of a security
interest in such commercial tort claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by Borrower to Agent shall be deemed to constitute such grant to Agent.
Upon the sending of such notice, any commercial tort claim described therein
shall constitute part of the Collateral and shall be deemed included therein.
Without limiting the authorization of Agent provided in Section 5.2(a) hereof or
otherwise arising by the execution by Borrower of this Agreement or any of the
other Financing Agreements, Agent is hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Agent or its
designee as secured party and Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, Borrower shall promptly upon Agent's request, execute and deliver, or
cause to be executed and delivered, to Agent such other agreements, documents
and instruments as Agent may require in connection with such commercial tort
claim.
(j) Borrower does not have any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for goods
located in the United States in transit to a location of Borrower permitted
herein in the ordinary course of business of Borrower in the possession of the
carrier transporting such goods. In the event that any goods, documents of title
or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Information
Certificate or such carriers, Borrower shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, Borrower shall deliver to Agent a
Collateral Access Agreement duly authorized, executed and delivered by such
person and Borrower.
(k) Borrower shall take any other actions reasonably requested by Agent
from time to time to cause the attachment, perfection and first priority of, and
the ability of Agent to enforce, the security interest of Agent in any and all
of the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC or other applicable law, to the extent, if any, that Borrower's
signature thereon is required therefor, (ii) causing Agent's name to be noted as
secured party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of Agent to
-42-
enforce, the security interest of Agent in such Collateral, (iii) complying with
any provision of any statute, regulation or treaty of the United States as to
any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Agent
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Agent receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Agent.
Until such time as Agent shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Agent and Lenders by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Agent may specify, with such banks as are acceptable to Agent
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Receivables and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. Borrower shall
deliver, or cause to be delivered to Agent a Deposit Account Control Agreement
duly authorized, executed and delivered by each bank where a Blocked Account is
maintained as provided in Section 5.2 hereof or at any time and from time to
time Agent may become bank's customer with respect to any of the Blocked
Accounts and promptly upon Agent's request, Borrower shall execute and deliver
such agreements and documents as Agent may require in connection therewith.
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Agent or any Lender, whether in respect of the
Receivables, as proceeds of Inventory or other Collateral or otherwise shall be
treated as payments to Agent and Lenders in respect of the Obligations and
therefore shall constitute the property of Agent and Lenders to the extent of
the then outstanding Obligations.
-43-
(b) Borrower and its shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as
the property of Agent, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Agent. In no event
shall the same be commingled with Borrower's own funds. Borrower agrees to
reimburse Agent on demand for any amounts owed or paid to any bank or other
financial institution at which a Blocked Account or any other deposit account or
investment account is established or any other bank financial institution or
other person involved in the transfer of funds to or from the Blocked Accounts
arising out of Agent's payments to or indemnification of such bank or person.
The obligation of Borrower to reimburse Agent for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Agent Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Agent shall apply payments received or collected from Borrower or for the
account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Agent from Borrower; second, to pay any
fees, indemnities or expense reimbursements then due to Lenders from Borrower;
third, to pay interest due in respect of any Loans (and including any Special
Agent Advances); fourth, to pay or prepay principal in respect of Special Agent
Advances; fifth, to pay principal due in respect of the Loans; sixth, to pay or
prepay any other Obligations whether or not then due, in such order and manner
as Agent determines. Notwithstanding anything to the contrary contained in this
Agreement, (i) unless so directed by Borrower, or unless a Default or an Event
of Default shall exist or have occurred and be continuing, Agent shall not apply
any payments which it receives to any Eurodollar Rate Loans, except (A) on the
expiration date of the Interest Period applicable to any such Eurodollar Rate
Loans or (B) in the event that there are no outstanding Prime Rate Loans and
(ii) to the extent Borrower uses any proceeds of the Loans or Letter of Credit
Accommodations to acquire rights in or the use of any Collateral or to repay any
Indebtedness used to acquire rights in or the use of any Collateral, payments in
respect of the Obligations shall be deemed applied first to the Obligations
arising from Loans and Letter of Credit Accommodations that were not used for
such purposes and second to the Obligations arising from Loans and Letter of
Credit Accommodations the proceeds of which were used to acquire rights in or
the use of any Collateral in the chronological order in which Borrower acquired
such rights in or use.
(b) At Agent's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Agent and Lenders on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Agent or any Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
-44-
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Agent or such Lender. Borrower shall be liable to pay
to Agent, and does hereby indemnify and hold Agent and Lenders harmless for the
amount of any payments or proceeds surrendered or returned. This Section 6.4(b)
shall remain effective notwithstanding any contrary action which may be taken by
Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
6.5 Authorization to Make Loans. Agent is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Agent, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. (Atlanta, Georgia time) on any day shall be deemed to have been made
as of the opening of business on the immediately following Business Day. All
Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lenders to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by Borrower
to Agent on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement, the other Financing Agreements and the Purchase Agreements and
consummation of the Merger. All other Loans made or Letter of Credit
Accommodations provided to or for the benefit of Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise prohibited
by the terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Loans to be considered a "purpose credit" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended..
6.7 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
-45-
6.8 Sharing of Payments, Etc.
(a) Borrower agrees that, in addition to (and without limitation of)
any right of setoff, banker's lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject, as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset
balances held by it for the account of Borrower at any of its offices, in
dollars or in any other currency, against any principal of or interest on any
Loans owed to such Lender or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
Borrower), in which case it shall promptly notify Borrower and Agent thereof;
provided, that, such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender (including Agent) shall obtain from Borrower payment
of any principal of or interest on any Loan owing to it or payment of any other
amount under this Agreement or any of the other Financing Agreements through the
exercise of any right of setoff, banker's lien or counterclaim or similar right
or otherwise (other than from Agent as provided herein), and, as a result of
such payment, such Lender shall have received more than its Pro Rata Share of
the principal of the Loans or more than its share of such other amounts then due
hereunder or thereunder by Borrower to such Lender than the percentage thereof
received by any other Lender, it shall promptly pay to Agent, for the benefit of
Lenders, the amount of such excess and simultaneously purchase from such other
Lenders a participation in the Loans or such other amounts, respectively, owing
to such other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.
(c) Borrower agrees that any Lender purchasing a participation (or
direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker's lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
right of setoff, banker's lien, counterclaims or similar rights or shall affect
the right of any Lender to exercise, and retain the benefits of exercising, any
such right with respect to any other Indebtedness or obligation of Borrower. If,
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section applies, such
Lender shall, to the extent practicable, assign such rights to Agent for the
benefit of Lenders and, in any event, exercise its rights in respect of such
secured claim in a manner consistent with the rights of Lenders entitled under
this Section to share in the benefits of any recovery on such secured claim.
-46-
6.9 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient manner
and to minimize the transfer of funds between Agent and Lenders, Agent may, at
its option, subject to the terms of this Section, make available, on behalf of
Lenders, the full amount of the Loans requested or charged to Borrower's loan
account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without requirement of prior notice to Lenders of the proposed Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
(Atlanta, Georgia time) on the Business Day immediately preceding the date of
each settlement computation; provided, that, Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week. Agent shall deliver to each of the Lenders after the end of each week, or
at such lesser period or periods as Agent shall determine, a summary statement
of the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a "Settlement Period"). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m.
(Atlanta, Georgia time), then such Lender shall make the settlement transfer
described in this Section by no later than 3:00 p.m. (Atlanta, Georgia time) on
the same Business Day and if received by a Lender after such time, then such
Lender shall make the settlement transfer by not later than 3:00 p.m. (Atlanta,
Georgia time) on the next Business Day following the date of receipt. If, as of
the end of any Settlement Period, the amount of a Lender's Pro Rata Share of the
outstanding Loans is more than such Lender's Pro Rata Share of the outstanding
Loans as of the end of the previous Settlement Period, then such Lender shall
forthwith (but in no event later than the time set forth in the preceding
sentence) transfer to Agent by wire transfer in immediately available funds the
amount of the increase. Alternatively, if the amount of a Lender's Pro Rata
Share of the outstanding Loans in any Settlement Period is less than the amount
of such Lender's Pro Rata Share of the outstanding Loans for the previous
Settlement Period, Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Agent. Agent and each Lender agrees to mark its books and records at
the end of each Settlement Period to show at all times the dollar amount of its
Pro Rata Share of the outstanding Loans and Letter of Credit Accommodations.
Each Lender shall only be entitled to receive interest on its Pro Rata Share of
the Loans to the extent such Loans have been funded by such Lender. Because the
Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to
the time when Lenders will actually advance and/or be repaid such Loans,
interest with respect to Loans shall be allocated by Agent in accordance with
the amount of Loans actually advanced by and repaid to each Lender and the Agent
and shall accrue from and including the date such Loans are so advanced to but
excluding the date such Loans are either repaid by Borrower or actually settled
with the applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by Borrower, Agent may apply such amounts repaid directly to any
-47-
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is funding a particular Loan to Borrower pursuant to this
Section above on any day, Agent may assume that each Lender will make available
to Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause
a corresponding amount to be made available to or for the benefit of Borrower on
such day. If Agent makes such corresponding amount available to Borrower and
such corresponding amount is not in fact made available to Agent by such Lender,
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of
Atlanta or at Agent's option based on the arithmetic mean determined by Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (Atlanta, Georgia time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and if
such amounts are not paid within three (3) days of Agent's demand, at the
highest Interest Rate provided for in Section 3.1 hereof applicable to Prime
Rate Loans. During the period in which such Lender has not paid such
corresponding amount to Agent, notwithstanding anything to the contrary
contained in this Agreement or any of the other Financing Agreements, the amount
so advanced by Agent to or for the benefit of Borrower shall, for all purposes
hereof, be a Loan made by Agent for its own account. Upon any such failure by a
Lender to pay Agent, Agent shall promptly thereafter notify Borrower of such
failure and Borrower shall pay such corresponding amount to Agent for its own
account within five (5) Business Days of Borrower's receipt of such notice. A
Lender who fails to pay Agent its Pro Rata Share of any Loans made available by
the Agent on such Lender's behalf, or any Lender who fails to pay any other
amount owing by it to Agent, is a "Defaulting Lender". Agent shall not be
obligated to transfer to a Defaulting Lender any payments received by Agent for
the Defaulting Lender's benefit, nor shall a Defaulting Lender be entitled to
the sharing of any payments hereunder (including any principal, interest or
fees). Amounts payable to a Defaulting Lender shall instead be paid to or
retained by Agent. Agent may hold and, in its discretion, re-lend to Borrower
the amount of all such payments received or retained by it for the account of
such Defaulting Lender. For purposes of voting or consenting to matters with
respect to this Agreement and the other Financing Agreements and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Lender's Commitment shall be deemed to be zero (0). This Section shall
remain effective with respect to a Defaulting Lender until such default is
cured. The operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by Borrower or any Obligor of their duties and obligations
hereunder.
-48-
(e) Nothing in this Section or elsewhere in this Agreement or the other
Financing Agreements shall be deemed to require Agent to advance funds on behalf
of any Lender or to relieve Lender from its obligation to fulfill its Commitment
hereunder or to prejudice any rights that Borrower may have against any Lender
as a result of any default by any Lender hereunder in fulfilling its Commitment.
6.10 Obligations Several; Independent Nature of Lenders' Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Agent with the following documents in a form
satisfactory to Agent:
(i) on a regular basis as required by Agent, (A) schedules of
sales made, credits issued and cash received, (B) reports of Borrower's
Inventory, including all in-transit Inventory, and (C) a Borrowing Base
certificate in the form of Exhibit E hereto;
(ii) as soon as possible after the end of each month (but in
any event within twenty (20) days after the end thereof), on a monthly
basis or more frequently as Agent may request, (A) perpetual inventory
reports, (B) inventory reports by location and category (including
identifying Inventory at locations owned and operated by third parties
or on consignment) and including product mixes and sizes, (C) agings of
accounts receivable (together with a reconciliation to the previous
month's aging and general ledger), (D) agings of accounts payable (and
including information indicating the amounts owing to owners and
lessors of leased premises, warehouses, processors and other third
parties from time to time in possession of any Collateral) and (E)
reports detailing any sales or transfers of Equipment or Real Property
during the prior month;
(iii) upon Agent's request, (A) copies of customer statements
and credit memos, remittance advices and reports, and copies of deposit
slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower; and
(iv) such other reports as to the Collateral as Agent shall
request from time to time.
- -49-
(b) If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Agent and to
follow Agent's instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Agent promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any account debtor involving
an Account exceeding $100,000 or the assertion of any claims, offsets, defenses
or counterclaims by any account debtor involving an Account exceeding $100,000,
or any disputes with account debtors involving an Account exceeding $100,000, or
any settlement, adjustment or compromise thereof, (ii) all material adverse
information known to Borrower relating to the financial condition of any account
debtor and (iii) any event or circumstance which, to the best of Borrower's
knowledge, would cause Agent to consider any then existing Accounts as no longer
constituting Eligible Accounts. No credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account debtor
without Agent's consent, except in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed in writing to Agent
and except as set forth in the schedules delivered to Agent pursuant to Section
7.1(a) above. So long as no Event of Default exists or has occurred and is
continuing, Borrower shall have the right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Agent shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any invoice
delivered to Agent or schedule thereof delivered to Agent shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Agent, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Agent in accordance with the
terms of this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable foreign, Federal, State or local laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(c) Agent shall have the right at any time or times, in Agent's name or
in the name of a nominee of Agent, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(d) On or before January 31, 2004, Borrower shall deliver to Agent a
report dated as of December 31, 2003, setting forth the balance of each account
payable for Borrower and Target which existed as of the Agreement Date,
-50-
accompanied by a certificate of the chief financial officer of Borrower
certifying that all accounts payable of Borrower and Target as of the Agreement
Date have been paid in full except for accounts payable being disputed in good
faith and fully disclosed on such certificate.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Agent,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Agent may request on or after an Event of Default, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be satisfactory to Agent concerning such
physical count; (c) Borrower shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Agent,
except for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location and except for Inventory shipped from the
manufacturer thereof to Borrower which is in transit to the locations set forth
or permitted herein; (d) upon Agent's request, Borrower shall, at its expense,
no more than two (2) times in any twelve (12) month period, but at any time or
times as Agent may request on or after an Event of Default, deliver or cause to
be delivered to Agent written appraisals as to the Inventory in form, scope and
methodology acceptable to Agent and by an appraiser acceptable to Agent,
addressed to Agent and Lenders and upon which Agent and Lenders are expressly
permitted to rely; (e) Borrower shall produce, use, store and maintain the
Inventory with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto); (f) none of the Inventory or
other Collateral constitutes farm products or the proceeds thereof; Borrower
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (g) Borrower shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Borrower to repurchase such
Inventory except for the right of return given to customers of Borrower
consistent with its current policies as of the date hereof; (h) Borrower shall
keep the Inventory in good and marketable condition; and (i) Borrower shall not,
without prior written notice to Agent or the specific identification of such
Inventory with respect thereto provided by Borrower to Lender pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval. In addition to, and not in limitation of, anything to the contrary
contained herein, Agent shall have the right to request the delivery to Agent of
all documents, invoices and bills of lading relating to any in-transit
Inventory.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a) upon Agent's request, Borrower shall, at its
expense, no more than one (1) time in any twelve (12) month period, but at any
time or times as Agent may request on or after an Event of Default, deliver or
cause to be delivered to Agent written appraisals as to the Equipment and/or the
Real Property in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent, addressed to Agent and upon which Agent is
expressly permitted to rely; (b) Borrower shall keep the Equipment in good
order, repair, running and marketable condition (ordinary wear and tear
-51-
excepted); (c) Borrower shall use the Equipment and Real Property with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws; (d) the Equipment is and
shall be used in Borrower's business and not for personal, family, household or
farming use; (e) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrower in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property unless it is attached to the Real Property subject to the Mortgage; and
(g) Borrower assumes all responsibility and liability arising from the use of
the Equipment and Real Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Agent (and all persons designated by Agent) as Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in Borrower's or Agent's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Receivables or other Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor or other obligor in respect of any Receivables or
other Collateral, (viii) notify the post office authorities to change the
address for delivery of remittances from account debtors or other obligors in
respect of Receivables or other proceeds of Collateral to an address designated
by Agent, and open and dispose of all mail addressed to Borrower and handle and
store all mail relating to the Collateral; and (ix) do all acts and things which
are necessary, in Agent's determination, to fulfill Borrower's obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, (ii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse Borrower's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any
Lender and deposit the same in Agent's account for application to the
Obligations, (iv) endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods pertaining thereto or any other Collateral, including any warehouse
or other receipts, or bills of lading and other negotiable or non-negotiable
documents, (v) clear Inventory the purchase of which was financed with Letter of
Credit Accommodations through U.S. Customs or foreign export control authorities
in Borrower's name, Agent's name or the name of Agent's designee, and to sign
and deliver to customs officials powers of attorney in Borrower's name for such
purpose, and to complete in Borrower's or Agent's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
-52-
the proceeds thereof, and (vi) sign Borrower's name on any verification of
Receivables and notices thereof to account debtors or any secondary obligors or
other obligors in respect thereof. Borrower hereby releases Agent and Lenders
and their respective officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Agent's or any
Lender's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any material agreement with a third
party that affects the Collateral, its value or the ability of Agent to collect,
sell or otherwise dispose of the Collateral or the rights and remedies of Agent
therein or the ability of Borrower to perform its obligations hereunder or under
the other Financing Agreements, (b) pay or bond on appeal any judgment entered
against Borrower, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any amount, incur any expense or perform any act which, in Agent's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Agent and Lenders with respect thereto. Agent
may add any amounts so expended to the Obligations and charge Borrower's account
therefor, such amounts to be repayable by Borrower on demand. Agent and Lenders
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Agent or any Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrower, (a) Agent or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Agent such copies of such books and records or extracts therefrom as Agent may
request, and (c) Agent or any Lender or Agent's designee may use during normal
business hours such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of Receivables and
realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Agent and Lenders the
following (which shall survive the execution and delivery of this Agreement and
which shall be deemed to be made after giving effect to the Merger), the truth
and accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations to Borrower:
8.1 Corporate Existence, Power and Authority. Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a Material Adverse Effect. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder (a) are all within Borrower's corporate powers, (b)
have been duly authorized, (c) are not in contravention of law or the terms of
- -53-
Borrower's certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or its property are bound and (d) will not result in
the creation or imposition of, or require or give rise to any obligation to
grant, any lien, security interest, charge or other encumbrance upon any
property of Borrower other than the liens and security interest under the
Financing Agreements. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of Borrower is as set forth on the signature
page of this Agreement and in the Information Certificate. Borrower has not
during the past five years, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in the Information Certificate.
(b) Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
Borrower or accurately states that Borrower has none and accurately sets forth
the federal employer identification number of Borrower.
(c) The chief executive office and mailing address of Borrower and
Borrower's Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 to the Information Certificate hereto and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in Schedule 8.2 to the Information Certificate,
subject to the right of Borrower to establish new locations in accordance with
Section 9.2 below. The Information Certificate correctly identifies any of such
locations which are not owned by Borrower and sets forth the owners and/or
operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower or Target which have been or may hereafter be
delivered by or on behalf of Borrower to Agent and Lenders pursuant to Section
9.6(a) have been prepared in accordance with GAAP (except as to any interim
financial statements, to the extent such statements are subject to normal
year-end adjustments and do not include any notes) and fairly present the
financial condition and the results of operation of Borrower and Target as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrower to Agent prior to the date of
this Agreement, there has been no act, condition or event which has had or is
likely to have a Material Adverse Effect since June 30, 2003. Each Borrowing
Base certificate delivered to Agent shall be true and correct as of the date
specified therein.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral (including all assets of Target) subject only to the
liens indicated on Schedule 8.4 to the Information Certificate hereto and the
-54-
other liens permitted under Section 9.8 hereof. Borrower has good and marketable
fee simple title to or valid leasehold interests in all of its Real Property and
good, valid and merchantable title to all of its other properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except (a) those granted to Agent, (b) as shown in the
title insurance policies delivered and accepted by Agent in connection with the
Mortgages, or (c) as permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
8.6 Litigation. Except as set forth in Schedule 8.6 to the Information
Certificate, (a) there is no present investigation by any Governmental Authority
pending, or to the best of Borrower's knowledge threatened, against or affecting
Borrower its assets or business and (b) there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrower's knowledge threatened,
against Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, the Purchase Agreements or the
Merger Documents, in each case, which if adversely determined against Borrower
has or could reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
Borrower is not in default in any material respect under, or in
violation in any material respect of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound and Borrower is in compliance in all material
respects with the requirements of all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any foreign, Federal,
State or local Governmental Authority relating to its business.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information Certificate,
Borrower and any Subsidiary have not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of Borrower and any Subsidiary complies in all material respects with
all Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
-55-
(b) Except as set forth on Schedule 8.8 to the Information Certificate,
there has been no investigation, proceeding, complaint, order, directive, claim,
citation or notice, by any Governmental Authority or any other person nor is any
pending or to the best of Borrower's knowledge threatened, with respect to any
non-compliance with, or violation of the requirements of, any Environmental Law
by Borrower and any Subsidiary or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law,
and all licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect.
8.9 Employee Benefits.
(a) Except as set forth on Schedule 8.9 hereto, each Plan is in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal or State law. Except as set forth on Schedule 8.9 hereto,
each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service or
is a standardized Plan that does not require a separate determination letter. To
the best of Borrower's knowledge, nothing has occurred which would cause the
loss of a favorable qualification. Borrower and its ERISA Affiliates have made
all required contributions to any Plan subject to Section 412 of the Code and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending, or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan.
(c) Except as set forth on Schedule 8.9 hereto, (i) no ERISA Event has
occurred or is reasonably expected to occur; (ii) the current value of each
Plan's assets (determined in accordance with the assumptions used for funding
such Plan pursuant to Section 412 of the Code) are not less than such Plan's
liabilities under Section 4001(a)(16) of ERISA; (iii) Borrower and its ERISA
Affiliates have not incurred and do not reasonably expect to incur, any
liability under Title IV of ERISA with respect to any Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) Borrower and its ERISA
Affiliates have not incurred and do not reasonably expect to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
-56-
4243 of ERISA with respect to a Multiemployer Plan; and (v) Borrower and its
ERISA Affiliates have not engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 to the Information
Certificate hereto, subject to the right of Borrower to establish new accounts
in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has
the right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrower does not have any Intellectual Property registered, or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 to the Information Certificate hereto and has not granted any
licenses with respect thereto other than as set forth in Schedule 8.11 to the
Information Certificate. No event has occurred which permits or would permit
after notice or passage of time or both, the revocation, suspension or
termination of such rights. To the best of Borrower's knowledge, except as set
forth on Schedule 8.11 to the Information Certificate, no slogan or other
advertising device, product, process, method, substance or other Intellectual
Property or goods bearing or using any Intellectual Property presently
contemplated to be sold by or employed by Borrower infringes any patent,
trademark, servicemark, tradename, copyright, license or other Intellectual
Property owned by any other Person presently and no claim or litigation is
pending or threatened against or affecting Borrower contesting its right to sell
or use any such Intellectual Property. Schedule 8.11 to the Information
Certificate hereto sets forth all of the agreements or other arrangements of
Borrower pursuant to which Borrower has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property owned
by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of Borrower as in effect on
the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by Borrower after the date hereof,
collectively, the "License Agreements" and individually, a "License Agreement").
No trademark, servicemark, copyright or other Intellectual Property at any time
used by Borrower which is owned by another Person, or owned by Borrower subject
to any security interest, lien, collateral assignment, pledge or other
encumbrance in favor of any person other than Agent, is affixed to any Eligible
Inventory, except to the extent permitted under the term of the License
Agreements listed on Schedule 8.11 to the Information Certificate hereto.
8.12 Subsidiaries; Affiliates; Capitalization.
(a) Borrower does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set
forth in Schedule 8.12 to the Information Certificate.
(b) Borrower is the record and beneficial owner of all of the issued
and outstanding shares of Capital Stock of each of the Subsidiaries listed on
the Information Certificate as being owned by Borrower and there are no proxies,
-57-
irrevocable or otherwise, with respect to such shares and no equity securities
of any of the Subsidiaries are or may become required to be issued by reason of
any options, warrants, rights to subscribe to, calls or commitments of any kind
or nature and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional
shares of it Capital Stock or securities convertible into or exchangeable for
such shares.
(c) The issued and outstanding shares of Capital Stock of Borrower are
directly and beneficially owned and held by the persons indicated on the
Information Certificate, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, other than liens in favor of the
Agent, except as disclosed in writing to Agent prior to the date hereof.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a list
(including dates of termination) of all collective bargaining or similar
agreements between or applicable to Borrower and any union, labor organization
or other bargaining agent in respect of the employees of Borrower on the date
hereof.
(b) There is (i) no significant unfair labor practice complaint pending
against Borrower or, to the best of Borrower's knowledge, threatened against it,
before the National Labor Relations Board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is pending on the date hereof against Borrower or, to best
of Borrower's knowledge, threatened against it, and (ii) no significant strike,
labor dispute, slowdown or stoppage is pending against Borrower or, to the best
of Borrower's knowledge, threatened against Borrower.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
except as set forth on Schedule 8.4 to the Information Certificate with respect
to SAIM, the ability of Borrower or any of its Subsidiaries to incur
Indebtedness or grant security interests to Agent or any Lender in the
Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which Borrower is a party or is bound as of
the date hereof. Borrower has delivered true, correct and complete copies of
such Material Contracts to Agent. Borrower is not in breach of or in default
under any Material Contract and has not received any notice of the intention of
any other party thereto to terminate any Material Contract.
8.16 Payable Practices. Borrower has not made any material adverse
change in the historical accounts payable practices from those in effect for
Target immediately prior to the date hereof.
-58-
8.17 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Agent or any Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information is not misleading.
Since June 30, 2003, no event or circumstance has occurred which has had or
could reasonably be expected to have a Material Adverse Effect, which has not
been fully and accurately disclosed to Agent in writing prior to the date
hereof.
8.18 Acquisition of Purchased Stock; Merger.
(a) Upon payment by Borrower of the purchase price therefor with the
proceeds of the initial Loans hereunder, (i) the Purchase Agreements and the
transactions contemplated thereunder have been duly executed, delivered and
performed in accordance with their terms by the respective parties thereto in
all respects, including the fulfillment (not merely the waiver, except as may be
disclosed to Agent and consented to in writing by Agent) of all conditions
precedent set forth therein and giving effect to the terms of the Purchase
Agreements and the assignments to be executed and delivered by Seller
thereunder, Borrower acquired and has good title to the Purchased Stock, free
and clear of all claims, liens, pledges and encumbrances of any kind, other than
liens in favor of the Agent, and (ii) the Merger is valid and effective in
accordance with the terms of the Merger Documents, and the corporation statutes
of the State of North Carolina and Borrower is the surviving corporation
pursuant to the Merger.
(b) Upon payment by Borrower of the purchase price with respect to the
Stock Purchase Agreement with the proceeds of the initial Loans hereunder and
the filing of the Merger Documents, all actions and proceedings required by the
Purchase Agreements or the Merger Documents, applicable law or regulation
(including, but not limited to, compliance with the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended) have been taken and the transactions
required thereunder have been duly and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements or the Merger Documents and no
governmental or other action or proceeding has been threatened or commenced,
seeking any injunction, restraining order or other order which seeks to void or
otherwise modify the transactions described in the Purchase Agreements or the
Merger Documents.
(d) Borrower has delivered, or caused to be delivered, to Agent true,
correct and complete copies of the Purchase Agreements and the Merger Documents.
8.19 Solvency. Borrower is Solvent and will continue to be Solvent
after the creation of the Obligations, the security interests of Agent and the
other transactions contemplated hereunder.
8.20 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
-59-
to have been made again to Agent and Lenders on the date of each additional
loan, advance or letter of credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrower shall now or
hereafter give, or cause to be given, to Agent or any Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Borrower shall at all times preserve, renew and keep in full force
and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits, licenses, trademarks,
trade names, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted.
(b) Borrower shall not change its name unless each of the following
conditions is satisfied: (i) Agent shall have received not less than thirty (30)
days' prior written notice from Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Agent shall have received a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of
Borrower as soon as it is available. Notwithstanding the foregoing, Borrower
shall be permitted to amend its organizational documents as necessary to change
its name to M. J. Soffe Co.
(c) Borrower shall not change its chief executive office or its mailing
address or organizational identification number (or if it does not have one,
shall not acquire one) unless Agent shall have received not less than thirty
(30) days' prior written notice from Borrower of such proposed change, which
notice shall set forth such information with respect thereto as Agent may
require and Agent shall have received such agreements as Agent may require in
connection therewith. Borrower shall not change its type of organization,
jurisdiction of organization or other legal structure.
9.2 New Collateral Locations. Borrower may only open any new location
within the continental United States provided Borrower (a) gives Agent fifteen
(15) days prior written notice from Borrower of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Agent such agreements, documents, and instruments as Agent may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders applicable to it and duly observe all requirements
of any Federal, State or local Governmental Authority, including ERISA, the
Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations, orders,
-60-
permits and stipulations relating to environmental pollution and employee health
and safety, including all of the Environmental Laws.
(b) Borrower shall give written notice to Agent immediately upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material, or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice, with
respect to: (A) any non-compliance with or violation of any Environmental Law by
Borrower or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material other than in the ordinary course of business and other than
as permitted under any applicable Environmental Law. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Agent. Borrower shall take prompt action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Agent on such response.
(c) Without limiting the generality of the foregoing, whenever Agent
determines that there is non-compliance, or any condition which requires any
action by or on behalf of Borrower in order to avoid any such non-compliance,
with any Environmental Law, Borrower shall, at Agent's request and Borrower's
expense: (i) cause an independent environmental engineer acceptable to Agent to
conduct such tests of the site where Borrower's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Agent a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(d) Borrower shall indemnify and hold harmless Agent, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including reasonable attorneys' fees actually incurred and legal
expenses) directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material, including the
costs of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation of
any closure, remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on Agent
or any Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Agent and Lenders harmless with respect to
the foregoing, and to repay to Agent or such Lender on demand the amount
-61-
thereof, and until paid by Borrower such amount shall be added and deemed part
of the Loans, provided, that, nothing contained herein shall be construed to
require Borrower to pay any income or franchise taxes attributable to the income
of Agent or Lenders from any amounts charged or paid hereunder to such Agent or
Lenders. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary to, at
all times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Agent as
to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Agent as Agent shall require as proof of such insurance, and, if
Borrower fails to do so, Agent is authorized, but not required, to obtain such
insurance at the expense of Borrower. All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction
of coverage and that Agent may act as attorney for Borrower in obtaining, and at
any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance. Borrower shall cause
Agent to be named as a loss payee and an additional insured (but without any
liability for any premiums) under such insurance policies and Borrower shall
obtain non-contributory lender's loss payable endorsements to all insurance
policies in form and substance satisfactory to Agent. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by Borrower or any of its
Affiliates. At its option, Agent may apply any insurance proceeds received by
Agent at any time to the cost of repairs or replacement of Collateral and/or to
payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly
furnish to Agent and Lenders all such financial and other information as Agent
shall reasonably request relating to the Collateral and the assets, business and
operations of Borrower, and to notify the auditors and accountants of Borrower
that Agent is authorized to obtain such information directly from them. Without
limiting the foregoing, Borrower shall furnish or cause to be furnished to
Agent, the following:
(i) within thirty (30) days after the end of each fiscal
month, monthly unaudited consolidated financial statements, and
unaudited consolidating financial statements (including in each case
balance sheets, statements of income and loss, statements of cash flow
and statements of shareholders' equity), all in reasonable detail,
fairly presenting the financial position and the results of the
operations of Borrower and its Subsidiaries as of the end of and
-62-
through such fiscal month, certified to be correct by the chief
financial officer of Borrower, subject to normal year-end adjustments
and accompanied by a compliance certificate substantially in the form
of Exhibit F hereto, along with a schedule in a form reasonably
satisfactory to Agent of the calculations used in determining, as of
the end of such month, whether Borrower is in compliance with the
covenants set forth in Section 9.17 of this Agreement for such month;
(ii) within forty-five (45) days after the end of each fiscal
quarter (other than at the end of the fiscal year), unaudited
consolidated financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity); and
(iii) within ninety (90) days after the end of each fiscal
year, audited consolidated financial statements and audited
consolidating financial statements of Parent and its Subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and
the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of
Parent and its Subsidiaries as of the end of and for such fiscal year,
together with the unqualified opinion of independent certified public
accountants, which accountants shall be Ernst & Young LLP or such other
independent accounting firm selected by Borrower and acceptable to
Agent, that such audited consolidated financial statements have been
prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of Parent and its Subsidiaries as of
the end of and for the fiscal year then ended (the "Annual Financial
Statements").
(b) Borrower shall promptly notify Agent in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim relating
to Collateral having a value of more than $100,000 or any other property which
is security for the Obligations or which if adversely determined could result in
any Material Adverse Effect, (ii) any Material Contract of Borrower being
terminated or amended or any new Material Contract entered into (in which event
Borrower shall provide Agent with a copy of such Material Contract), (iii) any
order, judgment or decree in excess of $500,000 shall have been entered against
Borrower or any of its properties or assets, (iv) any notification of violation
of laws or regulations received by Borrower, (v) any ERISA Event; and (vi) the
occurrence of any Default or Event of Default.
(c) Borrower shall promptly after the sending or filing thereof furnish
or cause to be furnished to Agent copies of all reports which Borrower sends to
its stockholders generally and copies of all reports and registration statements
which Borrower files with the Securities and Exchange Commission, any national
securities exchange or the National Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Agent such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Agent may, from time to time, reasonably
request. Agent is hereby authorized to deliver a copy of any financial statement
or any other information relating to Borrower to any court or other Governmental
Authority, to the extent required by any Governmental Authority or any Federal,
state or local law, rule or regulation, subpoena or court order, or to any
-63-
Affiliate of Lender or to any participant or assignee or prospective participant
or assignee. Borrower hereby irrevocably authorizes and directs all accountants
or auditors to deliver to Agent, at Borrower's expense, copies of the financial
statements of Borrower and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower and to disclose to Agent and
Lenders such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Agent or any
Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1)
year after the same are delivered to Agent or such Lender, except as otherwise
designated by Borrower to Agent or such Lender in writing.
(e) Borrower and its Subsidiaries shall deliver, or cause to be
delivered, to Agent, within thirty (30) days after the date hereof, an
internally-prepared unaudited opening balance sheet of Borrower and its
Subsidiaries, prepared on a consolidated and consolidating basis, after giving
effect to the transactions contemplated by this Agreement and the Purchase
Agreements.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it; provided, that,
Borrower and Target shall be permitted to consummate the Merger;
(b) sell, issue, assign, lease, license, transfer, abandon or otherwise
dispose of any Capital Stock or Indebtedness to any other Person or any of its
assets to any other Person, except for (i) sales of Inventory in the ordinary
course of business; (ii) the sale or other disposition of Equipment (including
worn-out or obsolete Equipment or Equipment no longer used or useful in the
business of Borrower) so long as (A) any proceeds are paid to Agent and (B) such
sales or other dispositions do not involve Equipment having an aggregate fair
market value in excess of $100,000 for all such Equipment disposed of in any
fiscal year of Borrower; (iii) the issuance and sale by Borrower of Capital
Stock of Borrower after the date hereof; provided, that, (A) Agent shall have
received not less than ten (10) Business Days prior written notice of such
issuance and sale by Borrower, which notice shall specify the parties to whom
such shares are to be sold, the terms of such sale, the total amount which it is
anticipated will be realized from the issuance and sale of such stock and the
net cash proceeds which it is anticipated will be received by Borrower from such
sale, (B) Borrower shall not be required to pay any cash dividends or repurchase
or redeem such Capital Stock or make any other payments in respect thereof, (C)
the terms of such Capital Stock, and the terms and conditions of the purchase
and sale thereof, shall not include any terms that include any limitation on the
right of Borrower to request or receive Loans or Letter of Credit Accommodations
or the right of Borrower to amend or modify any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrower with Agent or Lenders or are
more restrictive or burdensome to Borrower than the terms of any Capital Stock
in effect on the date hereof, (D) except as Agent may otherwise agree in
writing, all of the proceeds from such sale and issuance shall be paid to Agent
for application to the Obligations in such order and manner as Agent may
determine or at Agent's option, to be held as cash collateral for the
Obligations, and (E) as of the date of such issuance and sale and after giving
effect thereto, no Default or Event of Default shall exist or have occurred;
-64-
(iv) the assignment by Target within 150 days of the Agreement Date of certain
doubtful Accounts to Sellers in accordance with Section 9.7 of the Stock
Purchase Agreement ; (v) the IRC Section 1031 exchange of certain real property
located in Fayetteville, North Carolina between Target and Middle Road
Properties LLC, as described in the Stock Purchase Agreement and (vi)
dispositions of investments permitted under Section 9.10(b) to the extent the
proceeds thereof are used to acquire additional investments permitted under
Section 9.10(b).
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any security interest or lien with respect to any such assets
or properties, except:
(a) the security interests and liens of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower, or Subsidiary, as the case may be and with respect to
which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrower's or such
Subsidiary's business to the extent: (i) such liens secure Indebtedness which is
not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including Capital
Leases) and purchase money mortgages on Real Property to secure Indebtedness
permitted under Section 9.9(b) hereof;
(f) the security interests and liens on assets of Borrower securing the
Seller Note and Additional Consideration in favor of Sellers to the extent such
liens are subject to the Subordination Agreement;
-65-
(g) the security interests and liens securing the Obligations (as
defined under the Parent Revolving Loan Agreement) in favor of the Parent
Revolving Agent to the extent such liens are subject to the Intercreditor
Agreement;
(h) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate; and
(i) liens specified in any title insurance policy delivered to and
accepted by Agent in connection with any Mortgage.
9.9 Indebtedness. Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, suffer or permit to exist, any Indebtedness, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly), the
Indebtedness, performance, dividends or other obligations of any Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $2,000,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
Borrower other than the Equipment or Real Property so acquired, and the
Indebtedness secured thereby does not exceed the costs of the Equipment or Real
Property so acquired, as the case may be;
(c) guarantees by Borrower or any Guarantor of the Obligations (as
defined in the Parent Revolving Loan Agreement);
(d) Indebtedness of Borrower evidenced by or arising under the Seller
Note and the Additional Consideration required to be paid in accordance with the
Stock Purchase Agreement, in each case as in effect on the date hereof,
provided, that:
(i) the aggregate principal amount of such Indebtedness shall
not exceed $20,000,000 (of which not more than $8,000,000 shall
constitute Indebtedness under the Seller Note and not more than
$12,000,000 shall constitute Indebtedness under the Additional
Consideration), less the aggregate amount of all repayments,
repurchases or redemptions, whether optional or mandatory, in respect
thereof;
(ii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness; except that, Borrower may
make payments permitted under the Subordination Agreement;
(iii) Borrower shall not, directly or indirectly, without the
written consent of Agent, (A) amend, modify, alter or change any terms
of such Indebtedness or the Seller Note or any related agreements,
documents or instruments, except that Borrower may, after prior written
notice to Agent, amend, modify, alter or change the terms thereof so as
to extend the maturity thereof or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such
-66-
Indebtedness other than pursuant to payments thereof, or to reduce the
interest rate or any fees in connection therewith, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose;
(iv) Borrower shall furnish to Lender all written notices of
default, acceleration or demands in connection with such Indebtedness
received by Borrower or on its behalf, promptly after receipt thereof
or sent by Borrower or on its behalf concurrently with the sending
thereof; and (v) Such Indebtedness is subject to the Subordination
Agreement at all times.
(e) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof except, that, Borrower may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrower shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be;
(f) Hedging Obligations of Borrower entered into by Borrower in the
ordinary course of the businesses of Borrower consistent with the current
practices of Borrower as of the date hereof; provided, that, such arrangements
are with banks or other financial institutions that have combined capital and
surplus and undivided profits of not less than $250,000,000, and, in each case,
such Indebtedness shall be unsecured (except that Hedging Obligations owing to
Agent or any Affiliate of Agent may be secured by the Collateral); and
(g) Indebtedness of Borrower to any Guarantor in an aggregate amount at
any time not to exceed $5,000,000 to the extent permitted by the Parent
Revolving Loan Agreement.
9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, make, or suffer or permit to exist,
any loans or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Capital Stock
or Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
-67-
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) the terms and conditions of Section 5.2
hereof shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are held;
(c) (i) the existing equity investments of Borrower as of the date
hereof in its Subsidiaries, provided, that, Borrower shall have any further
obligations or liabilities to make any capital contributions or other additional
investments or other payments to or in or for the benefit of any of such
Subsidiaries and (ii) the purchase by Borrower of the Purchased Stock as of the
Agreement Date;
(d) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Agent, upon Agent's
request, together with such stock power, assignment or endorsement by Borrower
as Agent may request;
(e) obligations of account debtors to Borrower arising from Accounts
which are past due evidenced by a promissory note made by such account debtor
payable to Borrower; provided, that, promptly upon the receipt of the original
of any such promissory note by Borrower, such promissory note shall be endorsed
to the order of Agent by Borrower and promptly delivered to Agent as so
endorsed;
(f) loans by Borrower to a Guarantor after the date hereof, provided,
that,
(i) as to all of such loans, (A) within thirty (30) days after
the end of each fiscal month, Borrower shall provide to Agent a report
in form and substance satisfactory to Agent of the outstanding amount
of such loans as of the last day of the immediately preceding month and
indicating any loans made and payments received during the immediately
preceding month, (B) the Indebtedness arising pursuant to any such loan
shall not be evidenced by a promissory note or other instrument, unless
the single original of such note or other instrument is promptly
delivered to Agent upon its request to hold as part of the Collateral,
with such endorsement and/or assignment by the payee of such note or
other instrument as Agent may require, (C) as of the date of any such
loan and after giving effect thereto, Borrower shall be Solvent, (D) as
of the date of any such loan and after giving effect thereto, (1) no
Default or Event of Default shall exist or have occurred and be
continuing, and (2) Borrower shall have Excess Availability of not less
than $5,000,000; (E) the Indebtedness arising pursuant to such loan
shall be subject to, and subordinate in right of payment to, the right
of Agent and Lenders to receive the prior final payment and
satisfaction in full of all of the Obligations on terms and conditions
acceptable to Agent, (F) promptly upon Agent's request, Agent shall
have received a subordination agreement, in form and substance
satisfactory to Agent, providing for the terms of the subordination in
right of payment of such Indebtedness of Borrower to the prior final
payment and satisfaction in full of all of the Obligations, duly
authorized, executed and delivered by any Guarantor and Borrower, and
(G) Borrower shall not, directly or indirectly make, or be required to
-68-
make, any payments in respect of such Indebtedness prior to the end of
the then current term of this Agreement; and (H) as of the date of any
such loan and after giving effect thereto, the aggregate amount of all
such loans shall not exceed $5,000,000 in the aggregate with respect to
all intercompany loans among Borrower and its Affiliates;
(g) the loans, advances and investments set forth on Schedule 9.10 to
the Information Certificate hereto; provided, that, as to such loans and
advances, (i) Borrower shall not, directly or indirectly, amend, modify, alter
or change the terms of such loans and advances or any agreement, document or
instrument related thereto and (ii) Borrower shall furnish to Agent all with
notices of default, acceleration or demands in connection with such loans and
advances either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
any Capital Stock of Borrower or such Subsidiary now or hereafter outstanding,
or set aside or otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase or otherwise acquire any shares of any class
of Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except (a) in any case in the form
of shares of Capital Stock consisting of common stock, (b) any Subsidiary of
Borrower may pay any dividends to Borrower, (c) so long as no Event of Default
is continuing, Borrower may pay (by dividend or otherwise) to Parent the amount
of Federal and state taxes which are attributable to the income or assets of
Borrower (after giving effect to any "carry forward losses" or other net losses
to which Borrower may be entitled) and (d) payments permitted under Section
9.12.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly,
(a) purchase, acquire or lease any property from, or sell, transfer or
lease any property to, any officer, director or other Affiliate of Borrower,
except (i) in the ordinary course of and pursuant to the reasonable requirements
of Borrower's business and upon fair and reasonable terms no less favorable to
Borrower than Borrower would obtain in a comparable arm's length transaction
with an unaffiliated person; (ii) to effectuate the IRC Section 1031 exchange as
provided in the Purchase Agreement, or (iii) the stock pledge, lien and security
interests securing the Seller Note and Additional Consideration, subject to the
terms of the Subordination Agreement; or
(b) make any payments (whether by dividend, loan or otherwise) of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of Borrower, except (i) reasonable compensation to officers,
-69-
employees and directors for services rendered to Borrower in the ordinary course
of business (including payments to James F. Soffe, John D. Soffe and Anthony M.
Cimaglia under those certain employment agreements dated as of the Agreement
Date), (ii) an annual payment during each fiscal year by Borrower of management
fees to Parent not to exceed $400,000 so long as (A) after giving effect to each
such payment, no Event of Default exists and is continuing; (B) Borrower had
Excess Availability for each of the immediately preceding ninety (90)
consecutive days prior to the date of such payment of not less than $4,000,000;
(C) after giving effect to any such payment, Borrower has Excess Availability of
not less than $4,000,000 and (D) that certain Industrial Lease Agreement, dated
as of the Agreement Date, between Borrower and Middle Road Properties LLC shall
not have expired or been terminated, (iii) payments by Borrower to Parent for
actual and necessary reasonable out-of-pocket legal and accounting, insurance,
marketing, payroll, information systems and similar types of services paid for
by Borrower or Parent on behalf of Borrower, in the ordinary course of their
respective businesses or as the same may be directly attributable to Borrower
and (iv) loans, dividends or other payments permitted under Sections 9.10(f) and
9.11.
9.13 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) not terminate any of such Plans so as
to incur any liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any of such Plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such Plan; or (g) not allow or suffer to exist any occurrence of
a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such Plan
that is a single employer plan, which termination could result in any liability
to the Pension Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Borrower shall, for
financial reporting purposes, cause its, and each of its Subsidiaries' (a)
fiscal years to end on the Saturday closest to June 30 of each year and (b)
fiscal quarters to end on the last day of the 13th week following the end of the
immediately preceding fiscal quarter, provided, that, the end of the fourth
fiscal quarter shall be on the last day of the 14th week following the end of
the third fiscal quarter whenever necessary to have the fourth fiscal quarter
end the Saturday closest to June 30.
9.15 Change in Business. Borrower shall not engage in any business
other than the business of Borrower on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which Borrower
is engaged on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans
or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its
-70-
properties or assets to Borrower or any Subsidiary of Borrower; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii) the
security agreement securing the Seller Note provided such prohibitions are
subject to the senior right of Agent hereunder, (iv) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of Borrower or any of its Subsidiaries, (v) customary restrictions on
dispositions of real property interests found in reciprocal easement agreements
of Borrower or any Subsidiary, (vi) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of Borrower prior to the date on which
such Subsidiary was acquired by Borrower and outstanding on such acquisition
date, and (vii) the extension or continuation of contractual obligations in
existence on the date hereof; provided, that, any such encumbrances or
restrictions contained in such extension or continuation are no less favorable
to Agent and Lenders than those encumbrances and restrictions under or pursuant
to the contractual obligations so extended or continued.
9.17 Financial Covenants.
(a) Adjusted Tangible Net Worth. Borrower and its Subsidiaries shall,
at all times have, and shall maintain, Adjusted Tangible Net Worth of not less
than (a) from the Agreement Date through and including March 31, 2004,
$19,000,000, and (b) as of April 1, 2004 and at all times thereafter,
$20,000,000.
(b) Fixed Charge Coverage Ratio. Borrower shall not, as of the end of
each month ending on and after October 31, 2003, permit the Fixed Charge
Coverage Ratio for the twelve (12) month period most recently ending to be less
than 1.5 to 1.0.
9.18 License Agreements.
(a) Borrower shall (i) promptly and faithfully observe and perform all
of the material terms, covenants, conditions and provisions of the material
License Agreements to be observed and performed by it, at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything that
could reasonably be expected to result in a default under or breach of any of
the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing; except,
that, subject to Section 9.18(b) below, Borrower may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
Borrower; provided, that, Borrower shall give Agent not less than thirty (30)
days prior written notice of its intention to so cancel, surrender and release
any such material License Agreement, (iv) give Agent prompt written notice of
any material License Agreement entered into by Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request, (v) give Agent prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Agent (promptly upon
the receipt thereof by Borrower in the case of a notice to Borrower and
concurrently with the sending thereof in the case of a notice from Borrower) a
copy of each notice of default and every other notice and other communication
received or delivered by Borrower in connection with any material License
Agreement which relates to the right of Borrower to continue to use the property
subject to such License Agreement, and (vi) furnish to Agent, promptly upon the
request of Agent, such information and evidence as Agent may require from time
-71-
to time concerning the observance, performance and compliance by Borrower or the
other party or parties thereto with the terms, covenants or provisions of any
material License Agreement.
(b) Borrower will either exercise any option to renew or extend the
term of each material License Agreement in such manner as will cause the term of
such material License Agreement to be effectively renewed or extended for the
period provided by such option and give prompt written notice thereof to Agent
or give Agent prior written notice that Borrower does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, not less than sixty (60) days prior to the date of
any such non-renewal or expiration. In the event of the failure of Borrower to
extend or renew any material License Agreement, Agent shall have, and is hereby
granted, the irrevocable right and authority, at its option, to renew or extend
the term of such material License Agreement, whether in its own name and behalf,
or in the name and behalf of a designee or nominee of Agent or in the name and
behalf of Borrower, as Agent shall determine at any time that an Event of
Default shall exist or have occurred and be continuing. Agent may, but shall not
be required to, perform any or all of such obligations of Borrower under any of
the License Agreements, including, but not limited to, the payment of any or all
sums due from Borrower thereunder. Any sums so paid by Agent shall constitute
part of the Obligations.
9.19 After Acquired Real Property. If Borrower hereafter acquires any
Real Property, fixtures or any other property that is of the kind or nature
described in the Mortgages that is not already subject to a Mortgage and such
Real Property, fixtures or other property at any one location has a fair market
value in an amount equal to or greater than $300,000 (or if a Default or Event
of Default exists, then regardless of the fair market value of such assets),
without limiting any other rights of Agent or any Lender, or duties or
obligations of Borrower, promptly upon Agent's request, Borrower shall execute
and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent
may determine, in form and substance substantially similar to the Mortgages and
as to any provisions relating to specific state laws satisfactory to Agent and
in form appropriate for recording in the real estate records of the jurisdiction
in which such Real Property or other property is located granting to Agent a
first and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as Borrower would otherwise be permitted to
incur hereunder or under the Mortgages or as otherwise consented to in writing
by Agent) and such other agreements, documents and instruments as Agent may
require in connection therewith.
9.20 Costs and Expenses. Borrower shall pay to Agent and Lenders on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
-72-
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent's customary charges and fees with respect thereto;
(c) charges, fees or expenses charged by any bank or issuer in connection with
the Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Agent during the course of periodic field examinations of the
Collateral and Borrower's operations, plus a per diem charge at Agent's then
standard rate for Agent's examiners in the field and office (which rate as of
the date hereof is $750 per person per day); and (g) the reasonable fees
actually incurred and disbursements of counsel (including legal assistants) to
Agent in connection with any of the foregoing and to any other Lenders in
connection with enforcing the provisions of this Agreement and the other
Financing Agreements or defending any claims made or threatened against such
Lender arising out of the transaction hereunder.
9.21 Further Assurances. At the request of Agent at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Agent may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Agent, Agent and Lenders may, at Agent's option, cease
to make any further Loans or provide any further Letter of Credit Accommodations
until Agent has received such certificate and, in addition, Agent has determined
that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay when due any of the Obligations within
three (3) Business Days after the same becomes due and payable or (ii) Borrower
or any Obligor fails to perform any of the covenants contained in Sections 9.3,
9.4, 9.6, 9.13 or 9.15 of this Agreement and such failure shall continue for ten
(10) days; provided, that, such ten (10) day period shall not apply in the case
of: (A) any failure to observe any such covenant which is not capable of being
cured at all within such ten (10) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an intentional breach of
-73-
Borrower or any Obligor of any such covenant, or (iii) Borrower or any Obligor
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements other than those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by Borrower
to Agent in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of, any guarantee, security agreement, endorsement or other agreement
of such party in favor of Agent;
(d) any judgment for the payment of money is rendered against Borrower
or any Obligor in excess of $500,000 in any one case or in excess of $1,000,000
in the aggregate and shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not be effectively
stayed, or any judgment other than for the payment of money, or injunction,
attachment, garnishment or execution is rendered against Borrower or any Obligor
or any of their assets having a value in excess of $500,000 in the aggregate;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the Indebtedness due
to them;
(g) a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against Borrower or any Obligor or all or any part of its properties and
such petition or application is not dismissed within forty-five (45) days after
the date of its filing or Borrower or any Obligor shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by Borrower or any Obligor or for all or any part of its property; or
(i) any default by Borrower or any Obligor in respect any Indebtedness
(other than Indebtedness owing to Agent or Lenders), in any case in an amount in
excess of $250,000, which default continues for more than the applicable cure
-74-
period, if any, with respect thereto, or any default by Borrower or any Obligor
under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto and/or is not waived in
writing by the other parties thereto;
(j) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any action based
on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in
accordance with its terms, or any security interest provided for herein or in
any of the other Financing Agreements shall cease to be a valid and perfected
first priority security interest in any of the Collateral purported to be
subject thereto (except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could reasonably be
expected to result in liability of Borrower in an aggregate amount in excess of
$300,000;
(l) any Change of Control shall occur;
(m) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower, any Obligor
or Agent receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in the aggregate in excess of $300,000
or (ii) any other property of Borrower which is necessary or material to the
conduct of its business;
(n) there shall occur any event causing a Material Adverse Effect; or
(o) there shall be (i) a default or event of default under any of the
Seller Note, the Stock Purchase Agreement or any other guaranty, security
agreement, mortgage or similar agreement executed by Borrower or any Guarantor
in connection therewith, or (ii) an event of default under the Parent Revolving
Loan Agreement which has not been waived by the requisite lenders thereunder
prior to the exercise of remedies hereunder, or (iii) any default by Sellers
under the Subordination Agreement.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
-75-
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower or Obligor of this Agreement
or any of the other Financing Agreements. Subject to Section 12 hereof, Agent
may at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to any Obligor or any of the
Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and,
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Agent for itself and the ratable benefit of
Lenders, (provided, that, upon the occurrence of any Event of Default described
in Sections 10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), and (ii) terminate the Commitments and this
Agreement (provided, that, upon the occurrence of any Event of Default described
in Sections 10.1(g) and 10.1(h), the Commitments and any other obligation of the
Agent or a Lender hereunder shall automatically terminate).
(c) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and upon
the direction of the Required Lenders, shall (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (ii) require Borrower, at Borrower's expense, to assemble and make
available to Agent any part or all of the Collateral at any place and time
designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (iv) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with the Agent having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrower, which
right or equity of redemption is hereby expressly waived and released by
Borrower and/or (vi) terminate this Agreement. If any of the Collateral is sold
or leased by Agent upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by Agent. If notice of disposition of Collateral is required by law,
ten (10) days prior notice by Agent to Borrower designating the time and place
of any public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Agent institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required. At any time an Event of Default exists or has occurred
and is continuing, upon Agent's request, Borrower will either, as Agent shall
specify, furnish cash collateral to the issuer to be used to secure and fund
Agent's reimbursement obligations to the issuer in connection with any Letter of
Credit Accommodations or furnish cash collateral to Agent for the Letter of
Credit Accommodations. Such cash collateral shall be in the amount equal to one
-76-
hundred ten (110%) percent of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the expiration of such Letter of Credit Accommodations.
(d) Agent may, at any time or times that an Event of Default exists or
has occurred and is continuing, enforce Borrower's rights against any account
debtor, secondary obligor or other obligor in respect of any of the Accounts or
other Receivables. Without limiting the generality of the foregoing, Agent may
at such time or times, (i) notify any or all account debtors, secondary obligors
and other obligors in respect thereof that the Receivables have been assigned to
Agent and that Agent has a security interest therein and Agent may direct any or
all accounts debtors, secondary obligors or other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of Lenders. At any time that an
Event of Default exists or has occurred and is continuing, at Agent's request,
all invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Agent and are payable
directly and only to Agent and Borrower shall deliver to Agent such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Agent may require. In the event any
account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, Borrower shall, upon Agent's request, hold the returned
Inventory in trust for Agent, segregate all returned Inventory from all of its
other property, dispose of the returned Inventory solely according to Agent's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Agent's prior written consent.
(e) To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), Borrower acknowledges and agrees that it is
not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
-77-
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Borrower acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Agent or any Lender
would not be commercially unreasonable in the exercise by Agent or any Lender of
remedies against the Collateral and that other actions or omissions by Agent or
any Lender shall not be deemed commercially unreasonable solely on account of
not being indicated in this Section. Without limitation of the foregoing,
nothing contained in this Section shall be construed to grant any rights to
Borrower or to impose any duties on Agent or Lenders that would not have been
granted or imposed by this Agreement or by applicable law in the absence of this
Section.
(f) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, Borrower hereby grants to Agent, to the extent assignable,
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Borrower), to use, assign, license or sublicense any of
the trademarks, service-marks, trade names, business names, trade styles,
designs, logos and other source of business identifiers and other Intellectual
Property and general intangibles now owned or hereafter acquired by Borrower,
wherever the same maybe located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.
(g) Agent may apply the cash proceeds of Collateral actually received
by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrower shall remain liable to
Agent and Lenders for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys' fees actually incurred and
expenses.
(h) Without limiting the foregoing, upon the occurrence of a Default or
an Event of Default, Agent and Lenders may, at Agent's option, and upon the
occurrence of an Event of Default at the direction of the Required Lenders,
Agent and Lenders shall, without notice, (i) cease making Loans or arranging for
Letter of Credit Accommodations or reduce the lending formulas or amounts of
Loans and Letter of Credit Accommodations available to Borrower and/or (ii)
terminate any provision of this Agreement providing for any future Loans or
Letter of Credit Accommodations to be made by Agent and Lenders to Borrower,
and/or (iii) Agent may, at its option, establish such Reserves as Agent
determines without limitation or restriction, notwithstanding anything to the
contrary contained herein
-78-
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING
LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements (other than the Mortgages to the extent provided
therein) and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by,
and construed in accordance with, the laws of the State of Georgia, without
regard to principles of conflicts of law or other rule of law that would result
in the application of the law of any jurisdiction other than the State of
Georgia.
(b) Borrower and Agent and Lenders irrevocably consent and submit to
the non-exclusive jurisdiction of a Georgia state court or superior court
located in Fulton County, Georgia and the United States District Court for the
Northern District of Georgia, and waive any objection based on venue or forum
non conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent and Lenders shall have the right to bring any
action or proceeding against Borrower or its property in the courts of any other
jurisdiction which Agent deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all process upon
it and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Agent's option, by service upon
Borrower in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, Borrower shall appear in answer to such
process, failing which Borrower shall be deemed in default and judgment may be
entered by Agent against Borrower for the amount of the claim and other relief
requested.
(d) TO THE EXTENT PERMITTED BY LAW, BORROWER, AGENT AND LENDERS EACH
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE. BORROWER, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT BORROWER, AGENT OR ANY LENDER MAY FILE AN ORIGINAL
-79-
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Agent and such Lender, that
the losses were the result of its acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Agent and each Lender
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement. Except as prohibited by law, Borrower waives any
right which it may have to claim or recover in any litigation with Agent or any
Lender any special, exemplary, punitive or consequential damages or any damages
other than, or in addition to, actual damages. Borrower: (i) certifies that
neither Agent, any Lender nor any representative, agent or attorney acting for
or on behalf of Agent or any Lender has represented, expressly or otherwise,
that Agent and Lenders would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Agent and Lenders are relying upon, among other
things, the waivers and certifications set forth in this Section 11.1 and
elsewhere herein and therein.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Agent or any Lender may elect to give shall
entitle Borrower to any other or further notice or demand in the same, similar
or other circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing signed by Agent
and the Required Lenders or, at Agent's option, by Agent with the authorization
of the Required Lenders, and in addition, with respect to any amendments (other
than with respect to any provision of Section 12 hereof), by Borrower; except,
that, no such amendment, waiver, discharge or termination shall:
(i) reduce the interest rate or any fees or extend the time of
payment of principal, interest or any fees or reduce the principal
amount of any Loan or Letter of Credit Accommodations, in each case
without the consent of each Lender directly affected thereby,
-80-
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, in each case without the
consent of the Lender directly affected thereby,
(iii) release any Collateral (except as expressly provided
hereunder or under any of the other Financing Agreements or applicable
law and except as permitted under Section 12.11(b) hereof), without the
consent of Agent and all of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by Borrower or any
Guarantor of any of their rights and obligations under this Agreement,
without the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3 or
Section 12.8 hereof, without the consent of Agent and all of Lenders,
or
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
(b) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in the event that Borrower or any Guarantor requests that this
Agreement or any other Financing Agreements be amended or otherwise modified in
a manner which would require the unanimous consent of all of the Lenders and
such amendment or other modification is agreed to by the Required Lenders, then,
with the consent of Borrower, Agent and the Required Lenders, Borrower, Agent
and the Required Lenders may amend this Agreement without the consent of the
Lenders that did not agree to such amendment or other modification
(collectively, the "Minority Lenders") to provide for (i) the termination of the
Commitment of each of the Minority Lenders, (ii) the addition to this Agreement
of one or more other Lenders, or an increase in the Commitment of one or more of
the Required Lenders, so that the Commitments, after giving effect to such
amendment, shall be in the same aggregate amount as the Commitments immediately
before giving effect to such amendment, (iii) if any Loans are outstanding at
the time of such amendment, the making of such additional Loans by such new
Lenders or Required Lenders, as the case may be, as may be necessary to repay in
full the outstanding Loans of the Minority Lenders immediately before giving
-81-
effect to such amendment and (iv) the payment of all interest, fees and other
Obligations payable or accrued in favor of the Minority Lenders and such other
modifications to this Agreement as Borrower and the Required Lenders may
determine to be appropriate.
(d) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a "Non-Consenting Lender"), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Congress shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Congress of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Congress or such Eligible Transferee as Congress may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with
prior written notice of its intent to exercise its right under this Section,
which notice shall specify on date on which such purchase and sale shall occur.
Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Congress, or such Eligible Transferee
specified by Congress, shall pay to the Non-Consenting Lender (except as
Congress and such Non-Consenting Lender may otherwise agree) the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately
preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase (but in no event shall the
Non-Consenting Lender be deemed entitled to any early termination fee), minus
(iii) the amount of the closing fee received by the Non-Consenting Lender
pursuant to the terms hereof or of any of the other Financing Agreements
multiplied by the fraction, the numerator of which is the number of months
remaining in the then current term of the Credit Facility and the denominator of
which is the number of months in the then current term thereof. Such purchase
and sale shall be effective on the date of the payment of such amount to the
Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall
terminate on such date.
(e) The consent of Agent shall be required for any amendment, waiver or
consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Agent and each
Lender, and its officers, directors, agents, employees, advisors and counsel and
their respective Affiliates (each such person being an "Indemnitee"), harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses (including reasonable attorneys' fees actually incurred and expenses)
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
-82-
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees of
counsel actually incurred and expenses of counsel, except, as to any indemnified
party, for such losses, claims, damages, liabilities, costs or expenses
resulting from gross negligence or willful misconduct of such party, its
directors, agents, employees or counsel as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in this Section
may be unenforceable because it violates any law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law
to Agent and Lenders in satisfaction of indemnified matters under this Section.
To the extent permitted by applicable law, Borrower shall not assert, and
Borrower hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. All amounts due under this Section shall be
payable upon demand. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are incidental thereto. Agent (a) shall have
no duties or responsibilities except those expressly set forth in this Agreement
and in the other Financing Agreements, and shall not by reason of this Agreement
or any other Financing Agreement be a trustee or fiduciary for any Lender; (b)
shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any of the other
Financing Agreements, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by Borrower or any Obligor or any other Person to perform any of its
obligations hereunder or thereunder; and (c) shall not be responsible to Lenders
for any action taken or omitted to be taken by it hereunder or under any other
Financing Agreement or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
Agent may deem and treat the payee of any note as the holder thereof for all
purposes hereof unless and until the assignment thereof pursuant to an agreement
(if and to the extent permitted herein) in form and substance satisfactory to
Agent shall have been delivered to and acknowledged by Agent.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
-83-
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders. 12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, or Borrower specifying such Event of
Default or any unfulfilled condition precedent, and stating that such notice is
a "Notice of Default or Failure of Condition". In the event that Agent receives
such a Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders. Agent shall (subject to Section 12.7) take such action
with respect to any such Event of Default or failure of condition precedent as
shall be directed by the Required Lenders; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to or by
reason of such Event of Default or failure of condition precedent, as it shall
deem advisable in the best interest of Lenders. Without limiting the foregoing,
and notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Section 4 of this Agreement to the contrary, Agent may, but shall have
no obligation to, continue to make Loans and issue or cause to be issued Letter
of Credit Accommodations for the ratable account and risk of Lenders from time
to time if Agent believes making such Loans or issuing or causing to be issued
such Letter of Credit Accommodations is in the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender may
assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against Borrower or
Obligor or any of the Collateral or other property of Borrower or Obligor.
12.4 Congress in its Individual Capacity. With respect to its
Commitment and the Loans made and Letter of Credit Accommodations issued or
caused to be issued by it (and any successor acting as Agent), so long as
Congress shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Congress in its individual capacity as Lender
hereunder. Congress (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with Borrower (and
any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and
Congress and its Affiliates may accept fees and other consideration from
Borrower or any Obligor and any of its Subsidiaries and Affiliates for services
in connection with this Agreement or otherwise without having to account for the
same to Lenders.
-84-
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower hereunder and without limiting any obligations of
Borrower hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has, independently and without reliance on Agent or other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrower and Obligors and has made its own decision to enter
into this Agreement and that it will, independently and without reliance upon
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance or observance by Borrower or any Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of Borrower or any Obligor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from Borrower
or any Obligor which is required to be provided to Lenders or deemed to be
requested by Lenders hereunder and with a copy of any Notice of Default or
Failure of Condition received by Agent from Borrower or any Lender; provided,
that, Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent's own gross negligence
or willful misconduct as determined by a final non-appealable judgment of a
court of competent jurisdiction. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any other credit
or other information concerning the affairs, financial condition or business of
Borrower or Obligor that may come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Loans or provide any
Letter of Credit Accommodations to Borrower on behalf of Lenders intentionally
and with actual knowledge that such Loans or Letter of Credit Accommodations
would cause the aggregate amount of the total outstanding Loans and Letter of
Credit Accommodations to Borrower to exceed the Borrowing Base, without the
prior consent of all Lenders, except, that, Agent may make such additional Loans
-85-
or provide such additional Letter of Credit Accommodations on behalf of Lenders,
intentionally and with actual knowledge that such Loans or Letter of Credit
Accommodations will cause the total outstanding Loans and Letter of Credit
Accommodations to Borrower to exceed the Borrowing Base, as Agent may deem
necessary or advisable in its discretion, provided, that: (a) the total
principal amount of the additional Loans or additional Letter of Credit
Accommodations to Borrower which Agent may make or provide after obtaining such
actual knowledge that the aggregate principal amount of the Loans equal or
exceed the Borrowing Base shall not exceed the aggregate amount equal to
$5,000,000 outstanding at any time and shall not cause the total principal
amount of the Loans and Letter of Credit Accommodations to exceed the Maximum
Credit and (b) no such additional Loan or Letter of Credit Accommodation shall
be outstanding more than ninety (90) days after the date such additional Loan or
Letter of Credit Accommodation is made or issued (as the case may be), except as
the Required Lenders may otherwise agree. Each Lender shall be obligated to pay
Agent the amount of its Pro Rata Share of any such additional Loans or Letter of
Credit Accommodations provided that Agent is acting in accordance with the terms
of this Section 12.8.
12.9 Concerning the Collateral and the Related Financing Agreements.
Each Lender authorizes and directs Agent to enter into this Agreement and the
other Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of their
respective powers set forth therein or herein, together with such other powers
that are incidental thereto, shall be binding upon all of the Lenders.
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a monthly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and monthly report with respect to the
Borrowing Base being referred to herein as a "Report" and collectively,
"Reports"), appraisal and financial statements;
(b) expressly agrees and acknowledges that Agent (A) does not make any
representation or warranty as to the accuracy of any Report, appraisal or
financial statement or (B) shall not be liable for any information contained in
any Report, appraisal or financial statement;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrower and any Obligor and will rely significantly upon Borrower's and any
Obligor's books and records, as well as on representations of Borrower's and any
Obligor's personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
-86-
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof or (ii)
to enhance the likelihood or maximize the amount of repayment by Borrower of the
Loans and other Obligations, provided, that, the aggregate principal amount of
the Special Agent Advances pursuant to this clause (ii), plus the then
outstanding principal amount of the additional Loans and Letter of Credit
Accommodations which Agent may make or provide as set forth in Section 12.8
hereof, shall not exceed the aggregate amount of ten (10%) percent of the
Maximum Credit or (iii) to pay any other amount chargeable to Borrower pursuant
to the terms of this Agreement or any of the other Financing Agreements
consisting of costs, fees and expenses and payments to any issuer of Letter of
Credit Accommodations. Special Agent Advances shall be repayable on demand and
be secured by the Collateral. Special Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder. Interest on Special
Advances shall be payable at the Interest Rate then applicable to Prime Rate
Loans. Agent shall notify each Lender and Borrower in writing of each such
Special Agent Advance, which notice shall include a description of the purpose
of such Special Agent Advance. Without limitation of its obligations pursuant to
Section 6.9, each Lender agrees that it shall make available to Agent, upon
Agent's demand, in immediately available funds, the amount equal to such
Lender's Pro Rata Share of each such Special Agent Advance. If such funds are
not made available to Agent by such Lender, Agent shall be entitled to recover
such funds, on demand from such Lender together with interest thereon for each
day from the date such payment was due until the date such amount is paid to
Agent at the Federal Funds Rate for each day during such period (as published by
the Federal Reserve Bank of Atlanta or at Agent's option based on the arithmetic
mean determined by Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (Atlanta, Georgia time) on that day by
each of the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Borrower certifies to Agent that the sale or disposition
is made in compliance with Section 9.7 hereof (and Agent may rely conclusively
on any such certificate, without further inquiry), or (iii) constituting
property in which Borrower or any Obligor did not own an interest at the time
the security interest, mortgage or lien was granted or at any time thereafter,
or (iv) having a value in the aggregate in any fiscal quarter period of less
than $500,000, and to the extent Agent may release its security interest in and
lien upon any such Collateral pursuant to the sale or other disposition thereof,
such sale or other disposition shall be deemed consented to by Lenders, or (v)
if required or permitted under the terms of any of the other Financing
Agreements, including any intercreditor agreement, or (vi) approved, authorized
or ratified in writing by all of Lenders. Except as provided above, Agent will
not release any security interest in, mortgage or lien upon, any of the
-87-
Collateral without the prior written authorization of all of Lenders. Upon
request by Agent at any time, Lenders will promptly confirm in writing Agent's
authority to release particular types or items of Collateral pursuant to this
Section.
(c) Without any manner limiting Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of Borrower or any
Obligor in respect of) the Collateral retained by Borrower or any Obligor.
(d) Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by Borrower or any Obligor or is cared for, protected or insured or has
been encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its discretion, given Agent's
own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12 Agency for Perfection. Each Lender hereby appoints Agent and each
other Lender as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent as secured party. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days'
notice to Lenders and Borrower. If Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with Lenders and
Borrower, a successor agent from among Lenders. Upon the acceptance by the
-88-
Lender so selected of its appointment as successor agent hereunder, such
successor agent shall succeed to all of the rights, powers and duties of the
retiring Agent and the term "Agent" as used herein and in the other Financing
Agreements shall mean such successor agent and the retiring Agent's appointment,
powers and duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 12 shall inure to
its benefit as to any actions taken or omitted by it while it was Agent under
this Agreement. If no successor agent has accepted appointment as Agent by the
date which is thirty (30) days after the date of a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (October 3, 2006) (the "Renewal Date"), and from year to year
thereafter, unless sooner terminated pursuant to the terms hereof. Agent may, at
its option (or shall at the direction of any Lender in writing received in
writing by Agent at least sixty (60) days prior to the Renewal Date or the
anniversary of any Renewal Date, as the case may be), terminate this Agreement
and the other Financing Agreements, or Borrower may terminate this Agreement and
the other Financing Agreements, in each case, effective on the Renewal Date or
on the anniversary of the Renewal Date in any year by giving to the other party
at least sixty (60) days prior written notice. In addition, Borrower may
terminate this Agreement at any time upon ten (10) days prior written notice to
Agent (which notice shall be irrevocable) and Agent may terminate this Agreement
at any time on or after an Event of Default. Upon the Renewal Date or any other
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Agent all outstanding and unpaid Obligations and shall
furnish cash collateral to Agent (or at Agent's option, a letter of credit
issued for the account of Borrower and at Borrower's expense, in form and
substance satisfactory to Agent, by an issuer acceptable to Agent and payable to
Agent as beneficiary) in such amounts as Agent determines are necessary to
secure (or reimburse) Agent and Lenders from loss, cost, damage or expense,
including reasonable attorneys' fees actually incurred and expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Agent or any Lender has not yet
received final and indefeasible payment and any continuing obligations of Agent
or any Lender pursuant to any Deposit Account Control Agreement. The amount of
such cash collateral (or letter of credit, as Agent may determine) as to any
Letter of Credit Accommodations shall be in the amount equal to one hundred ten
(110%) percent of the amount of the Letter of Credit Accommodations plus the
amount of any fees and expenses payable in connection therewith through the end
of the latest expiration date of such Letter of Credit Accommodations. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to the Agent Payment Account or such other bank
account of Agent, as Agent may, in its discretion, designate in writing to
-89-
Borrower for such purpose. Interest shall be due until and including the next
Business Day, if the amounts so paid by Borrower to the Agent Payment Account or
other bank account designated by Agent are received in such bank account later
than 12:00 noon, Atlanta, Georgia time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower or any Obligor of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Agent's continuing security interest in the Collateral and the rights and
remedies of Agent and Lenders hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, Borrower waives any rights
it may have under the UCC to demand the filing of termination statements with
respect to the Collateral and Agent shall not be required to send such
termination statements to Borrower, or to file them with any filing office,
unless and until this Agreement shall have been terminated in accordance with
its terms and all of the Obligations are paid and satisfied in full in
immediately available funds.
(c) If for any reason this Agreement is terminated prior to the Renewal
Date, in view of the impracticality and extreme difficulty of ascertaining
actual damages and by mutual agreement of the parties as to a reasonable
calculation of Agent's and each Lender's lost profits as a result thereof,
Borrower agrees to pay to Agent for itself and the ratable benefit of Lenders,
upon the effective date of such termination, an early termination fee in the
amount equal to
AMOUNT PERIOD
------ ------
(i) 2% of Maximum Credit From the date hereof to and including the
first anniversary of the date hereof
(ii) 1% of the Maximum Credit After the first anniversary of the date
hereof to and including the second
anniversary of the date hereof
(iii) 1/2% of Maximum Credit After the second anniversary of the date
hereof, to (but not including) the third
anniversary of the date hereof or if the
term of this Agreement is extended, at
any time prior to the end of the then
current term.
Such early termination fee shall be presumed to be the amount of
damages sustained by Agent and Lenders as a result of such early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing. In addition, Agent and Lenders shall be entitled to such early
termination fee upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise
the right to terminate this Agreement, but elect, at their option, to provide
financing to Borrower or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section
13.1 shall be deemed included in the Obligations.
-90-
Notwithstanding anything set forth herein to the contrary, in the event
the Obligations are refinanced in full by Wachovia Bank, National Association or
an Affiliate thereof at any time after the first anniversary of the date hereof,
no early termination fee shall be payable to Agent or Lenders.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article 8 or
Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to Borrower, any Obligor, Agent and Lenders pursuant
to the definitions set forth in the recitals hereto, or to any other person
herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation" and the word "will" when used in this Agreement
shall be construed to have the same meaning and effect as the word "shall."
(f) All references to the term "good faith" used herein when applicable
to Agent or any Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower shall have the burden of proving any lack of good faith on
the part of Agent or any Lender alleged by Borrower at any time.
(g) An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Agent, if such Event of Default is capable of being cured
as determined by Agent.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Agent prior to the date hereof. Notwithstanding anything to the
contrary in GAAP or any interpretations or other pronouncements by the Financial
Accounting Standards Board or otherwise, the term "unqualified opinion" as used
herein to refer to opinions or reports provided by accountants shall mean an
opinion or report that is not only unqualified but also does not include any
explanatory note or language, including any explanation, supplemental comment or
other comment concerning the ability of the applicable person to continue as a
going concern or otherwise.
-91-
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references herein
to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their preparation.
13.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to Borrower: M. J. SOFFE CO.
c/o DELTA APPAREL, INC.
2750 Premiere Parkway, Suite 100
Duluth, GA 30097
Attention: Herb Mueller
Telephone No.: (678) 775-6900
Telecopy No.: (678) 584-1880
If to Agent: CONGRESS FINANCIAL CORPORATION (SOUTHERN)
200 Galleria Parkway, Suite 1500
Atlanta, GA 30339
Attention: Gary Silvers
Telephone No.: (770) 956-0094
Telecopy No.: (770) 956-1861
-92-
13.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement or the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. Any such purported assignment without such express prior
written consent shall be void. No Lender may assign its rights and obligations
under this Agreement without the prior written consent of Agent, except as
provided in Section 13.6 below. The terms and provisions of this Agreement and
the other Financing Agreements are for the purpose of defining the relative
rights and obligations of Borrower, Agent and Lenders with respect to the
transactions contemplated hereby and there shall be no third party beneficiaries
of any of the terms and provisions of this Agreement or any of the other
Financing Agreements.
13.6 Assignments; Participations.
(a) Each Lender may assign all or, if less than all, a portion equal to
at least $5,000,000 in the aggregate for the assigning Lender, of such rights
and obligations under this Agreement to one or more Eligible Transferees (but
not including for this purpose any assignments in the form of a participation),
each of which assignees shall become a party to this Agreement as a Lender by
execution of an Assignment and Acceptance; provided, that, (i) if such Eligible
Transferee is not a bank, Agent shall receive a representation in writing by
such Eligible Transferee that no part of its acquisition of its Loans is made
out of assets of any employee benefit plan, (ii) such transfer or assignment
will not be effective until recorded by Agent on the Register and (iii) Agent
shall have received for its sole account payment of a processing fee from the
assigning Lender or the assignee in the amount of $5,000. As used in this
Section, the term "employee benefit plan" shall have the meaning assigned to it
in Title I of ERISA and shall also include a "plan" as defined in Section
4975(e)(1) of the Code.
(b) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Borrower, Obligors,
Agent and Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Borrower and any Lender at any reasonable time and
from time to time upon reasonable prior notice.
-93-
(c) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other
Financing Agreements or the execution, legality, enforceability, genuineness,
sufficiency or value of this Agreement or any of the other Financing Agreements
furnished pursuant hereto, (ii) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower, any Obligor or any of their Subsidiaries or the performance or
observance by Borrower or any Obligor of any of the Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are incidental thereto,
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender. Agent and
Lenders may furnish any information concerning Borrower or any Obligor in the
possession of Agent or any Lender from time to time to assignees and
Participants.
(e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without limitation, all
or a portion of its Commitments and the Loans owing to it and its participation
in the Letter of Credit Accommodations, without the consent of Agent or the
other Lenders); provided, that, (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrower, Obligors and Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Financing Agreements, (iii) the
Participant shall not have any rights under this Agreement or any of the other
Financing Agreements (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
-94-
Lender in favor of the Participant relating thereto) and all amounts payable by
Borrower or any Obligor hereunder shall be determined as if such Lender had not
sold such participation, and (iv) if such Participant is not a bank, represent
that no part of its acquisition of its participation is made out of assets of
any employee benefit plan. As used in this Section, the term "employee benefit
plan" shall have the meaning assigned to it in Title I of ERISA and shall also
include a "plan" as defined in Section 4975(e)(1) of the Code.
(f) Nothing in this Agreement shall prevent or prohibit any Lender from
pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings
made by such Lenders from such Federal Reserve Bank; provided, that, no such
pledge shall release such Lender from any of its obligations hereunder or
substitute any such pledgee for such Lender as a party hereto.
(g) Borrower shall assist Agent or any Lender permitted to sell
assignments or participations under this Section 13.6 in whatever manner
necessary in order to enable or effect any such assignment or participation,
including (but not limited to) the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the delivery of informational materials, appraisals or other documents for, and
the participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrower shall certify the correctness and
accuracy of all descriptions of Borrower and its affairs provided, prepared or
reviewed by Borrower that are contained in any selling materials prepared for
potential Lenders in connection with the initial syndication of the Loans and
all other information provided by it and included in such materials.
(h) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date of its execution and delivery of
this Agreement in the case of each Lender which is a party hereto at the date
hereof, or on or prior to the date of the Assignment and Acceptance pursuant to
which it becomes a Lender in the case of each other Lender, and from time to
time thereafter as reasonably requested in writing by Borrower (but only so long
thereafter as such Lender remains lawfully able to do so), provide Agent and
Borrower with two original U.S. Internal Revenue Service Forms W-8BEN or W-8ECI,
or any successor or other form prescribed by the U.S. Internal Revenue Service,
certifying that such Lender is exempt from or entitled to a reduced rate of
United States withholding tax on payments pursuant to this Agreement.
13.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
13.8 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
-95-
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
[Remainder of page intentionally left blank.]
-96-
IN WITNESS WHEREOF, Agent, Lenders and Borrower have caused these
presents to be duly executed as of the day and year first above written.
AGENT AND BORROWER:
LENDER --------
- ----------
CONGRESS FINANCIAL CORPORATION (SOUTHERN) MJS ACQUISITION COMPANY,
a North Carolina corporation
By: /s/ Susan L.Miller By: /s/ Robert W. Humphreys
----------------------------- ------------------------------
Title: First Vice President Title: President and CEO
--------------------------- ---------------------------
GUARANTORS:
DELTA APPAREL, INC., a Georgia corporation
By: /s/ Robert W. Humphreys
-----------------------------
Title: President and CEO
---------------------------
SAIM, LLC, a North Carolina limited liability company
By: MJS Acquisition Company, its sole member
By: /s/ Robert W. Humphreys
------------------------------------
Title: President and CEO
------------------------------------