EXHIBIT ____
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
DELTA APPAREL, INC.
▇. ▇. ▇▇▇▇▇ CO.
and
JUNKFOOD CLOTHING COMPANY,
as Borrowers
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: August ___, 2005
SECTION 1 DEFINITIONS 8
SECTION 2 CREDIT FACILITIES 38
2.1 Loans 38
2.2 Letters of Credit 39
2.3 [Intentionally Omitted] 42
2.4 Commitments 42
SECTION 3 INTEREST AND FEES 42
3.1 Interest 42
3.2 Fees 44
3.3 Changes in Law and Increased Costs of Loans 44
3.4 Maximum Interest 45
SECTION 4 CONDITIONS PRECEDENT 47
4.1 Conditions Precedent to Initial Loans and Letter of Credit 47
Accommodations
4.2 Conditions Precedent to All Loans and Letter of Credit 49
Accommodations
4.3 Conditions Subsequent to Initial Loans and Letter of Credit 50
Accommodations
SECTION 5 GRANT OF SECURITY INTEREST 56
6.1 Borrower's Loan Account 56
6.2 Statements 56
6.3 Collection of Accounts 56
6.4 Payments 57
6.5 Authorization to Make Loans 58
6.6 Use of Proceeds 58
6.7 Pro Rata Treatment 58
6.8 Sharing of Payments, Etc. 58
6.9 Settlement Procedures 59
6.10 Obligations Several; Independent Nature of Lenders' Rights 61
SECTION 7 COLLATERAL REPORTING AND COVENANTS 64
7.1 Collateral Reporting 64
7.2 Accounts Covenants 65
7.3 Inventory Covenants 67
7.4 Equipment and Real Property Covenants 67
7.5 Power of Attorney 68
7.6 Right to Cure 69
7.7 Access to Premises 69
7.8 Bills of Lading and Other Documents of Title 70
SECTION 8 REPRESENTATIONS AND WARRANTIES 70
8.1 Corporate Existence, Power and Authority; Subsidiaries 70
8.2 Financial Statements; No Material Adverse Change 71
8.3 Chief Executive Office; Collateral Locations 71
8.4 Priority of Liens; Title to Properties 71
8.5 Tax Returns 71
8.6 Litigation 72
8.7 Compliance with Other Agreements and Applicable Laws 72
8.8 Environmental Compliance 73
8.9 Employee Benefits 73
8.10 Bank Accounts 74
8.11 Intellectual Property 74
8.12 Acquisition of Assets 75
8.13 Solvency 75
8.14 Labor Disputes 75
8.15 Corporate Name: Prior Transactions 76
8.16 Restrictions on Subsidiaries 76
8.17 Material Contracts 76
8.18 Accuracy and Completeness of Information 76
8.19 Survival of Warranties; Cumulative 76
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS 77
9.1 Maintenance of Existence 77
9.2 New Collateral Locations 77
9.3 Compliance with Laws, Regulations, Etc 77
9.4 Payment of Taxes and Claims 78
9.5 Insurance 79
9.6 Financial Statements and Other Information 79
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc 81
9.8 Encumbrances 82
9.9 Indebtedness 83
9.10 Loans, Investments, Guarantees, Etc 84
9.11 Dividends and Redemptions 85
9.12 Transactions with Affiliates 86
9.13 Additional Bank Accounts 87
9.14 Compliance with ERISA 87
9.15 End of Fiscal Years: Fiscal Quarters 88
9.16 Change in Business 88
9.17 Limitation of Restrictions Affecting Subsidiaries 88
9.18 Excluded Real Property; After Acquired Real Property 88
9.19 Costs and Expenses 89
9.20 Further Assurances 90
9.21 Fixed Charge Coverage Ratio 90
SECTION 10 EVENTS OF DEFAULT AND REMEDIES 90
10.1 Events of Default 90
10.2 Remedies 92
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW 94
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver 94
11.2 Waiver of Notices 95
11.3 Amendments and Waivers 96
11.4 Waiver of Counterclaims 98
11.5 Indemnification 98
SECTION 12 THE AGENT 98
12.1 Appointment, Powers and Immunities 98
12.2 Reliance by Agent 99
12.3 Events of Default 99
12.4 Wachovia in its Individual Capacity 100
12.5 Indemnification 100
12.6 Non-Reliance on Agent and Other Lenders 101
12.7 Failure to Act 101
12.8 Additional Loans 101
12.9 Concerning the Collateral and the Related Financing Agreements 102
12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders 102
12.11 Collateral Matters 102
12.12 Agency for Perfection 104
12.13 Successor Agent 104
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS 105
13.1 Term 105
13.2 Interpretative Provisions 106
13.3 Notices 107
13.4 Partial Invalidity 108
13.5 Successors 108
13.6 Assignments; Participations 109
13.7 Entire Agreement 111
13.8 No Novation; Reaffirmation of Grant of Security Interest 111
13.9 Counterparts, Etc 112
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Assignment and Acceptance
Exhibit B Applicable Margins for Interest Rate Calculation
Exhibit C Form of Guarantee
Exhibit D Information Certificate
Schedule 1.24 Customs Brokers
Schedule 1.47 Excluded Real Property
Schedule 1.89 Permitted Holders
Schedule 8.4 Existing Liens
Schedule 8.7 Permits
Schedule 8.8 Environmental Matters
Schedule 8.10 Bank Accounts
Schedule 8.11 Licensed Intellectual Property
Schedule 8.14 Labor Matters
Schedule 8.17 Material Contracts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT dated
August ____, 2005 (this "Agreement"), is entered into by and among DELTA
APPAREL, INC., a
Georgia corporation ("Delta"), ▇. ▇. ▇▇▇▇▇ CO. a North Carolina
corporation ("Soffe"), and JUNKFOOD CLOTHING COMPANY, a
Georgia corporation
("JCC"); (Delta, Soffe, and JCC being hereinafter collectively called
"Borrowers" and individually a "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
WACHOVIA BANK, NATIONAL ASSOCIATION, a national bank ("Wachovia"), in its
capacity as agent for Lenders (in such capacity, "Agent").
WITNESSETH:
WHEREAS, Delta, certain financial institutions (collectively, "Delta
Lenders") and Congress Financial Corporation (Southern) ("Congress"), in its
capacity as agent for the Delta Lenders (in such capacity, "Delta Agent"),
entered into that certain Amended and Restated
Loan and Security Agreement dated
October 3, 2003 (as amended, modified or supplemented from time to time prior to
the date hereof, the "Existing Delta Loan Agreement"); and Soffe, certain
financial institutions (collectively, "Soffe Lenders") and Congress, in its
capacity as agent for the Soffe Lenders (in such capacity, "Soffe Agent"),
entered into that certain
Loan and Security Agreement dated October 3, 2003 (as
amended, modified or supplemented from time to time prior to the date hereof,
(the "Existing Soffe Loan Agreement"; and, together with the Existing Delta Loan
Agreement, the "Existing Loan Agreements"); and
WHEREAS, Congress was merged with and into Wachovia as of December 31,
2004, with Wachovia being the survivor of such merger, and, as a result thereof,
has acquired all of Congress' right , title and interest in and to the Existing
Delta Loan Agreement, and constitutes the Delta Agent thereunder, and the
Existing Soffe Loan Agreement, and constitutes the Soffe Agent thereunder; and
WHEREAS, JCC, a wholly owned subsidiary of Delta, desires to acquire
all or substantially all of the assets of Liquid Blaino Designs, Inc. d/b/a
Junkfood Clothing, a California corporation ("Junkfood Seller"), pursuant to the
Asset Purchase Agreement dated as of August 22, 2005, among JCC, Junkfood
Seller, ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (as at any time amended, the "Junkfood
Asset Purchase Agreement") and, in connection with such acquisition, JCC desires
to obtain financing from Wachovia; and
WHEREAS, Delta has requested that JCC be joined as a Borrower under the
Existing Delta Loan Agreement, in order that JCC may obtain extensions of credit
thereunder, and that Soffe also be joined as a Borrower, and the Soffe
Obligations consolidated, under the Existing Delta Loan Agreement, as amended
and restated hereby; and
WHEREAS, each Borrower has requested that Lenders make available the
Credit Facility to Borrowers, which shall be used by Borrowers to finance their
mutual and collective enterprise of marketing, designing, manufacturing and
distributing branded and private-label apparel. In order to utilize the
financial powers of each Borrower in the most efficient and economical
manner, and in order to facilitate the financing of each Borrower's needs,
Lenders will, at the request of any Borrower, make loans to all Borrowers under
the Credit Facility on a combined basis and in accordance with the provisions
hereinafter set forth. Borrowers' business is a mutual and collective enterprise
and Borrowers believe that the consolidation of all Loans under this Agreement
will enhance the aggregate borrowing powers of each Borrower and ease the
administration of their loan relationship with Lenders, all to the mutual
advantage of Borrowers. Lenders' willingness to extend credit to Borrowers and
to administer each Borrower's collateral security therefor, on a combined basis
as more fully set forth in this Agreement, is done solely as an accommodation to
Borrowers and at Borrowers' request in furtherance of Borrowers' mutual and
collective enterprise; and
WHEREAS, each Borrower has agreed to be jointly and severally liable
for loans and all outstanding other obligations under this Agreement and to
guarantee the obligations of each of the other Borrowers under this Agreement
and each of the other Financing Agreements; and
WHEREAS, Wachovia is willing to amend and restate the Existing Delta
Loan Agreement, as hereinafter set forth, to, among other things, increase the
maximum amount of credit that may be obtained thereunder by Borrowers and to add
JCC and Soffe as Borrowers thereunder; and
WHEREAS, each of Borrowers and Wachovia acknowledges and agrees that
(i) the Obligations represent, among other things, the amendment, restatement,
renewal, extension, consolidation and modification of the Existing Obligations
arising in connection with the Existing Loan Agreements and the other Existing
Financing Agreements executed in connection therewith; (ii) it intends that the
collateral pledged under the Existing Loan Agreements and the other Existing
Financing Agreements executed in connection therewith shall secure, without
interruption or impairment of any kind, all Existing Obligations under the
Existing Loan Agreements and the other Existing Financing Agreements executed in
connection therewith, as amended, restated, renewed, extended, consolidated and
modified hereunder, together with all other Obligations hereunder; and (iii) all
security interests and liens evidenced by the Existing Loan Agreements and the
other Existing Financing Agreements executed in connection therewith are hereby
ratified, confirmed and continued; and
WHEREAS, Borrowers and Wachovia intend that (i) the provisions of the
Existing Loan Agreements and the other Existing Financing Agreements executed in
connection therewith, to the extent restated, renewed, extended, consolidated,
amended and modified hereby and by the other Financing Agreements dated as of
the date hereof, be hereby superseded and replaced by the provisions hereof and
of the other Financing Agreements; and (ii) by entering into and performing
their respective obligations hereunder, this transaction shall not constitute a
novation; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers 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;
-7-
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:
"Accounts" shall mean, as to each Borrower, all present and future
rights of such 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.
"Acquisition Agreement" shall mean, with respect to each Acquisition
Transaction, each stock purchase agreement or asset purchase agreement, as the
context may require, to be executed and delivered by and among a Borrower or an
Acquisition Subsidiary, as purchaser, and each owner, as seller, of the Capital
Stock or assets to be sold to such Borrower or Acquisition Subsidiary, together
with any and all permitted amendments, modifications and supplements thereto,
restatements thereof and substitutes therefor.
"Acquisition Consideration" shall mean the consideration given and to
be given by a Borrower or any Acquisition Subsidiary for or in an Acquisition
Transaction, including the fair market value of any cash, property, Capital
Stock or services given and the amount of any Funded Debt assumed or incurred by
such Borrower or Acquisition Subsidiary in connection with such Acquisition
Transaction.
"Acquisition Documents" shall mean, individually and collectively, as
the context may require, each Acquisition Agreement and any and all other
agreements, documents or instruments at any time executed and delivered by a
Borrower or an Acquisition Subsidiary, an Acquisition Target or any other Person
in connection with an Acquisition Transaction.
"Acquisition Subsidiary" shall mean a Subsidiary formed by a Borrower
after the Closing Date to purchase all of the issued and outstanding Capital
Stock, or all or substantially all of the assets, of an Acquisition Target or a
division or separate line of business of an Acquisition Target, subject to the
satisfaction of each of the following conditions as determined by Agent: (i) no
Default or Event of Default exists at the time or would result therefrom; (ii)
such Borrower and such Subsidiary deliver to Agent any and all documents,
agreements, financial statements, projections and instruments reasonably
requested by Agent, in form and substance reasonably satisfactory to Agent in
all respects, in connection with such formation, including (a) such documents
and instruments as may be necessary to grant or confirm to Agent a first
priority perfected lien on and security interest in all of the assets of the
Subsidiary, including the Capital Stock in such Subsidiary owned by such
Borrower (and subject to any permitted liens), and (b) a joinder agreement
executed by such Subsidiary, together with such other collateral documents and
opinions of counsel as may be requested by Agent, each in form and substance
satisfactory
-8-
to Agent; and (iii) such Borrower shall give Agent at least 7 days prior written
notice before forming such Subsidiary and provide copies of all organizational
documents of such Subsidiary to Agent.
"Acquisition Target" shall mean a Person whose Capital Stock or assets
are to be purchased pursuant to the terms of an Acquisition Agreement.
"Acquisition Transaction" shall mean the transaction pursuant to an
Acquisition Agreement for the purchase of all of the issued and outstanding
Capital Stock of, or all or substantially all of the assets of, an Acquisition
Target, or for the purchase of all or substantially all of the assets of a
division or separate line of business of an Acquisition Target.
"Administrative Borrower" shall mean Delta, in its capacity as
Administrative Borrower on behalf of itself and the other Borrowers pursuant to
Section 6.11 hereof and its successors and assigns in such capacity.
"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 onesixteenth (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 nonUnited 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.
"Affiliate" shall mean, with respect to a specified Person, any other
Person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
person; (b) which beneficially owns or holds five (5%) percent or more of any
class of the Voting Stock or other equity interest of such specified person; or
(c) of which five (5%) percent or more of the Voting Stock or other equity
interest is beneficially owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with") when used with respect to any specified person shall mean
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.
"Agent" shall mean Wachovia Bank, National Association, in its capacity
as agent on behalf of Lenders pursuant to the terms hereof and any replacement
or successor agent hereunder.
"Agent Payment Account" shall have the meaning set forth in Section
6.3(a) hereof.
"Agreement Date" shall mean as of August 22, 2005.
-9-
"Amount Due From Factor" shall mean (a)(i) at the date in question, if
a current Factor Status Statement has been delivered by Factor to Agent on such
date, an amount equal to the aggregate credit balances due from Factor to JCC
under the Factoring Agreement on such date as reflected on the Factor Status
Statement from Factor, or (ii) if a current Factor Status Statement has not been
delivered to Agent on such date, an amount equal to the aggregate credit
balances due to JCC under the Factoring Agreement on such date as reflected on
the Due From Factor Report delivered to Agent by Borrowers on such date or (iii)
in the absence of delivery of the Due From Factor Report, an amount determined
by Agent in its sole discretion, minus (b) at the date in question, the Factor
Reserve.
"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.
"Average Daily Balance" shall have the meaning set forth in Section
3.2(b) hereof.
"Bank Products" shall mean any one or more of the following types of
products, services or facilities extended to any Borrower by Wachovia or any
Affiliate of Wachovia: (i) commercial credit cards; (ii) merchant card services;
(iii) products or services under Cash Management Agreements; (iv) Hedging
Agreements; (v) interstate depository network services; and (vi) such other
banking products or services provided by Wachovia or any Affiliate of Wachovia
as may be requested by any Borrower, other than Letters of Credit.
"Banking Relationship Debt shall mean Indebtedness or other obligations
of a Borrower to Wachovia (or any Affiliate of Wachovia) arising out of or
relating to Bank Products.
"Blocked Accounts" shall have the meaning set forth in Section 6.3(a)
hereof
"Borrowing Base" shall mean, at any time, an amount equal to:
(a) the sum of:
(i) eighty-five percent (85%) of the Net Amount
of the Eligible Accounts, plus
(ii) the lesser of (1) the lesser of (A)
eighty-five percent (85%) of the Amount Due
From Factor on such date that is
attributable to Factored Accounts that are
not Client Risk Accounts or (B) $5,000,000,
or (2) the lesser of (X) eighty-five percent
(85%) of the Net Amount of Eligible Factored
Accounts or (Y) $5,000,000, plus
(iii) the lesser of:
(1) the Inventory Loan Limit, or
-10-
(2) the lesser of (A) sixty (60%)
percent of the Value of Eligible
Inventory consisting of finished
goods, Delta's raw materials
consisting of raw cotton and yarn
for such finished goods and
finished yarn categorized as
work-in-process; or (B) eighty-five
(85%) of the Net Orderly
Liquidation Value of such Eligible
Inventory, plus
(iv) to the extent greater than zero, the lesser
of:
(1) (A) the Fixed Asset Loan Limit,
minus
(B) the Fixed Asset Loan
Amortization Amount, or
(2) (A) eighty-five percent (85%)
of the appraised Net
Orderly Liquidation Value
of Eligible Equipment plus
eighty (80%) of the
appraised fair market value
of the Eligible Real
Property determined from
time to time by a qualified
appraiser acceptable to
Agent, minus
(B) the Fixed Asset Loan
Amortization Amount, plus
(v) the result of:
(1) the Tennessee Asset Loan Limit,
minus
(2) the Tennessee Asset Loan
Amortization Amount, minus
(b) the Reserves.
For purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letters of Credit for the purpose of purchasing
Eligible Inventory as Loans to the extent Agent is in effect basing the issuance
of Letters of Credit on the Value of the Eligible Inventory being purchased with
such Letters of Credit. In determining the actual amounts of Letter of Credit
Obligations 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 Borrowers
or the perpetual inventory record maintained by Borrowers. Notwithstanding
anything to the contrary set forth in this Agreement or any other Financing
Agreement, in no event shall the assets of JCC be eligible for borrowing
purposes under this Agreement until Agent's examiner shall have completed a
field examination and audit of the assets of JCC with results reasonably
acceptable to Agent, and Agent shall have received, reviewed and deemed to be
acceptable an appraisal of the assets of JCC.
"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
-11-
the State of
Georgia or the State of North Carolina, and a day on which the
Reference Bank and Agent are 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.
"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.
"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.
"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).
"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 ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc. or at least P-1 by ▇▇▇▇▇'▇ 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)
days 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.
-12-
"Cash Management Agreements" shall mean any agreement entered into from
time to time between any Borrower or any of its Subsidiaries, on the one hand,
and Wachovia or any of its Affiliates, on the other, in connection with cash
management services for operating, collections, payroll and trust accounts of
such Borrower or its Subsidiaries provided by such banking or financial
institution, including automatic clearinghouse services, controlled disbursement
services, electronic funds transfer services, information reporting services,
lockbox services, stop payment services and wire transfer services.
"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 any
Borrower or 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 any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or 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 one or more
Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any
Borrower or Guarantor or the Board of Directors of any Borrower or Guarantor; or
(d) during any period of two (2) consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of any Borrower or
Guarantor (together with any new directors who have been appointed by any
Permitted Holder, or whose nomination for election by the stockholders of such
Borrower or Guarantor, as the case may be, was approved by a vote of at least
sixty-six and two-thirds (66 2/3%) 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 any Borrower then still in
office.
"CIT" shall mean The CIT Group/Commercial Services, Inc., a New York
corporation.
"Client Risk Account" shall mean a Factored Account with respect to
which the risk of the account debtor's nonpayment for any reason is borne by JCC
instead of Factor.
"Closing Date" shall mean the date on which all the conditions
precedent in Section 4 hereof are satisfied or waived and the initial Loans are
made under this Agreement.
"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.
"Collateral" shall have the meaning set forth in Section 5.1 hereof.
"Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to any
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
-13-
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.
"Commitment" shall mean, at any time, as to each Lender, the principal
amount set forth beside such Lender's name on Schedule 1.21 hereto or in the
Assignment and Acceptance 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."
"Credit Facility" shall mean the Loans and Letters of Credit provided
to or for the benefit of Borrowers pursuant to Sections 2.1 and 2.2 hereof.
"Customs Brokers" shall mean the persons listed on Schedule 1.24 hereto
or such other Person as may be selected by any Borrower after the date hereof
and after written notice by such Borrower to Agent who is reasonably acceptable
to Agent, provided, that, as to each such Person (including those listed on such
Schedule), such Borrower has used reasonable efforts to obtain a Collateral
Access Agreement duly authorized, executed and delivered by such Person.
"Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
"Defaulting Lender" shall have the meaning set forth in Section 6.9(d)
hereof.
"Deposit Account Control Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Agent, by and among Agent, any 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 such Borrower and such other terms
and conditions as Agent may 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.
"Due From Factor Report" shall mean a report based on information
provided to JCC by Factor and prepared by JCC concurrently with each request for
a Loan under this Agreement (but no less frequently than monthly) that reflects
the status of Factored Accounts under the Factoring Agreement on such date.
"EBITDA" shall mean, as to Borrowers, with respect to any period, an
amount equal to: (a) the Net Income of Borrowers and their Subsidiaries for such
period on a consolidated basis
-14-
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 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.
"Eligible Accounts" shall mean Accounts created by a 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 such Borrower or rendition of services by such 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 the earlier of (i) sixty
(60) days after the original due date or for them (ii) one hundred twenty (120)
days after the date of the original invoice for them (or one hundred fifty (150)
days after the date of the original invoice for them for certain account debtors
of such Borrower which are pre-approved by Agent, on terms and conditions
acceptable to Agent);
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Agent's request, such 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 such 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 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 such 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
-15-
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 ▇▇▇▇▇▇▇▇ (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower's satisfactory completion of any further performance under
the agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage
invoices, except as to ▇▇▇▇ and hold invoices, if Agent shall have received an
agreement in writing from the account debtor, in form and substance 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 does not have, and does not engage in
transactions which 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 such 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;
(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;
(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 any Borrower;
(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, upon Agent's
request, 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;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might result in
any material adverse change in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than fifteen (15%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than the earlier of (i) sixty (60) days after the original due date
or for them (ii) one hundred twenty (120) days after the original invoice date
for them (or one hundred fifty (150) days after
-16-
the date of the original invoice for them for certain account debtors of such
Borrower which are pre-approved by Agent, on terms and conditions acceptable to
Agent) which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;
(o) 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
such Borrower to seek judicial enforcement in such State of payment of such
Account, unless such 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;
(p) such Accounts are owed by account debtors whose total indebtedness
to such Borrower does not exceed the credit limit with respect to such account
debtors (as determined by such Borrower from time to time substantially
consistent with its current practices as of the date hereof) by more than twenty
(20%) percent and as is reasonably acceptable to Agent (but the portion of the
Accounts not in excess of such credit limit may be deemed Eligible Accounts);
(q) such Accounts are not Factored Accounts; and
(r) such Accounts are owed by account debtors deemed creditworthy at
all times by such Borrower consistent with its current practice and who are
reasonably acceptable to Agent.
General criteria for Eligible Accounts may be established and revised from time
to time by Agent in good faith based on an event, condition or other
circumstance arising after the date hereof, or existing on the date hereof to
the extent Agent has no written notice thereof from a Borrower, 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.
"Eligible Equipment" shall mean Equipment owned or operated in the
ordinary course of the business of a 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 such Borrower, except any Equipment which would otherwise be
deemed Eligible Equipment that is not located at premises owned and operated by
such Borrower may nevertheless be considered Eligible Equipment: (i) as to
locations which are leased by such 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 such 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,
-17-
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 such 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 such Borrower, as consignor or ▇▇▇▇▇▇, 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; or (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 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 a 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.
"Eligible Factored Accounts" shall mean Accounts created by a Borrower
that would constitute Eligible Accounts but for the fact they are Factored
Accounts, which Factored Accounts are factored with a Qualified Factor.
"Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of a Borrower, raw
materials for such finished goods and finished yarn categorized as
work-in-process, which are acceptable to Agent based on the criteria set forth
below. In general, Eligible Inventory shall not include (a) work-in-process
(other than finished yarn); (b) raw materials other than yarn and raw cotton;
(c) spare parts for Equipment; (d) packaging and shipping materials; (e)
supplies used or consumed in such Borrower's business; (f) Inventory at premises
other than those owned and controlled by such Borrower, except any Inventory
which would otherwise be deemed Eligible Inventory at locations in the United
States of America which are not owned and operated by such Borrower may
nevertheless be considered Eligible Inventory: (i) as to locations which are
leased by such 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, except that notwithstanding that Agent
shall not have received such an agreement for a particular leased location,
Agent may consider Inventory at such leased location which would otherwise be
Eligible Inventory to be Eligible Inventory and in such event, Agent may at any
time establish such Reserves as Agent may determine in respect of amounts at any
time payable by such Borrower to the owner or lessor of such location, without
limiting any other rights and remedies of Agent under this Agreement or under
the other Financing Agreements with respect to the establishment of Reserves or
otherwise and (ii) as to premises of third parties (including consignees and
processors), Agent shall have received a Collateral Access Agreement duly
authorized, executed and delivered by the owner and operator of such premises
(except that notwithstanding that
-18-
Agent shall not have received such an agreement as to a particular third party
location, Agent may consider Inventory at such location which would otherwise be
Eligible Inventory to be Eligible Inventory and in such event, Agent may at any
time establish such Reserves as Agent may determine in respect of amounts at any
time payable by such Borrower to such third party, without limiting any other
rights or remedies of Agent under this Agreement or under the other Financing
Agreements with respect to the establishment of Reserves or otherwise), and in
addition, if required by Agent, as to premises of third parties where assets of
such Borrower are located: (A) the owner and operator executes appropriate UCC-1
financing statements in favor of such Borrower, which' are duly assigned to
Agent and (B) any secured Agent to the owner and operator is properly notified
of the first priority lien on such Inventory of Agent; (g) Inventory located
outside the United States of America shall only be Eligible Inventory if (i) it
is in transit to either the premises of a Customs Broker in the United States or
premises of such Borrower in the United States and as to premises of a Customs
Broker or premises which are not owned and controlled by such Borrower only if
Agent has received a Collateral Access Agreement duly authorized, executed and
delivered by such Customs Broker or the owner, lessor and operator of such other
premises, as the case may be, (ii) Agent has a first priority perfected security
interest in and control and possession of all originals of documents of title
with respect to such Inventory, (iii) Agent has received a Collateral Access
Agreement from the Customs Broker dealing with such Inventory, duly authorized,
executed and delivered by such person, and such agreement is in full force and
effect, binding upon such person and such person has complied with the terms
thereof, (iv) Agent has received (A) a copy of the certificate of marine cargo
insurance in connection therewith in which it has been named as an additional
insured and loss payee in a manner acceptable to Agent and (B) a copy of the
invoice and manifest with respect thereto, and (v) such Inventory is not subject
to any Letter of Credit; (h) Inventory subject to a security interest or lien in
favor of any person other than Agent, except those permitted in this Agreement;
(i) ▇▇▇▇ and hold goods; (j) Inventory which is not subject to the first
priority, valid and perfected security interest of Agent, (k) damaged and/or
defective Inventory which is unsaleable or which such Borrower has not marked
down to its realizable value; (l) Inventory purchased or sold on consignment;
(m) samples; (n) Inventory to be returned to vendors; (o) Inventory subject to
any License Agreement or other agreement that limits, conditions or restricts
such Borrower's or Agent's right to sell or otherwise dispose of such Inventory
unless the Licensor has entered into a Licensor/Lender Agreement with Agent; or
(p) Inventory that is the subject of an Intellectual Property Claim. General
criteria for Eligible Inventory play be established and revised from time to
time by Agent in good faith based on an event, condition or other circumstance
arising after the date hereof, or existing on the date hereof to the extent
Agent has no written notice thereof from a Borrower, 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.
"Eligible Real Property" shall mean Real Property of Borrowers 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 a Borrower) condemnation by any Governmental Authority
or any pending or threatened (in writing to a 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
-19-
of any Person even if permitted herein); (c) Real Property which is not subject
to the first priority, valid and perfected security interest or lien of Agent;
(d) Real Property with respect to which improvements thereon are uninsured; (e)
Real Property located outside the United States of America; (f) Real Property of
Delta located in ▇▇▇▇▇▇▇▇ County, Tennessee; or (g) Real Property with respect
to which Agent has not received an appraisal pursuant to Section 7.4(a) hereof.
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 a 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.
"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 after the initial
syndication of the Credit Facility by Wachovia or its Affiliates, unless a
Default or Event of Default exists, Borrowers; 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 any Borrower nor any Guarantor nor any Affiliate of any Borrower
or 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 any Borrower or Guarantor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree
"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 any 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,
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
-20-
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, 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.
"Equipment" shall mean, as to each Borrower, all of such 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.
"ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
"ERISA Affiliate" shall mean any person required to be aggregated with
any Borrower or any Subsidiaries of such Borrower under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 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 any Borrower or any Subsidiaries of such
Borrower is a "disqualified person" (within the meaning of Section 4975 of the
Code) or with respect to which any Borrower or any Subsidiaries of such Borrower
could otherwise be liable; (f) a complete or partial withdrawal by any 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 or Multiemployer 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 or Multiemployer 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 any Borrower or any ERISA
Affiliate; and 0) any other event or condition with respect to a Plan or
Multiemployer Plan or 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 any Borrower.
"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
-21-
which Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected, by Borrowers and
approved by Agent) on or about 9:00 a.m. (New York 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 Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers.
"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.
"Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
"Excess Availability" shall mean the amount, as determined by Agent,
calculated at any time, equal to: (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 Borrowers which
are more than sixty (60) days past due as of such time, plus (iii) the amount of
checks issued by Borrowers to pay trade payables and other obligations which are
more than sixty (60) days past due as of such time, but not yet sent.
"Exchange Act" shall mean the Securities Exchange Act of 1934, together
with all rules, regulations and interpretations thereunder or related thereto.
"Existing Delta Financing Agreements" shall mean the "Financing
Agreements" as defined in the Existing Delta Loan Agreement.
"Existing Delta Letters of Credit" shall mean, collectively, the
letters of credit issued for the account of Delta pursuant to the Existing Delta
Loan Agreement or for which Delta is otherwise liable.
"Existing Delta Loan Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Existing Delta Loans" shall mean the "Loans" under (and as defined in)
the Existing Delta Loan Agreement.
"Existing Delta Obligations" shall mean the "Obligations" under (and as
defined in) the Existing Delta Loan Agreement.
"Existing Financing Agreements" shall mean, collectively, the Existing
Delta Financing Agreements and the Existing Soffe Financing Agreement.
"Existing Letters of Credit" shall mean, collectively, the Existing
Delta Letters of Credit and the Existing Soffe Letters of Credit.
"Existing Loan Agreements" shall mean, collectively, the Existing Delta
Loan Agreement and the Existing Soffe Loan Agreement.
-22-
"Existing Loans" shall mean, collectively, the Existing Delta Loans and
the Existing Soffe Loans.
"Existing Obligations" shall mean, collectively, the Existing Delta
Obligations and the Existing Soffe Obligations.
"Excluded Real Property" shall mean all now owned real property of
Borrowers, including leasehold interests, together with the buildings,
structures and other improvements located thereon, and all licenses, easements
and appurtenances relating thereto, wherever located, as more particularly
described on Schedule 1.47 hereto, but not including the Real Property subject
to the Mortgages.
"Existing Soffe Financing Agreements" shall mean the "Financing
Agreements" as defined in the Existing Soffe Loan Agreement.
"Existing Soffe Letters of Credit" shall mean, collectively, the
letters of credit issued for the account of Soffe pursuant to the Existing Soffe
Loan Agreement or for which Soffe is otherwise liable.
"Existing Soffe Loan Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Existing Soffe Loans" shall mean the "Loans" under (and as defined in)
the Existing Soffe Loan Agreement.
"Existing Soffe Obligations" shall mean the "Obligations" under (and as
defined in) the Existing Soffe Loan Agreement.
"Factor " shall mean Continental Business Credit, Inc., a California
corporation.
"Factor Documents" shall mean the Factoring Agreement and any and all
other documents, agreements and instruments executed in connection therewith or
relating thereto.
"Factor Intercreditor Agreement" shall mean that certain Intercreditor
and Assignment Agreement dated August ___, 2005, between Agent and Factor,
pursuant to which, among other things, (a) JCC has assigned to Agent, for its
benefit and for the benefit of Lenders, all sums at any time due or to become
due from Factor to JCC under the Factoring Agreement and other Factor Documents
and (b) Factor and Agent have established the relative priorities of their
security interests and liens with respect to JCC's Accounts and other property.
"Factor Reserve" shall mean the amount which at any time may be charged
to JCC under the Factoring Agreement or withheld from sums otherwise due to JCC
under the Factoring Agreement, including interest, fees, commissions, ledger
debt and other charges due Factor under the Factoring Agreement and the amount
of any actual or anticipated disputes or claims arising with respect to any
Factored Account.
-23-
"Factor Status Statement" shall mean an account current statement or
similar report issued by Factor on a monthly basis under the Factoring Agreement
and setting forth the status of the Factored Accounts with Factor.
"Factored Account" shall mean an Account of JCC which is factored by
Factor under the Factoring Agreement.
"Factoring Agreement" shall mean that certain Factoring Agreement
(Collected Funds) dated as of August 22, 2005, between Factor and JCC as in
effect on the date hereof and as amended in compliance with the Factor
Intercreditor Agreement.
"Fee Letter" shall mean the letter agreement, dated July 26, 2005, by
and among Borrowers and Agent, setting forth certain fees payable by Borrowers
to Agent for its benefit and for the benefit of Lenders.
"Financing Agreements" shall mean, collectively, this Agreement, the
Factor Intercreditor Agreement, the Junkfood Subordination Agreement, the Soffe
Subordination Agreement, the Pledge Agreement, the Guarantees, the Mortgages and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or Obligor in connection with this Agreement.
"Fixed Asset Loan Amortization Amount" shall mean, on any date, the
product of $250,000 multiplied by the cumulative number of months that have
elapsed through such date since the Closing Date.
"Fixed Asset Loan Limit" shall mean $15,000,000.
"Fixed Charge Coverage Ratio" shall mean, with respect to Borrowers and
their Subsidiaries, on a consolidated basis, for any period of determination,
the ratio of (a) EBITDA of Borrowers during such period to (b) Fixed Charges of
Borrowers and their Subsidiaries for the same period.
"Fixed Charges" for any Person any period shall mean the sum of,
without duplication, (a) all Interest Expense, (b) all Capital Expenditures, and
(c) all regularly scheduled (as determined at the beginning of the respective
period) principal payments of Indebtedness for borrowed money and Indebtedness
with respect to Capital Leases (and without duplicating in items (a) and (c) of
this definition, the interest component with respect to Indebtedness under
Capital Leases) and (d) an amount equal to the product of: (i) $265,278 (which
represents the aggregate monthly reduction of the Fixed Asset Loan Limit and the
Tennessee Asset Loan Limit in effect under this Agreement) multiplied by (ii)
the cumulative number of months that elapsed during such period of
determination.
"Funded Debt" shall mean collectively, (a) the aggregate principal
amount of Indebtedness for borrowed money which would, in accordance with GAAP,
be classified as long-term Indebtedness, together with the current maturities
thereof and the face amount of all outstanding letters of credit; (b) all
Indebtedness outstanding under any revolving credit, line of
-24-
credit or renewals thereof, notwithstanding that any such Indebtedness is
created within one year of the expiration of such agreement; and (c) all
Indebtedness with respect to Capital Leases.
"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 9.21 hereof and for purposes of calculating "Net Income"
as defined in this Agreement, until such time as Administrative Borrower
notifies Agent of a change in GAAP that would have a material effect on the
calculation of Net Income or the covenant set forth in Section 9.21 and
Borrowers 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.
"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, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guarantee" shall mean, individually, any guarantee executed by a
Guarantor substantially in the form of Exhibit C attached hereto, and
"Guarantees" shall collectively refer to all such guarantees.
"Guarantors" shall mean SAIM, together with its successors and assigns.
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and 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).
"Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, forward contract, curency swap agreement,
comodity price protection agreement or other interest or currency exchange rate
or commodity price hedging arrangement.
"Honduras JV" shall mean Green Valley Industrial Park, S.A.
"Honduras Subsidiary" shall mean each of Delta Apparel Honduras, S.A.
and Delta ▇▇▇▇▇▇, ▇.▇.
-25-
"Hostile Acquisition" shall mean any investment in a Person, resulting
in control of such Person, involving a tender offer or proxy contest that has
not been recommended or approved by the board of directors or similar body of
such Person that is the subject of the investment prior to the first public
announcement or disclosure relating to such investment.
"Immaterial Subsidiary" means any Subsidiary of a Borrower which
accounted for less than (a) two percent (2%) of the consolidated assets of the
Borrowers and their Subsidiaries, on a consolidated basis, as of the end of the
Borrowers' most recent fiscal year and (b) two percent (2%) of the consolidated
revenues of the Borrowers and their Subsidiaries, on a consolidated basis, for
the four fiscal quarters ending as of the Borrowers' most recent fiscal year.
"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 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; and (h) Banking Relationship
Debt.
"Information Certificate" shall mean the Information Certificate of
Borrowers constituting Exhibit D hereto containing material information with
respect to Borrowers and their respective businesses and assets provided by or
on behalf of Borrowers to Agent in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
"Intellectual Property" shall mean, as to each Borrower, such
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
-26-
styles, trademark and service ▇▇▇▇ 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
▇▇▇ 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.
"Intellectual Property Claim" shall mean the assertion by any Person of
a claim (whether asserted in writing, by action, suit or proceeding or
otherwise) that any Borrower's ownership, use, marketing, sale or distribution
of any Inventory, Equipment, Intellectual Property or other property is
violative of any ownership or right to use any Intellectual Property of such
Person.
"Interest Expense" shall mean, for any period, as to any Person, all of
the following as determined on a consolidated basis in accordance with GAAP: (a)
total interest expense, whether paid or accrued during such period (including
the interest component of Capital Leases for such period), including all bank
fees, commissions, discounts and other fees and charges owed with respect to
letters of credit (but excluding amortization of discount and amortization of
deferred financing fees paid in cash in connection with the transactions
contemplated hereby, interest paid in property other than cash and any other
interest expense not payable in cash), minus (b) any net payments received
during such period as interest income received in respect of its investments in
cash.
"Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers (or
Administrative Borrower on behalf of Borrowers) may elect, the exact duration to
be determined in accordance with the customary practice in the applicable
Eurodollar Rate market; provided, that, Borrowers (or Administrative Borrower on
behalf of Borrowers) may not elect an Interest Period which will end after the
last day of the then-current term of this Agreement.
"Interest Rate" shall mean:
(a) Subject to clauses (b) and (c) of this definition below:
as to Prime Rate Loans, the Prime Rate minus one-quarter percent (.25%) and, as
to Eurodollar Rate Loans, a rate of one and one-half percent (1.5%) per annum in
excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by Borrowers (or Administrative Borrower on
behalf of Borrowers) 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 any Borrower);
(b) Subject to clause (c) below, effective as of March 1,
2006, and each fiscal quarter ending thereafter, the Interest Rate payable by
Borrowers shall be increased or decreased, as the case may be, to the rate equal
to the applicable margin set forth in Exhibit B hereto, on a per annum basis, in
excess of the Prime Rate as to Prime Rate Loans, and in excess of the
-27-
Adjusted Eurodollar Rate as to Eurodollar Rate Loans, in each case, based on
either (i) the quarterly average of the Excess Availability of Borrower for the
immediately preceding three (3) calendar months or (ii) Borrowers' Fixed Charge
Coverage Ratio, calculated on a quarterly basis, for the immediately preceding
four (4) consecutive fiscal quarters of Borrowers as calculated by Agent in good
faith.
(c) Notwithstanding anything to the contrary contained in
clauses (a) and (b) above, the applicable margin otherwise used to calculate the
Interest Rate shall be the highest percentage set forth on Exhibit B hereto for
each category of Loans (without regard to the amount of Excess Availability or
the Fixed Charge Coverage Ratio) plus two (2%) percent per annum, at Agent's
option, without notice, (i) either (A) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full, or (B) for the period from and after
the date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing as determined by Agent and (ii) on the Loans at
any time outstanding in excess of the amounts available to Borrowers under
Section 2 (whether or not such excesses) arise or are made with or without
Agent's knowledge or consent and whether made before or after an Event of
Default).
"Inventory" shall mean, as to each Borrower, all of such Borrower's now
owned and hereafter existing or acquired goods, wherever located, which (a) are
leased by such Borrower as lessor; (b) are held by such Borrower for sale or
lease or to be furnished under a contract of service; (c) are furnished by such
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.
"Inventory Loan Limit" shall mean $45,000,000.
"Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of such
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 such
Borrower and including such other terms and conditions as Agent may require.
"Issuing Bank" shall mean Wachovia or any Lender that is approved by
Agent that shall issue a Letter of Credit for the account of a Borrower and have
agreed in a manner satisfactory to Agent to be subject to the terms hereof as an
Issuing Bank.
"Junkfood Acquisition" shall mean the acquisition by JCC of all or
substantially all of the assets of Junkfood Seller pursuant to the Junkfood
Purchase Documents.
"Junkfood Asset Purchase Agreement" shall have the meaning set forth in
the recitals to this Agreement.
-28-
"Junkfood Purchase Documents" shall mean, individually and
collectively, the Junkfood Asset Purchase Agreement, Junkfood Seller Note,
Junkfood Seller Guaranty and other documents, instruments and agreements
executed in connection therewith or relating thereto.
"Junkfood Seller" shall have the meaning set forth in the recitals to
this Agreement.
"Junkfood Seller Guaranty" shall mean that certain Guaranty dated as of
August ___, 2005, made by Delta in favor of Junkfood Seller as in effect on the
date hereof and as amended in compliance with the Junkfood Subordination
Agreement.
"Junkfood Seller Note" shall mean that certain Promissory Note dated as
of August __, 2005, in the original principal amount of $2,500,000 executed and
delivered by JCC in favor of Junkfood Seller as in effect on the date hereof and
as amended in compliance with the Junkfood Subordination Agreement.
"Junkfood Subordination Agreement" shall mean that certain Debt
Subordination Agreement dated August __, 2005, among Borrowers, Junkfood Seller
and Agent.
"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 successors and
assigns; each sometimes being referred to herein individually as a "Lender".
"Letter of Credit Documents" shall mean, with respect to any Letter of
Credit, such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk or (b) any collateral
security for such obligations.
"Letter of Credit Limit" shall mean $20,000,000.
"Letter of Credit Obligations" shall mean, at any time, the sum of (a)
the aggregate undrawn amount of all Letters of Credit outstanding at such time,
plus (b) the aggregate amount of all drawings under Letters of Credit for which
Issuing Bank has not at such time been reimbursed, plus (c) without duplication,
the aggregate amount of all payments made by each Lender to Issuing Bank with
respect to such Lender's participation in Letters of Credit as provided in
Section 2.2 for which Borrowers have not at such time reimbursed the Lenders,
whether by way of a Loan or otherwise.
"Letters of Credit" shall mean all letters of credit (whether
documentary or stand-by and whether for the purchase of Inventory, Equipment or
otherwise) issued by an Issuing Bank for the account of any Borrower pursuant to
this Agreement, and all amendments, renewals, extensions or replacements thereof
and including the Existing Letters of Credit.
"License Agreement" shall mean any agreement between a Borrower and a
Licensor pursuant to which such Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of such Borrower.
-29-
"Licensor" shall mean any Person from whom a Borrower obtains the right
to use (whether on an exclusive or non-exclusive basis) any Intellectual
Property in connection with such Borrower's manufacture, marketing, sale or
other distribution of any Inventory.
"Licensor/Lender Agreement" shall mean an agreement between Agent and a
Licensor by which Agent is given the unqualified right, vis-a-vis such Licensor,
to enforce Agent's security interests and liens with respect to and to dispose
of a Borrower's Inventory with the benefit of any Intellectual Property
applicable thereto, irrespective of such Borrower's default under any License
Agreement with such Licensor and which is otherwise in form and substance
reasonably satisfactory to Agent.
"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.
"Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower
involving monetary liability of or to any Person in an amount in excess of
$1,000,000 in any fiscal year and (b) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which any
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 on
the business, assets, condition (financial or otherwise) or results of
operations or prospects of such Borrowers and their Subsidiaries taken as a
whole or the validity or enforceability of this Agreement, any of the other
Financing Agreements, or any of the rights and remedies of Agent hereunder or
thereunder.
"Maximum Credit" shall mean the amount of $85,000,000.
"Maximum Interest Rate" shall mean the maximum non-usurious rate of
interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken, reserved, charged or received in respect of
the indebtedness of Borrowers to Agent and Lenders, or to the extent that at any
time such applicable law may thereafter permit a higher maximum non-usurious
rate of interest, then such higher rate. Notwithstanding any other provision
hereof, the Maximum Interest Rate shall be calculated on a daily basis (computed
on the actual number of days elapsed over a year of three hundred sixty-five
(365) or three hundred sixty-six (366) days, as the case may be).
"Mexican Subsidiary" shall mean Delta Campeche, S.A. de C.V., a company
organized under the laws of Mexico.
"Monthly Average Excess Availability" shall mean, at any time, the
average of the amount of the Excess Availability for the immediately preceding
thirty (30) days as calculated by Agent based on the amount of the Excess
Availability on each date during such period.
"Mortgages" shall mean, individually and collectively, each of the
following, as each may be amended, modified, supplemented, extended or restated
from time to time: (a) that certain Amended and Restated Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated
October 3, 2003, by Delta in favor of Agent with respect to the Real Property
and related assets of Delta located in Catawba County, North Carolina; (b) that
certain
-30-
Amended and Restated Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated October 3, 2003, by Delta in favor of Agent
with respect to the Real Property and related assets of Delta located in ▇▇▇▇
County, Tennessee; (c) that certain Mortgage, Assignment of Rents and Leases and
Security Agreement dated as of October 3, 2003, with respect to the Real
Property and related assets of Delta located in Fayette County, Alabama; (d)
that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement
and Fixture Filing, dated November 1, 2004, by Delta in favor of Agent with
respect to the Real Property and related assets of Delta located in ▇▇▇▇▇▇▇▇
County, Tennessee; (e) that certain First Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Fixture Filing, dated as of October 3, 2003, by
Soffe in favor of Agent with respect to the Real Property and related assets of
Soffe located in Cumberland County, North Carolina; and (f) that certain First
Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture
Filing, dated as of October 3, 2003, by Soffe in favor of Agent with respect to
the Real Property and related assets of Soffe located in ▇▇▇▇▇▇▇ County, North
Carolina.
"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 any Borrower or
ERISA Affiliate.
"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.
"Net Amount of Eligible Factored Accounts" shall mean the gross amount
of all Eligible Factored 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.
"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 nonrecurring 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,
-31-
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; provided, the Honduras Subsidiaries and the Mexican Subsidiary
shall be considered to be wholly-owned Subsidiaries of Delta for purposes of the
calculation of Net Income hereunder so long as Delta owns at least 97% of the
Capital Stock of each such Subsidiaries.
"Net Orderly Liquidation Value" shall mean with respect to a 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.
"Net Proceeds" shall mean the aggregate cash proceeds received by any
Borrower, or any Subsidiaries of a Borrower, in respect of any asset sale
permitted under Section 9.7 hereof, net of the direct costs relating to such
asset sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts applied to the repayment of indebtedness secured by a
lien on the asset or assets that are the subject of such asset sale and any
other indebtedness required to be repaid in connection with such transaction and
any reserve for adjustment in respect of the sale price of such asset or assets.
Net Proceeds shall exclude any non-cash proceeds received from any asset sale,
but shall include such proceeds when and as converted by any Borrower or any
Subsidiary of a Borrower to cash.
"Obligations" shall mean (a) any and all Loans, Letter of Credit
Obligations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of the Borrowers to Agent or
any Lender 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 any or all of the Borrowers 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 direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Agent or Lenders
and (b) for purposes only of Sections 5 and 6.4 hereof, any and all Banking
Relationship Debt. From and after the Closing Date, all Existing Obligations
outstanding on the Closing Date shall be deemed to be outstanding, and to
constitute Obligations, under this Agreement, and shall be subject to all of the
terms and conditions hereof.
"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 Guarantors), other
than a Borrower.
-32-
"Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans and
Letters of Credit in conformity with the provisions of Section 13.6 of this
Agreement governing participations.
"Permits" shall have the meaning set forth in Section 8.7(b) hereof.
"Permitted Acquisition" shall mean any Acquisition Transaction,
provided that:
(a) the Acquisition Target's business is in a Permitted Business Field;
(b) Agent shall have received copies of (i) the definitive Acquisition
Documents and related due diligence documents (including lien search reports,
title insurance commitments and environmental assessments), (ii) historical
financial statements or other financial information of the Acquisition Target in
form and substance reasonably acceptable to Agent and (iii) all other financial
information, and such other documents and information, of the Acquisition Target
as Agent may reasonably request, all of which shall be reasonably acceptable to
Agent;
(c) if the acquired assets are to be included in the Borrowing Base
simultaneously with the consummation of the Permitted Acquisition, Agent's
examiners shall have completed a field exam and audit of the Acquisition Target,
in scope and with results reasonably acceptable to Agent, or if such field exam
and audit are not conducted, then the assets of such Acquisition Target shall
not be included in the Borrowing Base and shall be ineligible for borrowing
purposes until such exam and audit are conducted in scope and with results
reasonably acceptable to Agent;
(d) the Acquisition Consideration for all Acquisition Transactions
during the term of this Agreement shall not exceed $15,000,000;
(e) no Default or Event of Default shall exist at the time of the
Acquisition Transaction or after giving effect thereto;
(f) Borrowers shall have delivered to Agent a certificate executed by
the chief financial officer of Borrowers which demonstrates to the reasonable
satisfaction of Agent that (a) at the time of such Acquisition Transaction
Borrowers shall have Monthly Average Excess Availability of not less than
$15,000,000 and (b) at the time of and after giving effect to such Acquisition
Transaction Borrowers shall have Excess Availability of not less than
$15,000,000;
(g) any Indebtedness incurred to any or all of the sellers in
connection with any such Acquisition Transaction shall be subordinated to the
prior payment and performance of the Obligations pursuant to a debt
subordination agreement that is in all respects acceptable to Agent;
(h) the Acquisition Transaction is not a Hostile Acquisition;
(i) Borrower shall have notified Agent in writing of the Acquisition
Transaction (and provided to Agent and each Lender a complete information
package with respect to the Acquisition Transaction) at least 14 days prior to
the scheduled closing date of the Acquisition Transaction;
-33-
(j) the structure of the Acquisition Transaction shall be reasonably
acceptable to Agent and Lenders in all material respects, including the
requirement that, after giving effect to the Acquisition Transaction, all of the
Capital Stock of the Acquisition Target and/or Acquisition Subsidiary, as
appropriate, shall be directly or indirectly owned (legally and beneficially) by
a Borrower and a Borrower shall control all Voting Stock of any such Acquisition
Target; and
(k) Agent contemporaneously with the closing of such Acquisition
Transaction shall have received (i) such documents and instruments as may be
necessary to grant or confirm to Agent a first priority perfected lien on and
security interest in all of the assets (including Capital Stock) of the
Acquisition Target and/or Acquisition Subsidiary, as appropriate, so acquired,
and (ii) if the Acquisition Target and/or Acquisition Subsidiary, as
appropriate, acquired is not merged into a Borrower or an Acquisition Subsidiary
that already is a "Borrower" under the Agreement, a Joinder Agreement executed
by such Acquisition Target and/or Acquisition Subsidiary, as appropriate,,
together with such other collateral documents and opinions of counsel as may be
requested by Agent, each in form and substance satisfactory to Agent
"Permitted Business Field" shall mean the business engaged in by
Borrowers on the Closing Date or a business substantially similar to the
business engaged in by Borrowers on the Closing Date.
"Permitted Holders" shall mean the persons listed on Schedule 1.89
hereto and their respective successors and assigns.
"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.
"Plan" shall mean an employee benefit plan (as defined in Section 3(3)
of ERISA) which any 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.
"Pledge Agreement" shall mean that certain Amended and Restated Stock
Pledge Agreement by Borrowers in favor of Agent dated the date hereof.
"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.
"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.
"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
-34-
been terminated, the numerator shall be the unpaid amount of such Lender's Loans
and its interest in the Letters of Credit and the denominator shall be the
aggregate amount of all unpaid Loans and Letters of Credit.
"Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, municipal or
local, and whether foreign or domestic, that are paid or payable by any Person
in respect of any period in accordance with GAAP.
"Qualified Factor" shall mean Factor, for so long as Factor has a
re-factoring relationship with CIT, and any other Person that Agent deems to be
acceptable, and so long as Factor or such other Person is a party with Agent to
an intercreditor agreement that is in all respects acceptable to Agent. For the
purposes hereof, the Factor Intercreditor Agreement shall be deemed to be an
intercreditor agreement that Agent deems to be acceptable in all respects.
"Real Property" shall mean all now owned and hereafter acquired real
property of each 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.
"Receivables" shall mean, as to each Borrower, all of the following now
owned or hereafter arising or acquired property of such Borrower: (a) all
Accounts; (b) all amounts at any time payable to such Borrower in respect of the
sale or other disposition by such 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 such Borrower,
letters of credit, indemnities, guarantees, security or other deposits and
proceeds thereof issued payable to such Borrower or otherwise in favor of or
delivered to such 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 such 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 such Borrower or to or for the benefit of
any third person (including loans or advances to any Affiliates or Subsidiaries
of such Borrower) or otherwise associated with any Accounts, Inventory or
general intangibles of such Borrower (including choses in action, causes of
action, tax refunds, tax refund claims, any funds which may become payable to
such Borrower in connection with the termination of any Plan or other employee
benefit plan and any other amounts 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 such Borrower is a
beneficiary).
"Records" shall mean, as to each Borrower, all of such 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,
-35-
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
such Borrower with respect to the foregoing maintained with or by any other
person).
"Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Agent may from time to time designate.
"Register" shall have the meaning set forth in Section 13.6(b) hereof.
"Renewal Date" shall the meaning set forth in Section 13.1(a) hereof.
"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.
"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 Letters of Credit which would otherwise be available to
Borrowers under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks arising after the date of this
Agreement or of which Agent had no actual knowledge as of such 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, (ii) the assets,
business or financial condition of any Borrower or 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 any Borrower or Obligor to Agent is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) to reflect
outstanding Letters of Credit as provided in Section 2.2 hereof; or (d) in the
amount of any Banking Relationship Debt; or (e) in respect of any state of facts
which Agent determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default. 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
or Eligible Inventory so as to address any circumstances, condition, event or
contingency in an 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.
"SAIM" shall mean SAIM, LLC, a North Carolina limited liability
company.
"Soffe" shall have the meaning set forth in the recitals to this
Agreement.
"Soffe Purchase Documents" shall mean, individually and collectively,
the Soffe Stock Purchase Agreement, the Soffe Seller Note and the Related
Agreements (as defined in the Soffe Stock Purchase Agreement).
-36-
"Soffe Seller Note" means that certain Promissory Note dated as of
October 3, 2003 in the original principal amount of $8,000,000 executed and
delivered by Soffe in favor of Sellers in effect on the date hereof and as
heretofore amended in compliance with the terms of the Existing Soffe Loan
Agreement.
"Soffe Sellers" shall mean, collectively, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and their respective heirs, executors, successors and
assigns.
"Soffe Stock Purchase Agreement" shall have the meaning set forth in
the recitals to this Agreement.
"Soffe Subordination Agreement" shall mean that certain Amended and
Restated Subordination Agreement dated the Agreement Date among Agent, Borrowers
and Soffe Sellers.
"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).
"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.
"Tennessee Asset Loan Amoratization Amount" shall mean, on any date,
an amount equal to $15,278 multiplied by the cumulative number of months that
have elapsed through such date since the Closing Date.
"Tennessee Asset Loan Limit" shall mean $1,827,776.
"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).
-37-
"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.
"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.
"Wachovia" shall mean Wachovia Bank, National Association, a national
bank, in its individual capacity, and its successors and assigns.
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 Borrowers from time to time in amounts requested by Borrowers
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 Obligations outstanding at any time to
Borrowers 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 Borrowers based on the Eligible Inventory of Borrowers shall not exceed
the Inventory Loan Limit. If Agent shall determine, in its sole discretion, that
a material adverse change in the financial condition of any Borrower has
occurred, or if a Default or Event of Default exists, then Agent shall have the
right (exercisable at such time or times as Agent deems appropriate) to require
that separate Borrowing Base calculations be made for each Borrower, as well as
the right to limit the use of proceeds of the Loans by each Borrower to an
amount equal to such Borrower's Borrowing Base.
(b) Agent may, in its discretion, from time to time, upon not
less than five (5) days' prior notice to Borrowers, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Agent determines in
good faith that (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales)
has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has materially declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed or (B) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased, or (C) the nature, quality or mix of the
Inventory has materially deteriorated. The amount of any decrease in the lending
formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as
-38-
determined by Agent in good 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) Except in Agent's discretion, (i) the aggregate amount of
the Loans outstanding at any time shall not exceed the Maximum Credit, (ii) the
aggregate amount of Loans and Letter of Credit Obligations based on Eligible
Inventory consisting of yarn classified as work-in-process outstanding at any
time shall not exceed $1,000,000 at any time and (iii) the aggregate amount of
the Loans and the Letter of Credit Obligations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Obligations, exceed the amounts available under the lending
formulas, the Letter of Credit Limit, the Inventory Loan Limit or the Maximum
Credit, as applicable, such event shall not limit, waive or otherwise affect any
rights of Agent or Lenders in that circumstance or on any future occasions and
Borrowers 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) From and after the Closing Date, all Existing Loans
outstanding on the Closing Date shall be deemed to be made and outstanding, and
to constitute Loans, under this Agreement, and shall be subject to all of the
terms and conditions hereof.
2.2 Letter of Credit.
(a) Subject to and upon the terms and conditions contained
herein and in the Letter of Credit Documents, at the request of a Borrower (or
Administrative Borrower on behalf of such Borrower), Agent agrees to cause
Issuing Bank to issue, and Issuing Bank agrees to issue, for the account of such
Borrower one or more Letters of Credit, for the ratable risk of each Lender
according to its Pro Rata Share, containing terms and conditions acceptable to
Agent and Issuing Bank. From and after the Closing Date, all Existing Letters of
Credit outstanding on the Closing Date shall be deemed to be issued and
outstanding, and to constitute Letters of Credit, under this Agreement and all
Letter of Credit Accommodations (as defined in the Existing Loan Agreements)
outstanding on the Closing Date shall be deemed to be and constitute Letter of
Credit Obligations under this Agreement, and shall be subject to all of the
terms and conditions hereof.
(b) The Borrower requesting such Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall give Agent and Issuing
Bank two (2) Business Days' prior written notice of such Borrower's request for
the issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day and in no event shall be a
date less than ten (10) days prior to the end of the then current term of this
Agreement) of issuance of such requested Letter of Credit, whether such Letter
of Credit may be drawn in a single or in partial draws, the date on which such
requested Letter of Credit is to expire (which date shall be a Business Day and
shall not be more than one year from the date of issuance), the purpose for
which such Letter of Credit is to be issued, and the beneficiary of the
requested Letter of Credit. The Borrower requesting the Letter of Credit (or
Administrative Borrower on behalf of such
-39-
Borrower) shall attach to such notice the proposed terms of the Letter of
Credit. The renewal or extension of any Letter of Credit shall, for purposes
hereof be treated in all respects the same as the issuance of a new Letter of
Credit hereunder.
(c) 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 shall be available
unless each of the following conditions precedent have been satisfied in a
manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit
(or Administrative Borrower on behalf of such Borrower) shall have delivered to
Issuing Bank at such times and in such manner as Issuing Bank may require, an
application, in form and substance satisfactory to Issuing Bank and Agent, for
the issuance of the Letter of Credit and such other Letter of Credit Documents
as may be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank, (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, 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
Issuing Bank refrain from, the issuance of letters of credit generally or the
issuance of such Letter of Credit, (iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations shall not exceed the
Letter of Credit Limit, and (iv) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit, on the date of the
proposed issuance of any Letter of Credit shall be equal to or greater than: (A)
if the proposed Letter of Credit is for the purpose of purchasing Eligible
Inventory and the documents of title with respect thereto are consigned to
Issuing Bank, the sum of (1) the percentage equal to one hundred percent (100%)
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 such Borrower's locations for Eligible Inventory within
the United States of America and (B) if the proposed Letter of Credit is for any
other purpose or the documents of title are not consigned to Issuing Bank in
connection with a Letter of Credit for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the Letter of Credit Obligations
with respect thereto. Effective on the issuance of each Letter of Credit, a
Reserve shall be established in the applicable amount set forth in Section
2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).
(d) Except in Agent's discretion, with the consent of all
Lenders, the amount of all outstanding Letter of Credit Obligations shall not at
any time exceed the Letter of Credit Limit.
(e) Each Borrower shall reimburse immediately Issuing Bank for
any draw under any Letter of Credit issued for the account of such Borrower and
pay Issuing Bank the amount of all other charges and fees payable to Issuing
Bank in connection with any Letter of Credit issued for the account of such
Borrower immediately when due, irrespective of any claim, setoff, defense or
other right which such Borrower may have at any time against Issuing Bank or any
other Person. Each drawing under any Letter of Credit or other amount payable in
connection therewith when due shall constitute a request by the Borrower for
whose account
-40-
such Letter of Credit was issued to Agent for a Prime Rate Loan in the amount of
such drawing or other amount then due, and shall be made by Agent on behalf of
Lenders as a Loan (or Special Agent Advance, as the case may be). The date of
such Loan shall be the date of the drawing or as to other amounts, the due date
therefor. Any payments made by or on behalf of Agent or any Lender to Issuing
Bank and/or related parties in connection with any Letter of Credit shall
constitute additional Loans to such Borrower pursuant to this Section 2 (or
Special Agent Advances as the case may be).
(f) Borrowers and Guarantors 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 and any documents, drafts or acceptances
relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by Issuing Bank or correspondent with respect
to any Letter of Credit, except for such losses, claims, damages, liabilities,
costs or expenses that are a direct result of 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. Each Borrower and
Guarantor assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit and for such purposes the drawer or
beneficiary shall be deemed such Borrower's agent. Each Borrower and Guarantor
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
or any documents, drafts or acceptances thereunder. Each Borrower and Guarantor
hereby releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions with respect to or relating to any Letter
of Credit, 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 of this Agreement.
(g) In connection with Inventory purchased pursuant to any
Letter of Credit, Borrowers and Guarantors 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 that upon Agent's request, such items are to be
delivered to Agent and/or subject to Agent's order, and if they shall come into
such Borrower's or Guarantor's possession, to deliver them, upon Agent's
request, to Agent in their original form. Except as otherwise provided herein,
Agent shall not exercise such right to request such items so long as no Default
or Event of Default shall exist or have occurred and be continuing. Except as
Agent may otherwise specify, Borrowers and Guarantors shall designate Issuing
Bank as the consignee on all bills of lading and other negotiable and
non-negotiable documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes
and directs Issuing Bank to name such Borrower or Guarantor as the account party
therein and to deliver to Agent all instruments, documents and other writings
and property received by Issuing Bank pursuant to the Letter of Credit and to
accept and rely upon Agent's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit or the Letter of Credit
Documents with respect thereto. Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge
the credit of Agent or any Lender in
-41-
any manner. Borrowers and Guarantors shall be bound by any reasonable
interpretation made in good faith by Agent, or Issuing Bank 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 any Borrower or Guarantor.
(i) Immediately upon the issuance or amendment of any Letter
of Credit, 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 and the obligations of Borrowers with
respect thereto (including all Letter of Credit Obligations with respect
thereto). Each Lender shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and be obligated to pay to Issuing Bank
therefor and discharge when due, its Pro Rata Share of all of such obligations
arising under such Letter of Credit. Without limiting the scope and nature of
each Lender's participation in any Letter of Credit, to the extent that Issuing
Bank has not been reimbursed or otherwise paid as required hereunder or under
any such Letter of Credit, each such Lender shall pay to Issuing Bank its Pro
Rata Share of such unreimbursed drawing or other amounts then due to Issuing
Bank in connection therewith.
(j) The obligations of Borrowers to pay each Letter of Credit
Obligations and the obligations of Lenders to make payments to Agent for the
account of Issuing Bank with respect to Letters of Credit shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under any and all circumstances, whatsoever,
notwithstanding the occurrence or continuance of any Default, 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 any
Borrower in respect of Loans that are Prime Rate Loans. Any such reimbursement
shall not relieve or otherwise impair the obligation of Borrowers to reimburse
Issuing Bank under any Letter of Credit or make any other payment in connection
therewith.
2.3 [Intentionally Omitted.]
2.4 Commitments. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Obligations 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) Borrowers 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 or on the principal amount of the Loans at any
time outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without
-42-
Agent's knowledge or consent and whether made before or after an Event of
Default) shall be payable ON DEMAND.
(b) Borrowers (or Administrative Borrower on behalf of
Borrowers) may from time to time request Eurodollar Rate Loans or 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
Borrowers (or Administrative Borrower on behalf of Borrowers) shall specify the
amount of the Eurodollar Rate Loan or the amount of the Prime Rate Loans to be
converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loan 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 Borrowers (or Administrative Borrower on behalf of Borrowers), such 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 Event of
Default, or act, condition or event which with notice or passage of time or both
would constitute an 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) Borrowers (or Administrative Borrower on
behalf of Borrowers) shall have complied with such customary procedures as are
established by Agent and specified by Agent to Borrowers from time to time for
requests by Borrowers 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, and (vi) 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 Borrowers (or
Administrative Borrower on behalf of Borrowers). Any request by Borrowers (or
Administrative Borrower on behalf of Borrowers) for a Eurodollar Rate Loan 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 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. Borrowers shall pay to Agent, for the benefit of
Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of Borrowers) 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 Borrowers to Agent, for the
account of Lenders, monthly in arrears not later than the first day of each
calendar month and shall be
-43-
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. Borrower acknowledges and understands that the calculation of interest
on the basis of the actual days elapsed over the period of a three hundred sixty
(360) day year as opposed to a year of three hundred sixty-five (365) or three
hundred sixty-six (366) days results in a higher effective rate of interest. 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.
3.2 Fees. Borrowers agree to pay to Agent the following non-refundable
fees as follows:
(a) the fees set forth in the Fee Letter; 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 $70,000,000 exceeds the
average daily principal balance of the outstanding Loans and Letter of Credit
Obligations 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.
(c) in addition to any charges, fees or expenses charged by
Issuing Bank in connection with the Letters of Credit, Borrowers shall pay to
Agent, for the benefit of Lenders, a letter of credit fee at a rate equal to one
and one-half percent (1.5%) per annum, on the daily outstanding balance of the
Letter of Credit Obligations 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 Borrowers to pay to Agent for the ratable benefit of Lenders such letter
of credit fee, at a rate equal to three and one-half percent (3.5%) 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
Borrowers) 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
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 Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement.
3.3 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Agent to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for any Lender, Reference Bank or any participant with any
Lender to make or maintain Eurodollar Rate Loans or to comply with the terms
hereof in connection with the Eurodollar Rate Loans, or (B) shall result in the
increase in the costs to any
-44-
Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Agent to be material, or (C) reduce
the amounts received or receivable by any Lender in respect thereof by an amount
deemed by Agent to be material or (ii) the cost to any Lender, Reference Bank or
any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Agent to be material. Borrowers shall
pay to such Lender or the Reference Bank, upon demand by such Lender any amounts
required to compensate such Lender, the Reference Bank or any participant with
such Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A certificate of such
Lender setting forth the basis for the determination of such amount necessary to
compensate such Lender as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Agent other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Agent upon demand by Agent (or Agent may, at its option,
charge any loan account of Borrowers) any amounts required to compensate any
Lender, the Reference Bank or any participant with any Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
3.4 Maximum Interest.
(a) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, in no event whatsoever shall
the aggregate of all amounts that are contracted for, charged or received by
Lenders pursuant to the terms of this Agreement or any of the other Financing
Agreements and that are deemed interest under applicable law exceed the Maximum
Interest Rate (including, to the extent applicable, the provisions of Section
5197 of the Revised Statutes of the United States of America as amended, 12
U.S.C. Section 85, as amended). No agreements, conditions, provisions or
stipulations contained in this Agreement or any of the other Financing
Agreements, or any Event of Default, or the exercise by Lenders of the right to
accelerate the payment or the maturity of all or any portion of the Obligations,
or the exercise of any option whatsoever contained in this Agreement or any of
the other Financing Agreements, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any event or contingency whatsoever shall
entitle Agent or Lenders to contract for, charge or receive in any event,
interest or any charges, amounts, premiums or fees deemed interest by applicable
law in excess of the Maximum Interest Rate. In no event shall Borrowers be
obligated to pay interest or such amounts as may be deemed interest under
applicable law in amounts which exceed the Maximum Interest Rate. All
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrowers to pay
interest or such amounts which are deemed to
-45-
constitute interest in amounts which exceed the Maximum Interest Rate shall be
without binding force or effect, at law or in equity, to the extent of the
excess of interest or such amounts which are deemed to constitute interest over
such Maximum Interest Rate.
(b) In the event any Interest is charged or received in excess
of the Maximum Interest Rate ("Excess"), each Borrower acknowledges and
stipulates that any such charge or receipt shall be the result of an accident
and bona fide error, and that any Excess received by Agent and Lenders shall be
applied first, to the payment of the then outstanding and unpaid principal
hereunder; second to the payment of the other Obligations then outstanding and
unpaid; and third, returned to Borrowers, it being the intent of the parties
hereto not to enter into a usurious or otherwise illegal relationship. The right
to accelerate the maturity of any of the Obligations does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Agent and Lenders does not intend to collect any unearned
interest in the event of any such acceleration. Each Borrower recognizes that,
with fluctuations in the rates of interest set forth in Section 3.1 of this
Agreement and the Maximum Interest Rate, such an unintentional result could
inadvertently occur. All monies paid to Agent or Lenders hereunder or under any
of the other Financing Agreements, whether at maturity or by prepayment, shall
be subject to any rebate of unearned interest as and to the extent required by
applicable law.
(c) By the execution of this Agreement, each Borrower agrees
that (A) the credit or return of any Excess shall constitute the acceptance by
Borrowers of such Excess, and (B) no Borrower shall seek or pursue any other
remedy, legal or equitable, against Agent and Lenders, based in whole or in part
upon contracting for, charging or receiving any interest or such amounts which
are deemed to constitute interest in excess of the Maximum Interest Rate. For
the purpose of determining whether or not any Excess has been contracted for,
charged or received by Agent and Lenders, all interest at any time contracted
for, charged or received from Borrowers in connection with this Agreement or any
of the other Financing Agreements shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread during the entire term of this
Agreement in accordance with the amounts outstanding from time to time hereunder
and the Maximum Interest Rate from time to time in effect in order to lawfully
charge the maximum amount of interest permitted under applicable laws.
(d) Borrowers, Agent and Lenders shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest and (ii) exclude voluntary
prepayments and the effects thereof.
(e) The provisions of this Section 3.4 shall be deemed to be
incorporated into each of the other Financing Agreements (whether or not any
provision of this Section is referred to therein). Each of the Financing
Agreements and communications relating to any interest owed by Borrowers and all
figures set forth therein shall, for the sole purpose of computing the extent of
the Obligations, be automatically recomputed by Borrowers, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
-46-
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letters of Credit. Each
of the following is a condition precedent to Agent and Lenders making the
initial Loans and providing the initial Letters of Credit hereunder:
(a) all requisite corporate action and proceedings in
connection with the transactions contemplated by 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
Authorities;
(b) no material adverse change shall have occurred in the
assets, business or financial condition of Borrowers and their Subsidiaries,
taken as a whole, since the date of Agent's latest field examination and no
change or event shall have occurred which would impair the ability of Borrowers
or any Obligor to perform their obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Agent to enforce the
Obligations or realize upon the Collateral;
(c) Agent shall have completed a field review of the Records
and such other information with respect to the Collateral as Agent may require
to determine the amount of Loans available to Borrowers (including current
perpetual inventory records and/or roll-forwards of Accounts and Inventory
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;
(d) 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 Collateral Access Agreements by owners
and lessors of leased premises of Borrower and by warehouses at which Collateral
is located;
(e) the Excess Availability as determined by Agent, as of the
date hereof, shall be not less than $8,500,000 after giving effect to the
Purchase Agreements and the transactions contemplated thereunder;
(f) Agent shall have received, in form and substance
satisfactory to Agent, Deposit Account Control Agreements by and among Agent,
each Borrower and each bank where such Borrower has a deposit account, in each
case, duly authorized, executed and delivered by such bank and such Borrower (or
Agent shall be the bank's customer with respect to such deposit account as Agent
may specify);
-47-
(g) Agent shall have received and reviewed UCC search results
for all jurisdictions in the United States and Canada which assets of each
Borrower and Guarantor are located, which search results shall be in form and
substance satisfactory to Agent;
(h) Agent shall have received, in form and substance
satisfactory to Agent, the Junkfood Subordination Agreement, the Soffe
Subordination Agreement and the Factor Intercreditor Agreement duly executed and
delivered by the parties thereto;
(i) Agent shall have received, in form and substance
satisfactory to Agent, a Uniform Commercial Code filing authorization letter,
duly executed and delivered by each Borrower and the domestic Subsidiaries of
each Borrower, together with appropriate financing statements on Form UCC-1 or
Form UCC-3, as applicable, duly filed in such office or offices as may be
necessary or, in the opinion of Agent, desirable to perfect Agent's liens in and
to the collateral of such domestic Subsidiaries of Borrower, and Agent shall
have received confirmation of the filing of all such financing statements;
(j) Agent shall have received, reviewed and approved the duly
executed amendment to the Factor Documents;
(k) Agent shall have received, in form and substance
satisfactory to Agent, such opinion letters of counsel to Borrowers and
Guarantors with respect to this Agreement, the other 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;
(l) 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;
(m) Agent shall have received, reviewed and approved final
copies of the fully executed Junkfood Asset Purchase Agreement, all exhibits and
schedules thereto and all other Junkfood Purchase Documents, including the
Junkfood Seller Note, and Agent shall have received assurances satisfactory to
Agent that the Junkfood Acquisition has been, or concurrently with the funding
of the initial Loans hereunder will be, consummated in accordance with the terms
and conditions thereof;
(n) Agent shall have completed its legal and business due
diligence with respect to Borrowers and Junkfood, including Agent's receipt and
review of (i) updated monthly financial projections of Borrowers, including
statements of income and cash flows, balance sheets and Excess Availability
projections and (ii) all third-party due diligence with respect to Borrowers and
Junkfood;
(o) Agent shall have received a certificate, together with
supporting documentation, satisfactory to it from one or more knowledgeable
senior officers of Borrowers that, at the time of and after giving effect to the
financing under this Agreement and the Junkfood Acquisition, Borrowers are
Solvent;
-48-
(p) Agent shall have received, reviewed and found acceptable
fully paid endorsements to Agent's mortgagee title insurance policies (or
binding commitments to issue endorsements to Agent's mortgagee title insurance
policies, marked to Agent's satisfaction to evidence the form of such
endorsements to be delivered after the Closing Date) with respect to the title
insurance policies that insure the Mortgages (other than the Alabama Mortgage
and other than the Mortgage covering Real Property located in Catawba County,
North Carolina (the "Catawba County Mortgage")) to create a valid lien on all
Real Property subject thereto, which endorsements (and commitments therefor)
shall give effect to the transactions contemplated by this Agreement, shall
"down-date" the effective date of the title insurance policy (or policies) to
which they relate and shall not have a specific survey exception;
(q) No Default or Event of Default shall exist or have
occurred and be continuing under the Existing Soffe Loan Agreement; and
(r) the other Financing Agreements and all instruments and
documents hereunder, including amendments to the Mortgages, shall have been duly
executed and delivered to Agent, in form and substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letters of Credit. Each of
the following is an additional condition precedent to Agent and Lenders making
Loans and/or providing Letters of Credit to Borrowers, including the initial
Loans and Letters of Credit and any future Loans and Letters of Credit:
(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, 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 Letters of Credit, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
could reasonably be expected to have a material adverse effect on the assets,
business or prospects of Borrowers and their Subsidiaries, taken as whole, or
would impair the ability of any Borrower to perform its obligations hereunder or
under any of the other Financing Agreements or of Agent to enforce any
Obligations or realize upon any of the Collateral; 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 and after giving effect thereto.
-49-
4.3 Conditions Subsequent to All Loans and Letters of Credit. The
obligation of Agent and Lenders to continue to make Loans and/or provide Letters
of Credit to Borrowers is subject to the fulfillment, on or before the date
appliable thereto, of each of the conditions subsequent set forth below (the
failure by Borrowers to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Agreement Date (or such longer
period as Agent approves in writing), Borrowers shall deliver to Agent, in form
and substance satisfactory to Agent, a duly executed amendment to the Mortgage
covering Real Property located in Fayette County, Alabama (the "Alabama
Mortgage") which gives effect to the transactions contemplated by this
Agreement;
(b) within 30 days after the Agreement Date (or such longer
period as Agent approves in writing), Borrowers shall, if deemed necessary by
Agent, deliver to Agent a mortgage tax order from the Alabama Department of
Revenue with respect to recording taxes payable in connection with the
recordation of the amendment to the Alabama Mortgage contemplated hereinabove;
(c) within 30 days of the Agreement Date (or such longer
period as Agent approves in writing), Borrowers shall deliver to Agent, in form
and substance satisfactory to Agent, a valid, effective and fully paid
endorsement to Agent's mortgagee title insurance policy with respect to the
Alabama Mortgage, which endorsement shall give effect to the transactions
contemplated by this Agreement, shall "down-date" the effective date of the
title insurance policy to which it relates and shall not have a specific survey
exception; and
(d) within 30 days of the Agreement Date (or such longer
period as Agent approves in writing), Borrowers shall deliver to Agent, in form
and substance satisfactory to Agent, a valid, effective and fully paid mortgagee
title insurance policy, in standard ALTA form, issued by a title insurance
company satisfactory to Agent, in an amount equal to not less than the fair
market value of the Real Property subject to the Catawba County Mortgage,
insuring the Catawba County Mortgage to create a valid lien on the Real Property
covered thereby with no exceptions which Agent shall not have approved in
writing.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of
all Obligations, each 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 such
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;
-50-
(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;
(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 such 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 such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise;
(1) 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.
-51-
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 any
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 such 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) Each 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 such Borrower as debtor, as Agent may require, and including
any other information with respect to such 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. Each Borrower hereby ratifies and approves
all financing statements naming Agent or its designee as secured party and such
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). Each Borrower hereby
authorizes Agent to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In the event that the description of the
collateral in any financing statement naming Agent or its designee as the
secured party and any Borrower as debtor includes assets and properties of such
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 such 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 any 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 such Borrower as debtor.
(b) Each 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 any Borrower shall be
entitled to or shall receive any chattel paper or instrument after the date
hereof, such Borrower shall promptly notify Agent thereof in writing. Promptly
upon the receipt thereof by or on behalf of any Borrower (including by any agent
or representative), such Borrower shall deliver, or cause to be delivered to
Agent, all tangible
-52-
chattel paper and instruments that such 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, each Borrower shall, or Agent may at any
time on behalf of such 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 Wachovia Bank, National Association, 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 any 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), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent's request, each
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) Each Borrower does not have any deposit accounts as of the
date hereof, except as set forth in the Information Certificate. No Borrower
shall, 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 such 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 such 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, such Borrower
shall as Agent may specify either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such 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 any Borrower's salaried employees.
(e) No Borrower owns or holds, 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.
-53-
(f) In the event that any Borrower shall be entitled to or
shall at any time after the date hereof hold or acquire any certificated
securities, such 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 any Borrower are uncertificated and are issued to such
Borrower its nominee directly by the issuer thereof, such 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) No Borrower shall, 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 such 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 such 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 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, such 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 such 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) No Borrower is 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 any 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, such Borrower shall promptly notify Agent thereof in writing. Each
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 such Borrower and agreeing to make all payments
thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent
to become, at Borrowers' expense, the transferee beneficiary of the letter of
credit, banker's acceptance or similar instrument (as the case may be).
(i) No Borrower has any commercial tort claims as of the date
hereof, except as set forth in the Information Certificate. In the event that
any Borrower shall at any time after
-54-
the date hereof have any commercial tort claims, such 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 such 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 such
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 such 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 such Borrower as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, each 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) No Borrower has 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 such Borrower permitted
herein in the ordinary course of business of such 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, Borrowers shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, each Borrower shall deliver to Agent a
Collateral Access Agreement duly authorized, executed and delivered by such
Person and the Borrower that is the owner of such Collateral.
(k) Each 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, (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 such
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 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.
-55-
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letters of
Credit 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 Administrative Borrower each
month a statement setting forth the balance in Borrowers' loan account(s)
maintained by Agent for Borrowers 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 Borrowers and
conclusively binding upon Borrowers as an account stated except to the extent
that Agent receives a written notice from Administrative Borrower of any
specific exceptions of Administrative 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 Administrative Borrower a written statement as provided
above, the balance in Borrowers' loan account(s) shall be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrowers.
6.3 Collection of Accounts.
(a) Borrowers 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 Borrowers 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. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Agent, providing that all items received or deposited
in the Blocked Accounts are the property of Agent, that the depository 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 depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Agent as Agent may from time to time
designate for such purpose ("Agent Payment Account"). Agent shall instruct the
depository banks at which the Blocked Accounts are maintained to transfer the
funds on deposit in the Blocked Accounts to such operating bank account of
Borrowers as Administrative Borrower may specify in writing to Agent until such
time as Agent shall notify the depository bank otherwise. Agent may notify the
depository banks at which the Blocked Accounts are maintained that the Blocked
Account Agreements are effective and may instruct such banks to transfer all
funds received or deposited into the Blocked Accounts to the Agent Payment
Account at any time that either: (i) an Event of Default, or act, condition or
event which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred, or (ii) Monthly Average Excess
Availability shall at any time be less than $8,500,000, and, upon such notice,
Borrowers agree 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
-56-
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.
(b) Each Borrower and all of such Borrower's 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 any
Borrower's own funds. Borrowers agree to reimburse Agent on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or 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 Borrowers 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. 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 any
Borrower or for the account of any Borrowers (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 Borrowers;
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, unless so directed by Administrative
Borrower, or unless 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. 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
Borrowers. Borrowers 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 Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Agent or such Lender. Borrowers
shall be liable to pay to Agent, and do hereby indemnify and hold Agent and
Lenders harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 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.
-57-
6.5 Authorization to Make Loans. Agent is authorized to make the Loans
and provide Letters of Credit based upon telephonic or other instructions
received from anyone purporting to be an officer of any 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 Letters of Credit hereunder
shall specify the date on which the requested advance is to be made or Letters
of Credit 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 Letters of Credit under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrowers when deposited to the credit of
Borrowers or otherwise disbursed or established in accordance with the
instructions of Borrowers or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. All Loans made or Letters of Credit provided by
Agent or Lenders to Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for: (a) payments to each of the Persons listed in the
disbursement direction letter furnished by Borrowers to Agent on the Closing
Date; (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements; and (c) general operating, working capital and other proper
corporate purposes of Borrowers not otherwise prohibited by the terms hereof;
provided, however, that (a) the Loans may be used to pay the cash portion of the
purchase price under the Junkfood Asset Purchase Agreement. 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.
6.8 Sharing of Payments, Etc.
(a) Borrowers agree 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 any 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 such Borrower), in which case it shall promptly notify Borrowers
and Agent thereof; provided, that, such Lender's failure to give such notice
shall not affect the validity thereof.
-58-
(b) If any Lender (including Agent) shall obtain from any
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 Borrowers 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) Borrowers agree 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 any 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.
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
Borrowers' 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
-59-
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 ▇▇▇▇
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 Letters of
Credit. 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 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
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 Borrowers 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 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.
-60-
(d) If Agent is funding a particular Loan to a Borrower (or
Administrative Borrower for the benefit of such 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 any 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
Administrative Borrower of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days
of Administrative Borrower's receipt of such notice. A Lender who fails to pay
Agent its Pro Rata Share of any Loans made available by 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 a 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 any Borrower or any Obligor of their duties
and obligations hereunder.
(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 any Lender from its obligation to fulfill
its Commitment hereunder or to prejudice any rights that any 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
-61-
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.
6.11 Appointment of Administrative Borrower as Agent for Requesting
Loans and Receipts of Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes
Administrative Borrower as its agent and attorney-in-fact to request and receive
Loans and Letters of Credit pursuant to this Agreement and the other Financing
Agreements from Agent or any Lender in the name or on behalf of such Borrower.
Agent and Lenders may disburse the Loans to such bank account of Administrative
Borrower or a Borrower or otherwise make such Loans to a Borrower and provide
such Letters of Credit to a Borrower as Administrative Borrower may designate or
direct, without notice to any other Borrower or Guarantor. Notwithstanding
anything to the contrary contained herein, Agent may at any time and from time
to time require that Loans to or for the account of any Borrower be disbursed
directly to an operating account of such Borrower.
(b) Administrative Borrower hereby accepts the appointment by
Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this
Section 6.8. Administrative Borrower shall ensure that the disbursement of any
Loans to each Borrower requested by or paid to or for the account of Parent, or
the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to
or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably
appoints and constitutes Administrative Borrower as its agent to receive
statements on account and all other notices from Agent and Lenders with respect
to the Obligations or otherwise under or in connection with this Agreement and
the other Financing Agreements.
(d) Any notice, election, representation, warranty, agreement
or undertaking by or on behalf of any other Borrower or any Guarantor by
Administrative Borrower shall be deemed for all purposes to have been made by
such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower or Guarantor.
(e) No purported termination of the appointment of
Administrative Borrower as agent as aforesaid shall be effective, except after
ten (10) days' prior written notice to Agent.
6.12 Nature and Extent of Each Borrower's Liability.
(a) Each Borrower shall be liable for, on a joint and several
basis, and hereby guarantees the timely payment by all other Borrowers of, all
of the Loans and other Obligations, regardless of which Borrower actually may
have received the proceeds of any Loans or other extensions of credit hereunder
or the amount of such Loans received or the manner in which
-62-
Agent or any Lender accounts for such Loans or other extensions of credit on its
books and records, it being acknowledged and agreed that Loans to any Borrower
inure to the mutual benefit of all Borrowers and that Agent and Lenders are
relying on the joint and several liability of Borrowers in extending the Loans
and other financial accommodations hereunder. Each Borrower hereby
unconditionally and irrevocably agrees that upon default in the payment when due
(whether at stated maturity, by acceleration or otherwise) of any principal of,
or interest owed on, any of the Loans or other Obligations, such Borrower shall
forthwith pay the same, without notice or demand.
(b) Each Borrower's joint and several liability hereunder with
respect to, and guaranty of, the Loans and other Obligations shall, to the
fullest extent permitted by applicable law, be unconditional irrespective of (i)
the validity, enforceability, avoidance or subordination of any of the
Obligations or of any promissory note or other document evidencing all or any
part of the Obligations, (ii) the absence of any attempt to collect any of the
Obligations from any other Borrower or any Guarantor or any Collateral or other
security therefor, or the absence of any other action to enforce the same, (iii)
the waiver, consent, extension, forbearance or granting of any indulgence by
Agent or any Lender with respect to any provision of any instrument evidencing
or securing the payment of any of the Obligations, or any other agreement now or
hereafter executed by any other Borrower and delivered to Agent or any Lender,
(iv) the failure by Agent to take any steps to perfect or maintain the perfected
status of its security interest in or lien upon, or to preserve its rights to,
any of the Collateral or other security for the payment or performance of any of
the Obligations or Agent's release of any Collateral or of its security
interests or liens upon any Collateral, (v) Agent's or Lenders' election, in any
proceeding instituted under the Bankruptcy Code, for the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by any other Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code, (vii) the release or compromise, in whole or in part, of the
liability of any Borrower or Guarantor for the payment of any of the
Obligations, (viii) any amendment or modification of any of the Financing
Agreements or any waiver of a Default or Event of Default, (ix) any increase in
the amount of the Obligations beyond any limits imposed herein or in the amount
of any interest, fees or other charges payable in connection therewith, or any
decrease in the same, (x) the disallowance of all or any portion of Agent's or
any Lender's claims against any other Borrower or Guarantor for the repayment of
any of the Obligations under Section 502 of the Bankruptcy Code, or (xi) any
other circumstance that might constitute a legal or equitable discharge or
defense of any Borrower. After the occurrence and during the continuance of any
Event of Default, Agent may proceed directly and at once, without notice to any
Borrower or Guarantor, against any or all of Borrowers to collect and recover
all or any part of the Obligations, without first proceeding against any other
Borrower or Guarantor or against any Collateral or other security for the
payment or performance of any of the Obligations, and each Borrower waives any
provision under applicable law that might otherwise require Agent to pursue or
exhaust its remedies against any Collateral or Borrower or Guarantor before
pursuing another Borrower or Guarantor. Each Borrower consents and agrees that
Agent shall be under no obligation to marshal any assets in favor of any
Borrower or Guarantor or against or in payment of any or all of the Obligations.
(c) No payment or payments made by a Borrower or Guarantor or
received or collected by Agent from a Borrower or any other Person by virtue of
any action or proceeding or
-63-
any setoff or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Borrower under this Agreement,
each of whom shall remain jointly and severally liable for the payment and
performance of all Loans and other Obligations until full payment of the
Obligations.
(d) Each Borrower is unconditionally obligated to repay the
Obligations as a joint and several obligor under this Agreement. If, as of any
date, the aggregate amount of payments made by a Borrower on account of the
Obligations and proceeds of such Borrower's Collateral that are applied to the
Obligations exceeds the aggregate amount of Loan proceeds actually used by such
Borrower in its business (such excess amount being referred to as an
"Accommodation Payment"), then each of the other Borrowers (each such Borrower
being referred to as a "Contributing Borrower") shall be obligated to make
contribution to such Borrower (the "Paying Borrower") in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of each
Borrower by the Allocable Percentage of the Borrower from whom contribution is
sought less (B) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Borrower (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such Contributing Borrower by way of contribution hereunder, and to be
decreased by any amounts theretofore received by such Contributing Borrower by
way of contribution hereunder); provided, however, that a Paying Borrower's
recovery of contribution hereunder from the other Borrowers shall be limited to
that amount paid by the Paying Borrower in excess of its Allocable Percentage of
all Accommodation Payments then outstanding of all Borrowers. As used herein,
the term "Allocable Percentage" shall mean, on any date of determination
thereof, a fraction the denominator of which shall be equal to the number of
Borrowers who are parties to this Agreement on such date and the numerator of
which shall be 1; provided, however, that such percentages shall be modified in
the event that contribution from a Borrower is not possible by reason of
insolvency, bankruptcy or otherwise by reducing such Borrower's Allocable
Percentage equitably and by adjusting the Allocable Percentage of the other
Borrowers proportionately so that the Allocable Percentages of all Borrowers at
all times equals 100%.
(e) Each Borrower hereby subordinates any claims, including
any right of payment, subrogation, contribution and indemnity, that it may have
from or against any other Borrower or any Guarantor, and any successor or assign
of any other Borrower or any Guarantor, including any trustee, receiver or
debtor-in-possession, howsoever arising, due or owing or whether heretofore, now
or hereafter existing, to the full payment of all of the Obligations.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
Each Borrower hereby covenants and agrees, on behalf of itself and its
Subsidiaries, as applicable below, as follows:
7.1 Collateral Reporting.
(a) Borrowers shall provide Agent with the following documents
in a form satisfactory to Agent:
-64-
(i) on a weekly basis or more frequently as required
by Lender, (A) a schedule of sales made, credits issued and cash received and
(B) each Due From Factor Report, together with copies of all data and other
information requested by Agent from which each such Due From Factor Report is
derived.
(ii) on a monthly basis or more frequently as Lender
may request, (A) perpetual inventory reports, (B) inventory reports by location
and category, (C) an inventory mix report, (D) agings of accounts payable (and
including information indicating the status of payments to owners and lessors of
the leased premises of Borrowers) and (E) agings of accounts receivable
(together with a reconciliation to the previous month's aging and general
ledger)
(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 Borrowers;
(iv) reports detailing any sales or transfers of
Equipment or Real Property during the prior month; and
(v) such other reports as to the Collateral as Agent
shall request from time to time.
(b) If any of Borrowers' records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent, Borrowers 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) Borrowers shall notify Agent promptly of: (i) any material
delay in any 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 amount
exceeding $100,000, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof involving an amount exceeding $100,000, (ii)
all material adverse information relating to the financial condition of any
account debtor and (iii) any event or circumstance which, to any 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 a Borrower's business
in accordance with practices and policies previously disclosed in writing to
Agent. So long as no Event of Default exists or has occurred and is continuing,
Borrowers shall 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
-65-
exclusive right to settle, adjust or compromise any claim, offset, counterclaim
or dispute with account debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrowers to deliver
any other information to Agent, Borrowers shall promptly report to Agent any
return of Inventory by any one account debtor if the Inventory so returned in
such case has a value in excess of $50,000. At any time that Inventory is
returned, reclaimed or repossessed, the Account (or portion thereof) which arose
from the sale of such returned, reclaimed or repossessed Inventory shall not be
deemed an Eligible Account. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Agent's request, (i) hold the returned Inventory in trust for Agent,
(ii) segregate all returned Inventory from all of its other property, (iii)
dispose of the returned Inventory solely according to Agent's instructions, and
(iv) not issue any credits, discounts or allowances with respect thereto without
Agent's prior written consent.
(c) 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 each 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 State or Federal 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.
(d) Agent shall have the right at any time or times, in
Agent's name or in the name of a nominee bf Agent, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to Agent,
with appropriate endorsement and assignment, with full recourse to Borrowers,
all chattel paper and instruments which any Borrower now owns or may at any time
acquire immediately upon any Borrower's receipt thereof, except as Agent may
otherwise agree.
(f) Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Agent and that Agent has a security
interest therein and Agent may direct any or all accounts debtors to make
payment of Accounts 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 Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce
-66-
payment of any Accounts or such other obligations, but without any duty to do
so, and Agent shall not be liable for its 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. 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 Borrowers 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.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
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, such Borrower's cost therefor and
daily withdrawals therefrom and additions thereto; (b) Borrowers 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 reasonably satisfactory to Agent concerning
such physical count; (c) Borrowers 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 a 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 such Borrower which is in transit to the locations
set forth or permitted herein; (d) upon Agent's request, each Borrower shall, at
its expense, once 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 reports or 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) each 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)
each Borrower assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g)
Borrowers shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate any Borrower to
repurchase such Inventory except for the right of return given to customers of
such Borrower consistent with its current policies as of the date hereof; (h)
each Borrower shall keep the Inventory in good and marketable condition; and (i)
Borrowers shall not, without prior written notice to Agent, acquire or accept
any Inventory on consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a) upon Agent's request, Borrowers 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 reports or 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
-67-
permitted to rely; (b) Borrowers shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c)
Borrowers 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 a
Borrower's business and not for personal, family, household or farming use; (e)
Borrowers 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 a Borrower or to move
Equipment directly from one location set forth or permitted herein to another
such location except for the movement of motor vehicles used by or for the
benefit of such Borrower in the ordinary course of business and Borrowers shall
not remove any Equipment currently located in the United States to any location
outside of the United States except for the excess sewing equipment currently
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇; (f) the Equipment is now and
shall remain personal property and Borrowers shall not permit any of the
Equipment to be or become a part of or affixed to real property so as to become
a fixture or an accession to real property unless it is attached to the Real
Property subject to the Mortgage; and (g) each Borrower assumes all
responsibility and liability arising from the use of the Equipment and Real
Property.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Agent (and all persons designated by Agent) as such Borrower's true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's
name, to: (a) at any time a Default or 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 such 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 Agent deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Receivable, (vii) prepare, file and sign such 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 such 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 such 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 such 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 such 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 a Letter
of Credit through U.S. Customs in such Borrower's
-68-
name, Agent's name or the name of Agent's designee, and to sign and deliver to
customs officials powers of attorney in such Borrower's name for such purpose,
and to complete in such Borrower's or Agent's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, (vi) sign such Borrower's name on any verification of
Receivables and notices thereof to account debtors or other obligors in respect
thereof and (vii) execute in such Borrower's name and file any UCC financing
statements or amendments thereto. Each 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
Administrative Borrower, cure any default by any Borrower under any material
agreement with a third party which 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 any Borrower to perform
its obligations hereunder or under the other Financing Agreements, (b) pay or
bond on appeal any judgment entered against any 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 Borrowers' account therefor, such amounts
to be repayable by Borrowers 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 any 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 Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower's premises during normal business hours and after
notice to Administrative Borrower, or at any time and without notice to any
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
each Borrower's books and records, including the Records, and (b) each 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 any Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing (provided, that, such Borrower shall make such personnel, equipment,
supplies and premises available to Agent or its designee in such manner so as to
minimize any interference with the operations of such Borrower and so as to
enable Agent or its designee to comply with applicable health and safety
procedures and regulations) and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
-69-
7.8 Bills of Lading and Other Documents of Title. In the event that any
Inventory which would otherwise be Eligible Inventory located outside the United
States of America which is in transit to premises of a Customs Broker in the
United States or premises of any Borrower as described in the definition of
Eligible Inventory, constitutes Eligible Inventory then (a) such Borrower shall
cause all bills of lading and other documents of title relating to goods being
purchased by such Borrower which are outside the United States and in transit to
the premises of such Borrower or the premises of a Customs Broker in the United
States to name such Borrower as consignee, unless and until Agent may direct
otherwise; (b) at such time and from time to time as Agent may direct, such
Borrower shall cause Agent or such financial institution or other person as
Agent may specify to be named as consignee; (c) without limiting any other
rights of Agent hereunder, Agent shall have the right to endorse and negotiate
on behalf of, and as attorney-in-fact for, such Borrower any ▇▇▇▇ of lading or
other document of title with respect to such goods naming such Borrower as
consignee to Agent; (d) there shall be three (3) originals of each of such ▇▇▇▇
of lading or other document of title which unless and until Agent shall direct
otherwise shall be delivered as follows: (i) one (1) original to such Customs
Broker as such Borrower may specify (so long as Agent has received a Collateral
Access Agreement duly authorized, executed and delivered by such Customs
Broker), and (ii) two (2) originals to Agent or to such other person as Agent
may designate for such purpose; (e) such Borrower shall obtain a copy (but not
the originals) of such ▇▇▇▇ of lading or other documents from the Customs
Broker; and (f) such Borrower shall cause all bills of lading or other documents
of title relating to goods purchased by such Borrower which are outside the
United States and in transit to the premises of such Borrower or the premises of
a Customs Broker in the United States to be issued in a form so as to constitute
negotiable documents as such term is defined in the UCC.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Agent, Lenders and
Issuing Bank the following (which shall survive the execution and delivery of
this Agreement), the truth and accuracy of which are a continuing condition of
the making of Loans and providing Letters of Credit to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each
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 on the financial condition,
results of operation or business of such Borrower and its Subsidiaries, taken as
whole, or the rights of Agent in or to any of the Collateral. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within each
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of any Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower is a party or by which any
Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of each Borrower
enforceable in
-70-
accordance with their respective terms. Borrowers do not have any Subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. (a) All financial
statements relating to any Borrower which have been or may hereafter be
delivered by any Borrower to Agent and Lenders have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operation of such Borrower as at the dates and for the periods set forth
therein. Except as disclosed in any interim financial statements furnished by
Borrowers to Agent prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and condition,
financial or otherwise, of Borrowers and their Subsidiaries, taken as a whole,
since the date of the most recent audited financial statements furnished by
Borrowers to Agent prior to the date of this Agreement.
(b) The pro forma balance sheets and future cash flow
projections for Borrowers and their Subsidiaries (together with the summaries of
assumptions and projected assumptions, based on historical performance with
respect thereto) furnished by Borrowers to Agent prior to the date of this
Agreement represent the reasonable, good faith opinion of Borrowers and their
management as to the subject matter thereof.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower and each Borrower's Records concerning Accounts are
located only at the address set forth on the signature page hereto, and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in the Information Certificate, subject to the right of
each 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 a Borrower and sets forth the owners and/or operators thereof and
to the best of each Borrower's knowledge, the holders of any mortgages on such
locations.
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 subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof other than
Collateral located in a Borrower's locations outside of the United States as set
forth in item 9 of the Information Certificate. Each Borrower has good and
marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Agent and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each 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. Each 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 such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been
-71-
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 on the Information Certificate,
there is no present investigation by any Governmental Authority pending, or to
the best of each Borrower's knowledge threatened, against or affecting any
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of each Borrower's knowledge
threatened, against any Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against any Borrower would result in any material adverse change in
the assets, business or prospects of Borrowers and their Subsidiaries, taken as
a whole, or would impair the ability of Borrowers to perform their obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Agent to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrowers are not in default in any material respect
under, or in violation in any material respect of any 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. Borrower is in compliance
in all material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority relating to its business,
including those set forth in or promulgated pursuant to the Occupational Safety
and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, ERISA, the Code, as amended, and the rules and regulations thereunder,
all Federal, State and local statutes, regulations, rules and orders relating to
consumer credit (including, as each has been amended, the Truth-in-Lending Act,
the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair
Credit Reporting Act, and regulations, rules and orders promulgated thereunder),
all Federal, State and local states, regulations, rules and orders pertaining to
sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as
amended, and all regulations, piles and orders promulgated thereunder).
(b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business. Schedule 8.7 hereto sets
forth all material permits, licenses, approvals, consents, certificates, orders
or authorizations (the "Permits") issued to or held by each Borrower as of the
date hereof by any Federal, State or local governmental agency and any
applications pending by each Borrower with such federal, state or local
governmental agency. The Permits constitute all permits, licenses, approvals,
consents, certificates, orders or authorizations necessary for each Borrower to
own and operate its business as presently conducted or proposed to be conducted
where the failure to have such Permits would have a material adverse effect on
the business, performance, operations or properties of such Borrower or the
legality, validity or enforceability of this Agreement or the other Financing
Agreements or the ability of Borrowers and their respective Subsidiaries, taken
as a whole, to perform its obligations under the Agreement or any of the other
Financing Agreements or the rights and remedies of Agent under this Agreement or
any of the other Financing Agreements. All of the
-72-
Permits are valid and subsisting and in full force and effect. There are no
actions, claims or proceedings pending or threatened that seek the revocation,
cancellation, suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, Borrowers and
their Subsidiaries 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 Borrowers and
their Subsidiaries comply in all material respects with all Environmental Laws
and all licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 8.8 hereto, 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 each Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or any Subsidiary of any Borrower 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 any Borrower or its business, operations or assets or any
properties at which any Borrower has transported, stored or disposed of any
Hazardous Materials.
(c) Borrowers and their 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) Borrowers and their Subsidiaries have all licenses,
permits, certificates, approvals or similar authorizations required to be
obtained or filed in connection with the operations of Borrowers under any
Environmental Law and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in material compliance with the applicable
provisions of ERISA, the Code and other federal or state law. 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 and to the best knowledge
of each Borrower, nothing has occurred which would cause the loss of such
qualification. Each 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.
-73-
(b) There are no pending or to the best knowledge of each
Borrower, 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 that
has not been fully cured by reversal of the transaction or otherwise, including
payment in full of any applicable fees or penalties.
(c) (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) do not exceed such Plan's liabilities under Section 4001(a)(16) of ERISA;
(iii) Borrowers and their 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) Borrowers and their 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 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrowers and their 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 any Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of each Borrower to establish new accounts in accordance with Section
9.13 below.
8.11 Intellectual Property. Each 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, Borrowers do 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 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.11 hereto. 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 the knowledge of each
Borrower, 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 any
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 any
Borrower contesting its right to sell or use any such Intellectual Property.
Schedule 8.11 sets forth all of the agreements or other arrangements of each
Borrower pursuant to which such 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 such Borrower as in
effect on the date hereof. No trademark, servicemark or other Intellectual
Property at any time used by any Borrower which is owned by another person, or
owned by such 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 hereto.
-74-
8.12 Acquisition of Assets.
(a) The Junkfood Purchase Documents and the transactions
contemplated thereunder have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all material
respects, including the fulfillment of all conditions precedent set forth
therein and giving effect to the terms of the Junkfood Purchase Documents and
the assignments to be executed and delivered by Junkfood Seller (or any of its
Affiliates or Subsidiaries) thereunder, JCC has acquired and has good and
marketable title to the assets of Junkfood, free and clear of all claims, liens,
pledges and encumbrances of any kind, except as permitted hereunder.
(b) All actions and proceedings, required by the Junkfood
Purchase Documents in respect of the Junkfood Acquisition, applicable law or
regulation (including compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust
Improvements Act of 1976, as amended, if applicable) to be taken have been taken
and the transactions required thereunder have been duly and validly taken and
consummated hereof.
(c) No court of competent jurisdiction has issued any
injunction, restraining order or other order which prohibits consummation of the
transactions described in the Junkfood Purchase 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 Junkfood Purchase Documents.
(d) JCC has delivered, or caused to be delivered, to Agent,
true, correct and complete copies of the Junkfood Purchase Documents.
8.13 Solvency. Each 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.
8.14 Labor Disputes.
(a) Set forth on Schedule 8.14 hereto is a list (including
dates of termination) of all collective bargaining or similar agreements between
or applicable to any Borrower and any union, labor organization or other
bargaining agent in respect of the employees of any Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice
complaint pending against any Borrower or, to the best of the knowledge of each
Borrower, 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
any Borrower or, to best of the knowledge of each Borrower, threatened against
it,
-75-
and (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against any Borrower or, to the best of the knowledge of each Borrower,
threatened against any Borrower.
8.15 Corporate Name: Prior Transactions. No Borrower has, during the
past five years, been known by or used by 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.
8.16 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrowers
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on any Borrower or any Subsidiaries of any Borrower
which prohibit or otherwise restrict (a) the transfer of cash or other assets
(i) between any Borrower and any of its Subsidiaries or (ii) between any
Subsidiaries of any Borrower or (b) the ability of any Borrower or any of its
Subsidiaries to incur Indebtedness or grant security interests to Agent or any
Lender in the Collateral.
8.17 Material Contracts. Schedule 8.17 hereto sets forth all Material
Contracts to which each Borrower is a party or is bound as of the date hereof.
Borrowers have delivered true, correct and complete copies of such Material
Contracts to Agent on or before the date hereof. No Borrower is 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.
8.18 Accuracy and Completeness of Information. All information
furnished by or on behalf of any 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 not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrowers and their Subsidiaries, taken as a whole, which has not been fully and
accurately disclosed to Agent in writing.
8.19 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
to have been made again to Agent and Lenders on the date of each additional
Loan, advance or Letter of Credit 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 any Borrower shall now or hereafter give, or
cause to be given, to Agent or any Lender.
-76-
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower hereby covenants and agrees, on behalf of itself and its
Subsidiaries, as applicable below, as follows:
9.1 Maintenance of Existence. Each 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, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Borrowers shall give Agent thirty (30) days prior written notice of
any proposed change in any Borrower's corporate name, which notice shall set
forth the new name and Borrowers shall deliver to Agent a copy of the amendment
to the Certificate of Incorporation of such Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of such Borrower as soon as it is available.
9.2 New Collateral Locations. Each Borrower may open any new location
within the continental United States provided such Borrower (a) gives Agent
fifteen (15) days prior written notice 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, including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and shall cause any Subsidiary of
such Borrower 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, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws.
(b) At the reasonable request of Agent and in any event, to
the extent required by applicable law, each Borrower shall establish and
maintain, at its expense, a system to assure and monitor its continued
compliance with all Environmental Laws in all of its operations, which system
shall include annual reviews of such compliance by employees or agents of such
Borrower who are familiar with the requirements of the Environmental Laws.
Copies of all environmental surveys, audits, assessments, feasibility studies
and results of remedial investigations shall be promptly furnished, or caused to
be furnished, by each Borrower to Agent. Each Borrower shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Agent on such response.
(c) Each Borrower shall give both oral and written notice to
Agent immediately upon such Borrower's receipt of any notice of, or such
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge,
-77-
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 such
Borrower or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or (D) any other environmental, health or safety matter, which affects
such Borrower or its business, operations or assets or any properties at which
such Borrower transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrowers shall, at Agent's
request and Borrowers' expense: (i) cause an independent environmental engineer
acceptable to Agent to conduct such tests of the site where such 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 such Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Each 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 such 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. Each 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 such Borrower or such
Subsidiary, as the case may be, and with respect to which adequate reserves have
been set aside on its books. Borrowers 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 each 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 thereof, and until paid by Borrowers such amount
shall be added and deemed part of the Loans, provided, that, nothing contained
herein shall be construed to require Borrowers to pay any income or franchise
taxes attributable to the income of Agent or Lenders from any amounts charged or
paid hereunder to
-78-
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. Each 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. Each Borrower shall furnish certificates,
policies or endorsements to Agent as Agent shall require as proof of such
insurance, and, if such Borrower fails to do so, Agent is authorized, but not
required, to obtain such insurance at the expense of Borrowers. 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
each 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. Each 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 each 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 any 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) Each 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 such Borrower and its Subsidiaries in accordance with GAAP.
Borrowers 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 Borrowers, and to notify the auditors
and accountants of Borrowers that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers shall furnish or
cause to be furnished to Agent, the following: (i) within thirty (30) days after
the end of each fiscal month (other than at the end of a fiscal quarter),
monthly unaudited consolidated 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 Borrowers and their
Subsidiaries as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of Borrowers subject to normal year-end
adjustments, (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
-79-
statements (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 Borrowers and their
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 an independent accounting firm selected by Borrowers and
reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrowers and their Subsidiaries as of the end of and
for the fiscal year then ended.
(b) Borrowers shall promptly notify Agent in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in the
business, properties, assets, goodwill or condition, financial or otherwise, of
Borrowers and their Subsidiaries taken as a whole, (ii) any Material Contract of
any Borrower being terminated or amended or any new Material Contract entered
into (in which event Borrowers 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 any Borrower or any of its properties or assets, (iv) any
notification of violation of laws or regulations received by any Borrower, (v)
any ERISA Event, and (vi) the occurrence of any Default or Event of Default.
(c) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Agent copies of all reports which
any Borrower sends to its stockholders generally and copies of all reports and
registration statements which any Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrowers shall deliver, or cause to be delivered, to
Agent, within ninety (90) days from the date hereof, an opening unaudited
consolidated balance sheet of Borrowers and their Subsidiaries after giving
effect to the transactions contemplated by this Agreement and the Junkfood
Purchase Documents, which present fairly the financial condition of Borrowers as
of such date.
(e) Borrowers shall furnish or cause to be furnished to Agent
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrowers, 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 the business of
Borrowers to any Court or other Government Authority to the extent required by
statute, rule, regulation, subpoena or court order, or to any Affiliate of any
Agent or Lender or to any participant or assignee or prospective participant or
assignee. Each Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Agent, at Borrowers' expense, copies of
the financial statements of Borrowers and any reports or management letters
prepared by such accountants or auditors on behalf of Borrowers and to disclose
to Agent and Lenders such information as they may have regarding the business of
Borrowers. 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
-80-
Agent or such Lender, except as otherwise designated by Administrative Borrower
to Agent or such Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each
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, except for
mergers of a Borrower into, or consolidations of a Borrower with, another
Borrower in which a Borrower is the surviving entity; or
(b) sell, assign, lease, 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 disposition of worn-out or obsolete
Equipment so long as (A) any proceeds are paid to Agent and (B) such sales 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 Borrowers;
(iii) the issuance and sale by any Borrower of
Capital Stock of such 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 such 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 such
Borrower from such sale, (B) such 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 except as permitted in Section 9.11 hereof, (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
any Borrower to request or receive Loans or Letters of Credit or the right of
any 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 Borrowers with Agent or Lenders or are
more restrictive or burdensome to any Borrower than the terms of any Capital
Stock in effect on the date hereof, and (D) 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;
(iv) the issuance of Capital Stock of any Borrower
consisting, of common stock pursuant to a stock option plan, 401(k) plan, or
incentive stock award plan of such Borrower for the benefit of its employees,
directors and consultants, provided, that, in no event shall such Borrower be
required to issue, or shall such Borrower issue, Capital Stock pursuant to such
stock option plan, 401(k) plan, or incentive stock award plan which would result
in an Event of Default;
-81-
(v) sales of Excluded Real Property (other than
Excluded Real Property covered by a Mortgage pursuant to Section 9.18 hereof)
and related assets, provided, that, as to each and all of such sales (A) Agent
shall have received not less than ten (10) days' prior written notice of such
sale, which notice shall set forth in reasonable detail satisfactory to Agent,
the parties to such sale, the Excluded Real Property to be sold, the purchase
price and the manner of payment thereof and such other information with respect
thereto as Agent may request, (B) such sale shall be on commercially reasonable
terms in a bona fide arm's-length transaction with a non-affiliated person, (C)
all of the Net Proceeds of any such sale shall be paid either (i) directly to
Agent or (ii) to a Borrower, provided, that, the entire amount of the Net
Proceeds are used to repay the outstanding amount of Loans which amounts may be
reborrowed, (D) Borrowers shall not incur any liabilities in connection with
such sales except as permitted herein, and (E) as of the date of such sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing;
(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); and
(vii) sales of Factored Accounts by JCC to Factor
pursuant to the Factoring Agreement or sales of such Factored Accounts to any
other Qualified Factor.
(c) form or acquire any Subsidiaries other than those listed
on the Information Certificate and as permitted in accordance with Section 9.10
hereof, except that Delta may form JCC and JCC may acquire the assets of
Junkfood Seller pursuant to the Junkfood Purchase Documents;
(d) wind up, liquidate or dissolve, except for liquidations or
dissolutions of an Immaterial Subsidiary or SAIM; or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower shall not, and shall 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, except:
(a) (i) the security interests and liens of Agent for itself
and the benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other
government 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 such Borrower or such Subsidiary, as the case may be and with
respect to which adequate reserves have been set aside on its books;
-82-
(c) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of such 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 such 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 such 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) to secure Indebtedness permitted under Section 9.9(b) hereof;
(f) liens specified in any title insurance policy delivered to
and accepted by Agent in connection with any Mortgage; and
(g) the security interests and liens set forth on Schedule 8.4
hereto.
9.9 Indebtedness. Each Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any Indebtedness, except:
(a) (i) the Obligations; (ii) guarantees permitted by Section
9.10(d) hereof; and (iii) Indebtedness permitted by Section 9.10(h) hereof;
(b) purchase money Indebtedness (including Capital Leases) to
the extent secured by purchase money security interests in Equipment (including
Capital Leases) not to exceed $1,000,000 in the aggregate at any time
outstanding so long as such security interests do not apply to any property of
such Borrower other than the Equipment so acquired, and the Indebtedness secured
thereby does not exceed the cost of the Equipment so acquired;
(c) Indebtedness of such Borrower under Hedging Agreements
entered into for the purpose of protecting a Person against fluctuations in
interest rates; provided, that, such arrangements are with banks or other
financial institutions that have combined capital and surplus and undivided
profits of not less than $100,000,000 and are not for speculative purposes and
such indebtedness shall be unsecured;
(d) Banking Relationship Debt of Borrowers entered into by
Borrowers in the ordinary course of the businesses of Borrowers consistent with
the current practices of Borrowers as of the date hereof;
-83-
(e) the Indebtedness set forth on Schedule 9.9 hereto;
provided, that, (i) such 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) such 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, such 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 such Borrower or
on its behalf, promptly after the receipt thereof, or sent by such Borrower or
on its behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Each Borrower shall not, and
shall not permit any Subsidiary to, directly or indirectly, make 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 guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the Indebtedness, performance, obligations or dividends
of any Person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
(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) as to any of the foregoing, unless
waived in writing by Agent, Borrower shall take such actions as are deemed
necessary by Agent to perfect the security interest of Agent in such
investments;
(c) the existing equity investments of such Borrower as of the
date hereof in its Subsidiaries, provided, that, such Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries;
(d) guarantees by any Subsidiaries of any Borrower of the
Obligations in favor of Agent and Lenders;
(e) stock or obligations issued to such Borrower by any Person
(or the representative of such Person) in respect of Indebtedness of such Person
owing to such 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 such Borrower as Agent may request;
-84-
(f) obligations of account debtors to such Borrower arising
from Accounts which are past due evidenced by a promissory note made by such
account debtor payable to such Borrower; provided, that, promptly upon the
receipt of the original of any such promissory note by such Borrower, such
promissory note shall be endorsed to the order of Agent by such Borrower and
promptly delivered to Agent as so endorsed;
(g) the loans, advances and guarantees set forth on Schedule
9.10 hereto; provided, that, (i) such 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) such 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, such 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) such Borrower shall furnish to Agent all notices or
demands in connection with such Indebtedness either received by such Borrower or
on its behalf, promptly after the receipt thereof, or sent by such Borrower or
on its behalf, concurrently with the sending thereof, as the case may be;
(h) loans by such Borrower to any other Borrower after the
date hereof;
(i) the transactions relating to the Soffe Purchase Documents
and the transactions contemplated by the Junkfood Purchase Documents;
(j) Permitted Acquisitions; and
(k) investments in the Honduras JV not to exceed an aggregate
amount of $3,000,000 during the term of this Agreement.
9.11 Dividends and Redemptions. Each Borrower shall, not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of such Borrower 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 other than common stock 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, that:
(a) any Subsidiary of such Borrower may pay dividends to such
Borrower;
(b) such Borrower may pay cash dividends or distributions from
legally available funds therefor, to its shareholders from time to time in
amounts such that the aggregate
-85-
amount paid to shareholders since May 16, 2000 does not exceed twenty-five (25%)
percent of its cumulative Net Income (calculated from May 16, 2000 to date of
determination), provided, that, (i) Agent shall have received ten (10) days
prior to any payment thereof, a certificate signed by such Borrower's chief
financial officer (A) setting forth such Borrower's Cumulative Net Income with
respect to which the dividend or distribution is to be made and providing full
information and computations with respect thereto and (B) such dividend or
distribution is not in violation of applicable law or any other agreement to
which such Borrower is a party or by which it is bound, (ii) as of the date of
any such payment and after giving effect thereto, the Excess Availability shall
be not less than $6,000,000, and (iii) as of the date of any such payment and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred;
(c) such Borrower may repurchase its Capital Stock consisting
of common stock, provided, that, as to (i) any such repurchase, each of the
following conditions is satisfied: (A) as of the date of the payment for such
repurchase and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing, (B) such repurchase shall be paid with
funds legally available therefor, (C) such repurchase shall not violate any law
or regulation or the terms of any indenture, agreement or undertaking to which
such Borrower is a party or by which such Borrower or its property is bound, (D)
as of the date of any such payment for such repurchase and after giving effect
thereto, the Excess Availability shall be not less than $3,000,000, and (E) the
aggregate amount of all payments for such repurchases since May 16, 2000 shall
not exceed $23,000,000.
9.12 Transactions with Affiliates. Each Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly,
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director, agent or other person
affiliated with such Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than Borrower would obtain
in a comparable arm's length transaction with an unaffiliated person; or
(b) make any payments of management, consulting or other fees
for management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or other Affiliate of such Borrower, except,
(i) reasonable compensation to officers, employees
and directors for services rendered to such Borrower in the ordinary course of
business;
(ii) dividends permitted under Section 9.11(b) above;
(iii) payments by such Borrower to the Honduras
Subsidiaries for (A) actual and necessary reasonable out-of-pocket
administrative, operating and capital expenditures of the Honduras Subsidiaries
for the business of such Borrower as presently conducted in the ordinary course
of business (including lease payments, payroll, insurance, franchise taxes and
similar items), provided, that, the amount of all such payments permitted under
this Section 9.12(b)(iii)(A) in respect of capital expenditures shall not exceed
$1,000,000 in the
-86-
aggregate in any fiscal year of such Borrower, and (B) actual and necessary
reasonable out-of-pocket legal, accounting, insurance (including premiums for
such insurance), marketing, payroll and similar types of services paid for by
such Honduras Subsidiary in the ordinary course of its business as conducted as
of the date hereof or as the same may be directly attributable to such Borrower;
provided, that, (1) such expenses are in the ordinary course of and pursuant to
the reasonable requirements of such Borrower's business as conducted on the date
hereof, and (2) to the extent such expenses are payable to a Honduras
Subsidiary, such expenses shall be payable upon terms no less favorable to such
Borrower, than such Borrower, could obtain in a comparable arm's length
transaction with a person who is not an Affiliate; and
(iv) payments by such Borrower to Mexican Subsidiary
for (A) actual and necessary reasonable out-of-pocket administrative, operating
and capital expenses of Mexican Subsidiary for the business of such Borrower as
presently conducted in the ordinary course of business (including lease
payments, payroll, insurance, franchise taxes and similar items), provided,
that, the amount of all such payments permitted under Section 9.12(b)(iv)(A) in
respect of capital expenditures shall not exceed $1,000,000 in the aggregate in
any fiscal year of such Borrower and (B) actual and necessary reasonable
out-of-pocket legal, accounting, insurance (including premiums for such
insurance), marketing, payroll and similar types of services paid for by Mexican
Subsidiary in the ordinary course of its business as conducted as of the date
hereof or as the same may be directly attributable to such Borrower; provided,
that, (1) such expenses are in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's business as conducted on the date
hereof, and (2) to the extent such expenses are payable to Mexican Subsidiary,
such expenses shall be payable upon terms no less favorable to such Borrower,
than such Borrower, could obtain in a comparable arm's length transaction with a
person who is not an Affiliate;
(v) Indebtedness permitted under Section 9,10(h)
above; and
(vi) investments in the Honduras JV permitted under
Section 9.10(k) above.
9.13 Additional Bank Accounts. Each Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Agent and subject to such conditions thereto as Agent
may establish and (b) as to any accounts used by such Borrower to make payments
of payroll, taxes or other obligations to third parties, after prior written
notice to Agent.
9.14 Compliance with ERISA. Each 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
-87-
created thereunder which would subject such 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)
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.
9.15 End of Fiscal Years: Fiscal Quarters. Each Borrower shall, for
financial reporting purposes, cause its, and each of its Subsidiaries' (a)
fiscal years to end the Saturday closest to June 30 of each year and (b) fiscal
quarters to end on the last day of the thirteenth (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 fourteenth (14th) week
following the end of the third fiscal quarter whenever necessary to have the
fourth fiscal quarter end on the Saturday closest to June 30.
9.16 Change in Business. Each Borrower shall not engage in any business
other than the business of such Borrower on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which such
Borrower is engaged on the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Each 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 such Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower;
(b) make loans or advances to such Borrower or any Subsidiary of such Borrower,
(c) transfer any of its 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) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of such Borrower or any of its
Subsidiaries, (iv) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of such Borrower or its
Subsidiary, (v) any agreement relating to permitted Indebtedness or permitted
liens or encumbrances incurred by a Subsidiary of such Borrower prior to the
date on which such Subsidiary was acquired by such Borrower and outstanding on
such acquisition date, and (vi) 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.
9.18 Excluded Real Property; After Acquired Real Property.
(a) In the event that Agent determines that (i) the average
daily Excess Availability of Borrowers shall have been less than $3,000,000
during any consecutive thirty (30) day period,
-88-
or (ii) a Default or Event of Default exists, without limiting any other rights
of Agent, or duties or obligations of Borrowers, upon Agent's request, Borrowers
shall promptly, execute and deliver to Agent (A) a mortgage, deed of trust or
deed to secure debt, as Agent may determine, in form and substance substantially
similar to the Mortgages in respect of any or all of the Excluded Real Property
(as Agent shall determine in its sole discretion, exercised in good faith), 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 Excluded Real Property is located granting to Agent a first and
only lien and mortgage on and security interest in such Excluded Real Property,
fixtures or other property located thereon, and (B) such other agreements,
surveys, title insurance policies, documents and instruments as Agent may
require in connection therewith.
(b) If any Borrower hereafter acquires any Real Property,
fixtures or any other property that is of the kind or nature described in the
Mortgages 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 $500,000 (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 such Borrower, upon Agent's request, such 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 such 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.
9.19 Costs and Expenses. Borrowers 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
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 Issuing Bank in connection with any
Letter of Credit; (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
-89-
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 the rate of $850
per person per day for Agent's examiners in the field and office; and (g) the
reasonable fees actually incurred and disbursements of counsel (including legal
assistants) to Agent in connection with any of the foregoing.
9.20 Further Assurances. At the request of Agent at any time and from
time to time, each Borrower shall, at Borrowers' 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 any Borrower representing that all conditions precedent to
the making of Loans and providing Letters of Credit 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 Letters
of Credit until Agent has received such certificate and, in addition, Agent has
determined that such conditions are satisfied. Where permitted by law, each
Borrower hereby authorizes Agent to execute and file one or more UCC financing
statements signed only by Agent.
9.21 Fixed Charge Coverage Ratio. If at any time during any month,
Excess Availability as determined by Agent is less than $7,500,000, Borrowers
shall not, as of the end of such month, permit the Fixed Charge Coverage Ratio
for the twelve (12) month period most recently ending to be less than 1.50 to
1.0.
9.22 Amount Due From Factor. Borrowers shall promptly provide Agent
with copies of all reports, statements of account and other communications
received by JCC from Factor with reference to the Factoring Agreement, including
all Factor Status Statements, all notices of default or termination and all
amendments to the Factoring Agreement (which must comply with the provisions of
Section 9.23 hereof). Borrowers shall identify to Agent each month the Client
Risk Accounts and amount thereof.
9.23 Amendments to Factoring Agreement, Etc. Borrowers shall not enter
into or permit any amendment or modification to the Factoring Agreement except
to the extent expressly permitted under the Factor Intercreditor Agreement.
Borrowers shall promptly notify Agent in writing if Factor exercises its right
under the Factoring Agreement to withdraw credit aproval or a credit line with
respect to any account debtor of JCC.
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":
-90-
(a) (i) Borrowers fail to pay any of the Obligations within
three (3) Business Days after the same becomes due and payable or (ii) Borrowers
or any Obligor fails to perform any of the covenants contained in Sections 9.3,
9.4, 9.6, 9.13, 9.14, 9.16, or 9.21 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 or 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 any Borrower or Obligor of any such covenant or (iii) any
Borrower 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
any 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, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent;
(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $500,000 in any one case or in excess of
$2,000,000 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 any
Borrower or 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 any 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) any Borrower or 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;
(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 any Borrower or 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 such Borrower or 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;
-91-
(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 any Borrower or Obligor or for all or any part of its
property; or
(i) any default by any Borrower or Obligor under any
agreement, document or instrument relating to any Indebtedness for borrowed
money owing to any person other than a Lender, or any capitalized lease
obligations, contingent Indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Agent, in any case in an amount in excess of $500,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any material default under any Material Contract to any person other
than Agent, which default continues for more than the applicable cure period, if
any, with respect thereto;
(j) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of any Borrower in an aggregate
amount in excess of $500,000;
(k) any Change of Control shall occur;
(1) the indictment by any Governmental Authority, or as Agent
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower of which any Borrower 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 Agent, under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against such Borrower, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral with an aggregate value in excess of $500,000 or more,
or (ii) any other property of any Borrower which is necessary or material to the
conduct of its business;
(m) there shall be a material adverse change in the business,
assets or prospects of Borrowers and their Subsidiaries, taken as a whole, after
the date hereof;
(n) there shall be an event of default under any of the other
Financing Agreements; or
(o) there shall be (i) a default or event of default under any
of the Junkfood Seller Note, the Junkfood Seller Guaranty, the Junkfood Asset
Purchase Agreement or any other guaranty, security agreement, mortgage or
similar agreement executed by any Borrower or Guarantor in connection therewith,
or (ii) any default by Junkfood Sellers under the Junkfood 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
-92-
Financing Agreements, the UCC and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by any Borrower or
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, 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 any
Borrower 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 any
Borrower or Obligor to collect the principal balance of the Obligations and all
interest accrued thereon without prior recourse to 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 the principal balance of
the Obligations and all interest accrued thereon 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), the principal balance of the Obligations and all interest accrued
thereon 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 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 any Borrower, at Borrowers' 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 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
any Borrower, which right or equity of redemption is hereby expressly waived and
released by such 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, five (5) days prior notice by Agent to Administrative 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 each Borrower waives any other
notice. In the event Agent institutes an action
-93-
to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, each Borrower waives the posting of any bond which might
otherwise be required.
(d) For the purpose of enabling Agent to exercise the rights
and remedies hereunder, each Borrower hereby grants to Agent, to the extent
assignable, an, irrevocable, non exclusive license (exercisable without payment
of royalty or other compensation to such 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
such 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.
(e) 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. Borrowers 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 legal
expenses.
(f) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute 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 Letters of Credit or reduce the lending formulas or amounts of
Loans and Letters of Credit available to Borrowers and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letters of Credit
to be made by Agent and Lenders to Borrowers.
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 and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Georgia
(without giving effect to principles of conflicts of law).
(b) Each Borrower, Agent, Issuing Bank and Lenders irrevocably
consent and submit to the nonexclusive jurisdiction of the Superior Court of
▇▇▇▇▇▇ 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
-94-
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 any 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 any Borrower or its property).
(c) Each 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 on
the signature pages hereof 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 such Borrower (or Administrative Borrowe on
behalf of such Borrower) in any other manner provided under the rules of any
such courts. Within thirty (30) days after such service, each Borrower shall
appear in answer to such process, failing which such Borrower shall be deemed in
default and judgment may be entered by Agent against such Borrower for the
amount of the claim and other relief requested.
(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER,
AGENT. ISSUING BANK 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. EACH BORROWER, AGENT, ISSUING
BANK 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 SUCH BORROWER, AGENT, ISSUING BANK OR ANY LENDER MAY FILE AN ORIGINAL
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 any
Borrower (whether in tort, contract, equity or otherwise) for losses suffered by
such 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.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all
-95-
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 any Borrower which Agent or any Lender may elect to give shall entitle
such Borrower to any other or further notice or demand in the same, similar or
other circumstances. Without limiting the generality of the foregoing, each
Borrower waives (i) notice prior to Agent's taking possession or control of any
of the Collateral or any bond or security which might be required by any court
prior to allowing Agent to exercise any of Agent's remedies, including the
issuance of an immediate writ of possession and (ii) the benefit of all
valuation, appraisement and exemption laws.
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
any 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, in each case without the consent of each
Lender directly affected thereby,
(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 any
Borrower or 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.
-96-
(b) Agent, Lenders and Issuing Bank 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, any Lender or
Issuing Bank 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, any Lender or Issuing Bank 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 any Borrower or 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 Borrowers, Agent and the Required Lenders,
Borrowers, 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 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 Borrowers 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 Wachovia shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Wachovia of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Wachovia 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, Wachovia, or such Eligible Transferee
specified by Wachovia, shall pay to the Non-Consenting Lender (except as
Wachovia 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
-97-
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. Each 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. Each Borrower shall indemnify and hold Agent,
each Lender and Issuing Bank, 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 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 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 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, Borrowers 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.
SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender and Issuing Bank
irrevocably designates, appoints and authorizes Wachovia 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.
Without limiting the generality of the foregoing, Agent shall have the sole and
exclusive right and authority to: (x) act as the disbursing and collecting Agent
for Lenders with respect to all payments and collections arising in connection
with this Agreement
-98-
and the other Financing Agreements; (y) execute and deliver as Agent each
Financing Agreement (including the Factor Intercreditor Agreement, the Soffe
Subordination Agreement, the Junkfood Subordination Agreement and each
Collateral Access Agreement) and accept delivery of each such agreement by any
Borrower, Guarantor or other Person; and (z) bind each Lender to the terms of
the Factor Intercreditor Agreement, the Soffe Subordination Agreement and the
Junkfood Subordination Agreement as if such Lender were a direct signatory
thereto (including the terms of the Factor Intercreditor Agreement relating to
the priority, enforcement and release of Agent's security interest and liens).
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 any Borrower or 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
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 a Default or an Event of Default or other failure of a
condition precedent to the Loans and Letters of Credit 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
-99-
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 Issuing Bank may, but shall have no
obligation to, issue or cause to be issued any Letters of Credit 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 Letters of Credit is in the best
interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender
or Issuing Bank may assert or exercise any enforcement right or remedy in
respect of the Loans, Letter of Credit Obligations or other Obligations, as
against any Borrower or Obligor or any of the Collateral or other property of
any Borrower or Obligor.
12.4 Wachovia in its Individual Capacity. With respect to its
Commitment and the Loans made and Letters of Credit issued by it (and any
successor acting as Agent), so long as Wachovia 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 Wachovia in
its individual capacity as Lender hereunder. Wachovia (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 any Borrower (and any Subsidiaries or Affiliates of such Borrower)
as if it were not acting as Agent, and Wachovia and its Affiliates may accept
fees and other consideration from any Borrower or any Obligor and any
Subsidiaries and Affiliates of such Borrower or Obligor for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers 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.
-100-
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 Borrowers 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 any Borrower or 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 any Borrower or Obligor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from any
Borrower or 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 any Borrower or 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
any 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
Letters of Credit to Borrowers on behalf of Lenders intentionally and with
actual knowledge that such Loans or Letters of Credit would cause the aggregate
amount of the total outstanding Loans and Letter of Credit Obligations to
Borrowers to exceed the Borrowing Base, without the prior consent of all
Lenders, except, that, Agent may make such additional Loans or provide such
additional Letters of Credit on behalf of Lenders, intentionally and with actual
knowledge that such Loans or Letters of Credit will cause the total outstanding
Loans and Letters of Credit to Borrowers 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 Letters of Credit 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 Obligations to exceed the Maximum Credit and (b) no such additional
Loan or Letters of Credit shall be outstanding more than ninety (90) days after
the date such additional Loan or Letter of Credit is made or issued (as the case
may be), except as the Required Lenders may otherwise agree. Each Lender shall
be
-101-
obligated to pay Agent the amount of its Pro Rata Share of any such additional
Loans or Letters of Credit 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
Borrowers and Obligors and will rely significantly upon Borrowers' and any
Obligor's books and records, as well as on representations of Borrowers' 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.
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 making of Loans and
issuance of Letters of Credit 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
Borrowers 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 Letters
of Credit 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
-102-
Maximum Credit or (iii) to pay any other amount chargeable to Borrowers pursuant
to the terms of this Agreement or any of the other Financing Agreements
consisting of costs, fees and expenses and payments to Issuing Bank on account
of Letter of Credit Obligations. 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 Borrowers 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 Administrative Borrower or any 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 any Borrower or 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 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
-103-
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 any Borrower or any Obligor in respect of) the
Collateral retained by any Borrower or any Obligor.
(d) Agent shall have no obligation whatsoever to any Lender,
Issuing Bank or any other Person to investigate, confirm or assure that the
Collateral exists or is owned by any Borrower or 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
Letters of Credit 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 or Issuing Bank.
12.12 Agency for Perfection. Each Lender and Issuing Bank hereby
appoints Agent and each other Lender and Issuing Bank 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 and Issuing Bank hereby acknowledges that it
holds possession of any such Collateral for the benefit of Agent as secured
party. Should any Lender or Issuing Bank 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 Administrative 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 Administrative Borrower, a successor agent from among Lenders. Upon
the acceptance by the 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
-104-
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 August __, 2008 (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 Administrative Borrower or any other 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; provided, that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrowers shall pay to Agent, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Agent in such amounts as Agent
determines are reasonably necessary to secure Agent and Lenders from loss, cost,
damage or expense, including reasonable attorneys' fees actually incurred and
legal expenses, in connection with any contingent Obligations, including issued
and outstanding Letters of Credit 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. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Agent, as Agent may, in its discretion, designate
in writing to Administrative Borrower for such purpose. Interest shall be due
until and including the next Business Day, if the amounts so paid by Borrowers
to the 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 any Borrower of its respective duties,
obligations and covenants under this Agreement or any of 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.
(c) If for any reason this Agreement is terminated prior to
the end of the then current term or renewal term of this Agreement, 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 lost
profits as a result thereof, Borrowers agree to pay to Agent, upon the effective
date of such termination, an early termination fee in the amount equal to:
-105-
Amount Period
------ ------
(i) 2.0% of Maximum Credit From the date hereof to and
including the first anniversary of
the date hereof
(ii) 1.0% of Maximum Credit From and after the first
anniversary of the date hereof to
and including the second
anniversary of the date hereof
(iii) .50% of Maximum Credit From and after the second
anniversary of the date hereof to
and including August __, 2008.
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
Borrowers agree 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 any 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.
(d) Notwithstanding anything to the contrary contained in
Section 13.1(c) above, in the event of the termination of this Agreement at the
request of Administrative Borrower or any other Borrower prior to the end of the
term of this Agreement and the full and final repayment of all Obligations and
the receipt by Agent of cash collateral all as provided in Section 13.1 (a)
above, no early termination fee shall be payable by Borrowers if such payments
are made to Agent with the initial proceeds of a financing transaction provided
or underwritten by Wachovia to Borrowers.
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 any Borrower, any Obligor, Agent,
Lenders and Issuing Bank 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
-106-
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".
(f) 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.
(g) 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 Borrowers most recently
received by Agent prior to the date hereof.
(h) 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".
(i) 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 (iii) 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.
(j) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(k) 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.
(1) 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
-107-
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 Borrowers: Delta Apparel, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent: Wachovia Bank, National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Portfolio Manager
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(a) made to Agent at its address set forth above and to Borrowers at the address
set forth above, or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) 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.
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, Issuing Bank, Borrowers and
their respective successors and assigns, except that no Borrower may assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent. 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 Borrowers, Agent, Lenders and Issuing Bank 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.
-108-
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 Borrowers, 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 Administrative Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(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 Obligations) 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 any Borrower, any Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or any Obligor of
any of the
-109-
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 any
Borrower or 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 Obligations, 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 Borrowers, 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
Lender in favor of the Participant relating thereto) and all amounts payable by
any Borrower or 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)(l) 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) Borrowers 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
-110-
Participants. Borrowers shall certify the correctness and accuracy of all
descriptions of Borrowers and their affairs provided, prepared or reviewed by
any 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 Administrative
Borrower (but only so long thereafter as such Lender remains lawfully able to do
so), provide Agent and Administrative 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 No Novation; Reaffirmation of Grant of Security Interest.
(a) Each Borrower agrees that the security interests and liens
granted to Wachovia, as Agent, pursuant to the Existing Loan Agreements and the
Existing Financing Agreements (as defined in the Existing Loan Agreements),
shall remain outstanding and in full force and effect in accordance with the
Existing Financing Agreements, in each case, as amended as of the date hereof
and shall continue to secure the Obligations.
(b) Each Borrower, Agent, Issuing Bank and each Lender
acknowledges and agrees that (i) the Obligations represent, among other things,
the amendment, restatement, renewal, extension, consolidation and modification
of the Obligations (as defined in the Existing Loan Agreements) arising in
connection with the Existing Loan Agreements and the other Existing Financing
Agreements executed in connection therewith; (ii) each Borrower, Agent, Issuing
Bank and each Lender intends that the Collateral pledged under the Existing Loan
Agreements and the other Existing Financing Agreements executed in connection
therewith shall secure, without interruption or impairment of any kind, all
existing Obligations (as defined in the Existing Loan Agreements) under the
Existing Loan Agreements and the other Existing Financing Agreements executed in
connection therewith as amended, restated, renewed, extended, consolidated and
modified hereunder, together with all other Obligations hereunder; and (iii) all
security interests and liens granted under or evidenced by the Existing Loan
-111-
Agreements and the other Existing Financing Agreements executed in connection
therewith are hereby ratified, confirmed and continued.
(c) Each Borrower, Agent, Issuing Bank and each Lender intends
that by entering into and performing their respective obligations hereunder,
this transaction shall not constitute a novation or an accord and satisfaction.
13.9 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
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.
-112-
IN WITNESS WHEREOF, Agent, Borrower and Guarantors have caused these
presents to be duty executed as of the day and year first above written.
AGENT AND BORROWERS:
LENDER:
WACHOVIA NATIONAL BANK, DELTA APPAREL, INC., a Georgia
NATIONAL ASSOCIATION corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------- ---------------------------------
Title: Director Title: VP and CFO
---------------------------- ------------------------------
Address: Chief Executive Office:
------- ----------------------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
LENDERS:
Siemens Financial Services, Inc. ▇.▇. ▇▇▇▇▇ CO., a North Carolina
---------------------------------- corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------- ---------------------------------
Title: VP Title: VP and CFO
---------------------------- -----------------------------
Address: Chief Executive Office:
------- ----------------------
---------------------- ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------- Suite 100
---------------------- ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
[Signatures continued on following page]
-113-
JUNKFOOD CLOTHING COMPANY, a
--------------------------------- Georgia corporation
By: By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------ --------------------------------
Title: Title: VP and Asst. Secretary
--------------------------- ------------------------------
Address: Chief Executive Office:
------- ----------------------
-------------------------------- ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------- Suite 100
-------------------------------- ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
-114-
EXHIBIT A
to
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of _____________, 200_ is made between
_____________________(the "Assignor") and ____________________________(the
"Assignee").
WITNESSETH:
WHEREAS, Wachovia Bank, National Association, in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the financial institutions which are parties thereto as lenders (in such
capacity, "Agent"), and the financial institutions which are parties to the Loan
Agreement as lenders (individually, each a "Lender" and collectively, "Lenders")
have entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to Delta Apparel, Inc., ▇.▇. ▇▇▇▇▇ Co. and Junkfood Clothing
Company (collectively, "Borrowers") as set forth in the Second Amended and
Restated
Loan and Security Agreement, dated August ____, 2005, by and among
Borrowers, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement"), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
"Financing Agreements");
WHEREAS, as provided under the Loan Agreement, Assignor committed to
making Loans (the "Committed Loans") to Borrowers in an aggregate amount not to
exceed $85,000,000 (the "Commitment");
WHEREAS, Assignor wishes to assign to Assignee [part of the] [all]
rights and obligations of Assignor under the Loan Agreement in respect of its
Commitment in an amount equal to $_____________ (the "Assigned Commitment
Amount") on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee,. and
Assignee hereby purchases, assumes and undertakes from Assignor, without
recourse and without representation or warranty
(except as provided in this Assignment and Acceptance) an interest in (i) the
Commitment and each of the Committed Loans of Assignor and (ii) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Loan Agreement and the other Financing Agreements, so
that after giving effect thereto, the Commitment of Assignee shall be as set
forth below and the Pro Rata Share of Assignee shall be (___%) percent.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed
to all of the rights and be obligated to perform all of the obligations of a
Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Commitment Amount. Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Commitment Amount
and Assignor shall relinquish its rights and be released from its obligations
under the Loan Agreement to the extent such obligations have been assumed by
Assignee; provided, that, Assignor shall not relinquish its rights under
Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignee's Commitment will be
$_____________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignor's Commitment will be $
_____________ (as such amount may be further reduced by any other assignments by
Assignor on or after the date hereof).
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, Assignee shall pay to Assignor on the
Effective Date in immediately available funds an amount equal to $_____________,
representing Assignee's Pro Rata Share of the principal amount of all Committed
Loans.
(b) Assignee shall pay to Agent the processing fee in the
amount specified in Section 13.6(a) of the Loan Agreement.
3. Reallocation of Payments. Any interest, fees and other payments
accrued to the Effective Date with respect to the Commitment, Committed Loans
and outstanding Letters of Credit shall be for the account of Assignor. Any
interest, fees and other payments accrued on and after the Effective Date with
respect to the Assigned Commitment Amount shall be for the account of Assignee.
Each of Assignor and Assignee agrees that it will hold in trust for the other
party any interest, fees and other amounts which it may receive to which the
other party is entitled pursuant to the preceding sentence and pay to the other
party any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision. Assignee acknowledges that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto,
together with copies of the most
-2-
recent financial statements of Borrowers and their Subsidiaries, and such other
documents and information as it has deemed appropriate to make its own credit
and legal analysis and decision to enter into this Assignment and Acceptance and
agrees that it will, independently and without reliance upon Assignor, Agent or
any Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit and legal decisions in
taking or not taking action under the Loan Agreement.
5. Effective Date; Notices.
(a) As between Assignor and Assignee, the effective date for
this Assignment and Acceptance shall be ___________, 200_ (the "Effective
Date"); provided, that, the following conditions precedent have been satisfied
on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by Assignor and Assignee;
(ii) the consent of Agent as required for an effective
assignment of the Assigned Commitment Amount by
Assignor to Assignee shall have been duly obtained
and shall be in full force and effect as of the
Effective Date;
(iii) written notice of such assignment, together with
payment instructions, addresses and related
information with respect to Assignee, shall have been
given to Administrative Borrower and Agent; Assignee
shall pay to Assignor all amounts due to Assignor
under this Assignment and Acceptance; and
(iv) the processing fee referred to in Section 2(b) hereof
shall have been paid to Agent.
(b) Promptly following the execution of this Assignment and
Acceptance, Assignor shall deliver to Administrative Borrower and Agent, for
acknowledgment by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.
6. [Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]
(a) Assignee hereby appoints and authorizes Assignor in its
capacity as Agent to take such action as agent on its behalf to exercise such
powers under the Loan Agreement as are delegated to Agent by Lenders pursuant to
the terms of the Loan Agreement.
(b) Assignee shall assume no duties or obligations held by
Assignor in its capacity as Agent under the Loan Agreement.]
7. Withholding Tax. Assignee (a) represents and warrants to Assignor,
Agent and Borrowers that under applicable law and treaties no tax will be
required to be withheld by Assignee, Agent or Borrowers with respect to any
payments to be made to Assignee hereunder or under any of the Financing
Agreements, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to Agent and
Borrowers, prior to the time that Agent or Borrowers are required to make any
payment of principal, interest or
-3-
fees hereunder, duplicate executed originals of either U.S. Internal Revenue
Service Form W-8BEN or W-8ECI, as applicable (wherein Assignee claims
entitlement to the benefits of a tax treaty that provides for a complete
exemption from U.S. federal income withholding tax on all payments hereunder)
and agrees to provide new such Forms upon the expiration of any previously
delivered form or comparable statements in accordance with applicable U.S. law
and. regulations and amendments thereto, duly executed and completed by
Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.
8. Representations and Warranties.
(a) Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any security interest, lien, encumbrance or
other adverse claim, (ii) it is duly organized and existing and it has the full
power and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto. Assignor makes no representation or warranty in
connection with, and assumes no responsibility with respect to, the solvency,
financial condition or statements of Borrowers, Guarantors or any of their
respective Affiliates, or the performance or observance by Borrowers, Guarantors
or any other Person, of any of their respective obligations under the Loan
Agreement or any other instrument or document furnished in connection therewith.
(c) Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder, (ii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Loan Agreement, no further action by, or notice to, or filing with, any
-4-
Person is required of it for such execution, delivery or performance, and (iii)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of Assignee, enforceable
against Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights to
general equitable principles.
9. Further Assurances. Assignor and Assignee each hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to Borrowers or Agent, which may be
required in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other for further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) Assignor and Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA. Assignor and
Assignee each irrevocably submits to the non-exclusive jurisdiction of any State
or Federal court sitting in ▇▇▇▇▇▇ County, Georgia over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such Georgia State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(f) TO THE EXTENT PERMITTED BY APPLICABLE LAW, ASSIGNOR AND
ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE
LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED
-5-
DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
and Acceptance to be executed and delivered by their duly authorized officers as
of the date first above written.
[ASSIGNOR]
By:
--------------------------
Title:
-----------------------
[ASSIGNEE]
By:
--------------------------
Title:
-----------------------
-6-
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
________________, 20__
Attn:________________________
Re: Delta Apparel, Inc., ▇.▇. ▇▇▇▇▇ Co. and Junkfood Clothing Company
Ladies and Gentlemen:
Wachovia Bank, National Association, in its capacity as agent pursuant
to the Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
"Agent"), and the financial institutions which are parties to the Loan Agreement
as lenders (individually, each a "Lender" and collectively, "Lenders") have
entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to Delta Apparel, Inc., ▇.▇. ▇▇▇▇▇ Co. and Junkfood Clothing
Company (collectively, "Borrowers") as set forth in the Second Amended and
Restated
Loan and Security Agreement, dated August ___, 2005, by and among
Borrowers, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement"), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
"Financing Agreements"). Capitalized terms not otherwise defined herein shall
have the respective meanings ascribed thereto in the Loan Agreement.
l. We hereby give you notice of, and request your consent to, the
assignment by ____________________ (the "Assignor") to__________________ (the
"Assignee") such that after giving effect to the assignment Assignee shall have
an interest equal to______ (_%) percent of the total Commitments pursuant to the
Assignment and Acceptance Agreement attached hereto (the "Assignment and
Acceptance"). We understand that the Assignor's Commitment shall be reduced by
$___________, as the same may be further reduced by other assignments on or
after the date hereof.
2. Assignee agrees that, upon receiving the consent of Agent to such
assignment, Assignee will be bound by the terms of the Loan Agreement as fully
and to the same extent as if Assignee were the Lender originally holding such
interest under the Loan Agreement.
3. The following administrative details apply to Assignee:
(A) Notice address:___________________
Assignee name:___________________
Address:_________________________
_________________________
_________________________
Attention:________________________
Telephone:_______________________
Telecopier:_______________________
(B) Payment instructions:
Account No.:_____________________
At:_____________________________
Reference:_______________________
Attention:________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
--------------------------
Title:
-----------------------
[NAME OF ASSIGNEE]
By:
--------------------------
Title:
-----------------------
-2-
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
AGENT:
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
By:
--------------------------------
Title:
------------------------------
BORROWERS*:
DELTA APPAREL, INC.
By:
--------------------------------
Title:
------------------------------
▇.▇. ▇▇▇▇▇ CO.
By:
--------------------------------
Title:
------------------------------
JUNKFOOD CLOTHING COMPANY
By:
--------------------------------
Title:
------------------------------
----------
* No signature of Borrowers required if a Default or Event of Default exists.
-3-
EXHIBIT B
PRICING GRID
For the first six months after the Closing Date, the applicable margin for Prime
Rate Loans will be -.25% and the applicable margin for Eurodollar Rate Loans
will be 1.50%. Thereafter, the applicable margin will be increased or decreased
on a quarterly basis, based upon the following pricing grid:
When Excess Availability or Applicable Applicable
Level Fixed Charge Coverage Ratio Is: Prime Rate Margin Eurodollar Rate Margin
----- ------------------------------ ----------------- ----------------------
Level 1 greater than or equal to $30,000,000 or >2.5:1 -.50% 1.25%
Level 2 greater than or equal to $20,000,000 < $30,000,000 -.25% 1.50%
or greater than or equal to 2.0:1 or less than 2.5:1
▇▇▇▇▇ ▇ >10,000,000 <$20,000,000 or greater than or 0% 1.75%
equal to 1.5:1 or less than 2.0:1
▇▇▇▇▇ ▇ less than or equal to 10,000,000 or less than 1.5:1 .25% 2.25%
At any time that an Event of Default exists, the applicable margin shall be
adjusted immediately to the margin applicable for Level 4. For the avoidance of
doubt, Borrowers shall be entitled to the Level most favorable to Borrowers in
which either the Excess Availability or Fixed Charge Coverage Ratio test is met
for such Level.