LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (SOUTHERN)
as Lender
and
DELTA APPAREL, INC.
as Borrower
Dated: May 16, 2000
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS .......................................................................1
SECTION 2 CREDIT FACILITIES ................................................................19
2.1 Revolving Loans ..................................................................19
2.2 Letter of Credit Accommodations ..................................................20
2.3 Term Loan ........................................................................23
SECTION 3 INTEREST AND FEES ................................................................23
3.1 Interest. ........................................................................23
3.2 Closing Fee ......... ............................................................25
3.3 Servicing Fee ....................................................................25
3.4 Unused Line Fee ..................................................................25
3.5 Changes in Laws and Increased Costs of Loans. ....................................25
SECTION 4 CONDITIONS PRECEDENT .............................................................27
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations ........27
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations ............30
SECTION 5 GRANT OF SECURITY INTEREST .......................................................31
SECTION 6 COLLECTION AND ADMINISTRATION ....................................................32
6.1 Borrower's Loan Account ..........................................................32
6.2 Statements .......................................................................32
6.3 Collection of Accounts ...........................................................32
6.4 Payments .........................................................................33
6.5 Authorization to Make Loans ......................................................34
6.6 Use of Proceeds ..................................................................34
SECTION 7 COLLATERAL REPORTING AND COVENANTS ...............................................35
7.1 Collateral Reporting .............................................................35
7.2 Accounts Covenants ...............................................................35
7.3 Inventory Covenants ..............................................................37
7.4 Equipment and Real Property Covenants ............................................37
7.5 Power of Attorney ................................................................38
7.6 Right to Cure ....................................................................39
7.7 Access to Premises ...............................................................39
7.8 Bills of Lading and Other Documents of Title......................................40
(i)
SECTION 8 REPRESENTATIONS AND WARRANTIES ...................................................40
8.1 Corporate Existence, Power and Authority; Subsidiaries............................40
8.2 Financial Statements; No Material Adverse Change. ................................41
8.3 Chief Executive Office; Collateral Locations. ....................................41
8.4 Priority of Liens; Title to Properties ...........................................41
8.5 Tax Returns ......................................................................41
8.6 Litigation .......................................................................42
8.7 Compliance with Other Agreements and Applicable Laws .............................42
8.8 Environmental Compliance .........................................................43
8.9 Employee Benefits. ...............................................................43
8.10 Bank Accounts ....................................................................44
8.11 Intellectual Property ............................................................44
8.12 Acquisition of Assets ............................................................45
8.13 Solvency .........................................................................45
8.14 Labor Disputes ...................................................................46
8.15 Corporate Name; Prior Transactions ...............................................46
8.16 Restrictions on Subsidiaries .....................................................46
8.17 Material Contracts ...............................................................46
8.18 Accuracy and Completeness of Information. ........................................46
8.19 Survival of Warranties; Cumulative ...............................................46
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS ...............................................47
9.1 Maintenance of Existence .........................................................47
9.2 New Collateral Locations .........................................................47
9.3 Compliance with Laws, Regulations, Etc. ..........................................47
9.4 Payment of Taxes and Claims ......................................................48
9.5 Insurance ........................................................................49
9.6 Financial Statements and Other Information .......................................49
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. .........................51
9.8 Encumbrances .....................................................................52
9.9 Indebtedness .....................................................................53
9.10 Loans, Investments, Guarantees, Etc. .............................................53
9.11 Dividends and Redemptions ........................................................55
9.12 Transactions with Affiliates .....................................................56
9.13 Additional Bank Accounts .........................................................57
9.14 Compliance with ERISA. ...........................................................57
9.15 End of Fiscal Years: Fiscal Quarters .............................................57
9.16 Change in Business................................................................57
9.17 Limitation of Restrictions Affecting Subsidiaries ................................57
9.18 Existing Real Property; After Acquired Real Property .............................58
9.19 Costs and Expenses ...............................................................59
9.20 Further Assurances ...............................................................59
9.21 Year 2000 Compliance .............................................................59
(ii)
SECTION 10 EVENTS OF DEFAULT AND REMEDIES ...................................................60
10.1 Events of Default ................................................................60
10.2 Remedies .........................................................................62
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW.......................................................63
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver ............63
11.2 Waiver of Notices ................................................................65
11.3 Amendments and Waivers ...........................................................65
11.4 Waiver of Counterclaims ..........................................................65
11.5 Indemnification ..................................................................65
SECTION 12 TERM OF AGREEMENT; MISCELLANEOUS .................................................66
12.1 Term .............................................................................66
12.2 Interpretative Provisions ........................................................67
12.3 Notices ..........................................................................68
12.4 Partial Invalidity ...............................................................68
12.5 Successors .......................................................................68
12.6 Entire Agreement .................................................................69
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Information Certificate
Exhibit B Applicable Margins for Interest Rate Calculation
Schedule 1.15 Customs Brokers
Schedule 1.30 Existing Letters of Credit
Schedule 1.31 Existing Real Property
Schedule 1.60 Permitted Holders
Schedule 8.2 Pro Forma Balance Sheet and Cash Flow Projections
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
(i)
LOAN AND SECURITY AGREEMENT
---------------------------
This Loan and Security Agreement dated May 16, 2000 is entered into by and
between Congress Financial Corporation (Southern), a Georgia corporation
("Lender") and Delta Apparel, Inc., a Georgia corporation ("Borrower").
W I T N E S S E T H:
--------------------
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one- sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1
1.3 "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.
1.4 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.5 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) eighty-five (85%) percent of the Net Amount of Eligible Accounts, plus
(b) the lesser of: (i) fifty-five (55%) percent of the Value of Eligible
Inventory consisting of finished goods, raw materials consisting of raw cotton
and yarn for such finished goods, and finished yarn categorized as
work-in-process, or (ii) Inventory Loan Limit, less (c) any Reserves. For
purposes only of applying the sublimit on Revolving Loans based on Eligible
Inventory set forth clause (b)(ii) above, Lender may treat the then undrawn
amounts of outstanding Letter of Credit Accommodations for the purpose of
purchasing Eligible Inventory as Revolving Loans to the extent Lender is in
effect basing the issuance of the Letter of Credit Accommodations on the Value
of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving 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.
1.6 "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, the State of Georgia or the State of North
Carolina, and a day on which the Reference Bank and Lender 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.
1.7 "Capital Expenditures" shall mean, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year or
years.
1.8 "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
2
Person as lessee which in accordance with GAAP, is required to be reflected as a
liability on the balance sheet of such Person.
1.9 "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, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).
1.10 "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 of 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 to 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.
1.11 "Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially all of the assets of Borrower
to any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act); (b) the liquidation or dissolution of Borrower or the adoption of a plan
by the stockholders of Borrower relating to the dissolution or liquidation of
Borrower; (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 fifty (50%) percent or more
of the voting power of the total outstanding Voting Stock of Borrower or the
Board of Directors of Borrower; or (d) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of Borrower (together with any new directors who have been appointed
by any Permitted Holder, or whose nomination for election by the stockholders of
Borrower, as the
3
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 Borrower then still in office.
1.12 "Code" shall mean the Internal Revenue Code of 1986, together with all
rules, regulations and interpretations thereunder or related thereto.
1.13 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.14 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, from any lessor of premises to
Borrower, or any other person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, inter alia, acknowledges the
first priority security interest of Lender 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 Lender access to, and the right to remain on, the premises of
such lessor, consignee or other person so as to exercise Lender's rights and
remedies and otherwise deal with such Collateral and in the case of any person
who at any time has custody, control or possession of any bills of lading or
other documents of title, agrees to hold such bills of lading or other documents
as bailee for Lender and to follow all instructions of Lender with respect
thereto.
1.15 "Customs Brokers" shall mean the persons listed on Schedule 1.15
hereto or such other person as may be selected by Borrower after the date hereof
and after written notice by Borrower to Lender who is reasonably acceptable to
Lender, provided, that, as to each such person (including those listed on such
Schedule), Borrower has used reasonable efforts to obtain a Collateral Access
Agreement duly authorized, executed and delivered by such person.
1.16 "Distribution Agreements" shall mean, individually and collectively,
(a) the Distribution Agreement, dated as of March 15, 2000 by and among
▇▇▇▇▇▇▇▇, ▇▇ Apparel Company, Inc. and Borrower (the "DWI Distribution
Agreement") and (b) Deed, dated as of the date hereof, from Delta ▇▇▇▇▇, Inc. to
Borrower, with respect to the real property located in Edgefield, South
Carolina, the ▇▇▇▇ of Sale, Assignment and Assumption Agreement, dated the date
hereof, made by Delta ▇▇▇▇▇, Inc., as Seller and Borrower, as Purchaser, and the
Agreement for the Purchase and Sale of Property dated April 1, 2000, by and
between Delta ▇▇▇▇▇, Inc., as Seller and Borrower, as Buyer, and (c) all bills
of sale, quitclaim deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to in the agreements described in clause
(a) and (b) above and all side letters with respect thereto, and all agreements,
documents and instruments executed and/or delivered in connection therewith, as
all of the foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced; provided, that, the term
"Distribution Agreements" as used herein shall not include any of the "Financing
Agreements" as such term is defined herein.
4
1.17 "EBITDA" shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Net Income of such Person and its Subsidiaries for such
period on a consolidated basis determined in accordance with GAAP, plus
depreciation, amortization and other non-cash charges (including, but not
limited to, imputed interest and deferred compensation) for such period (to the
extent deducted in the computation of Net Income), all in accordance with GAAP,
plus the Interest Expense for such period (to the extent deducted in the
computation of Net Income), plus charges for Federal, Provincial, State,
district, municipal, local and foreign income taxes.
1.18 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of
goods by Borrower or rendition of services by Borrower in the ordinary course of
its business which transactions are completed in accordance with the terms and
provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than 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
Borrower which are pre-approved by Lender, on terms and conditions acceptable to
Lender);
(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 Lender's request, Borrower shall execute and deliver,
or cause to be executed and delivered, such other agreements, documents and
instruments as may be required by Lender to perfect the security interests of
Lender 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 Lender may request to enable Lender as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Lender's option, if the chief executive office and principal
place of business of the account debtor with respect to such Accounts is located
other than in the United States of America or Canada, then if either: (i) the
account debtor has delivered to Borrower an irrevocable letter of credit issued
or confirmed by a bank satisfactory to Lender and payable only in the United
States of America and in U.S. dollars, sufficient to cover such
5
Account, in form and substance satisfactory to Lender and if required by Lender,
the original of such letter of credit has been delivered to Lender or Lender's
agent and the issuer thereof notified of the assignment of the proceeds of such
letter of credit to Lender, or (ii) such Account is subject to credit insurance
payable to Lender issued by an insurer and on terms and in an amount acceptable
to Lender, or (iii) such Account is otherwise acceptable in all respects to
Lender (subject to such lending formula with respect thereto as Lender 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 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 Lender shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to
Lender, 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 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 Lender 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 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 Lender'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 Lender;
(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;
6
(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 the date of the original invoice for them
for certain account debtors of Borrower which are pre- approved by Lender, on
terms and conditions acceptable to Lender) 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
Borrower to seek judicial enforcement in such State of payment of such Account,
unless Borrower has qualified to do business in such state or has filed a Notice
of Business Activities Report or equivalent report for the then current year or
such failure to file and inability to seek judicial enforcement is capable of
being remedied without any material delay or material cost;
(p) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account debtors
(as determined by Borrower from time to time substantially consistent with its
current practices as of the date hereof) by more than twenty (20%) percent and
as is reasonably acceptable to Lender (but the portion of the Accounts not in
excess of such credit limit may be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy at all
times by Borrower consistent with its current practice and who are reasonably
acceptable to Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender 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 Lender has no written notice thereof from Borrower, which adversely
affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Lender. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.19 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrower, raw
materials for such finished goods and finished yarn categorized as
work-in-process, which are acceptable to Lender 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 Borrower's business; (f) Inventory at premises
other than those owned and controlled by Borrower, except any Inventory which
would otherwise be deemed Eligible Inventory at locations in the United States
of America which are not owned and operated by Borrower may nevertheless be
considered Eligible Inventory: (i) as to locations which are leased by Borrower
if Lender shall have received a Collateral Access Agreement from the owner and
lessor of such location, duly
7
authorized, executed and delivered by such owner and lessor, except that
notwithstanding that Lender shall not have received such an agreement for a
particular leased location, Lender may consider Inventory at such leased
location which would otherwise be Eligible Inventory to be Eligible Inventory
and in such event, Lender may at any time establish such Reserves as Lender may
determine in respect of amounts at any time payable by Borrower to the owner or
lessor of such location, without limiting any other rights and remedies of
Lender 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), Lender shall have received a
Collateral Access Agreement duly authorized, executed and delivered by the owner
and operator of such premises (except that notwithstanding that Lender shall not
have received such an agreement as to a particular third party location, Lender
may consider Inventory at such location which would otherwise be Eligible
Inventory to be Eligible Inventory and in such event, Lender may at any time
establish such Reserves as Lender may determine in respect of amounts at any
time payable by Borrower to such third party, without limiting any other rights
or remedies of Lender under this Agreement or under the other Financing
Agreements with respect to the establishment of Reserves or otherwise), and in
addition, if required by Lender, as to premises of third parties where assets of
Borrower are located: (A) the owner and operator executes appropriate UCC-1
financing statements in favor of Borrower, which are duly assigned to Lender and
(B) any secured lender to the owner and operator is properly notified of the
first priority lien on such Inventory of Lender; (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 Borrower in the United States and as to premises of a Customs Broker
or premises which are not owned and controlled by Borrower only if Lender 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) Lender 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) Lender 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) Lender 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 Lender and (B) a copy of the
invoice and manifest with respect thereto, and (v) such Inventory is not subject
to any Letter of Credit Accommodation; (h) Inventory subject to a security
interest or lien in favor of any person other than Lender, 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 Lender;
(k) damaged and/or defective Inventory which is unsaleable or which any Borrower
has not marked down to its realizable value; (l) Inventory purchased or sold on
consignment; (m) samples; and (n) Inventory to be returned to vendors. General
criteria for Eligible Inventory may be established and revised from time to time
by Lender 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
Lender has no written notice thereof from Borrower, which adversely affects or
could reasonably be expected to adversely affect the Inventory in the good faith
determination of Lender. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
8
1.20 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.21 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.22 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.23 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.24 "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 Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be liable;
(f) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer
9
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 Borrower or any ERISA Affiliate; and (j) 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 Borrower.
1.25 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) 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 Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.26 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.27 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.28 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the Borrowing Base and
(ii) the Revolving Loan Limit, minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations (but not including for this purpose the then
outstanding principal amount of the Term Loan), plus (ii) the aggregate amount
of all then outstanding and unpaid trade payables and other obligations of
Borrower which are more than sixty (60) days past due as of such time, plus
(iii) the amount of checks issued by Borrower to pay trade payables and other
obligations which are more than sixty (60) days past due as of such time, but
not yet sent.
1.29 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.30 "Existing Letters of Credit" shall mean the letters of credit issued
for the account of Borrower listed on Schedule 1.30 hereto.
10
1.31 "Existing Real Property" shall mean all now owned real property of
Borrower, 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 1.31 hereto but not including the Real Property subject to the
Mortgages.
1.32 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement.
1.33 "Fixed Charge Coverage Ratio" shall mean, with respect to Borrower and
its Subsidiaries, on a consolidated basis, for any period of determination, the
ratio of (a) EBITDA during such period to (b) Fixed Charges of Borrower and its
Subsidiaries for the same period.
1.34 "Fixed Charges" for 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).
1.35 "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.
1.36 "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.
1.37 "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).
1.38 "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
11
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; and (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.
1.39 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.40 "Intellectual Property" shall mean Borrower's now owned and hereafter
arising or acquired: patents, patent rights, patent applications, copyrights,
works which are the subject matter of copyrights, copyright registrations,
trademarks, trade names, trade styles, trademark and service ▇▇▇▇ 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; customer and other lists in whatever form maintained; and
trade secret rights, copyright rights, rights in works of authorship, and
contract rights relating to computer software programs, in whatever form created
or maintained.
1.41 "Interest Expense" shall mean, for any period, as to any Person, all
of the following as determined 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, without limitation, all
bank fees, commissions, discounts and other fees and charges
12
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.
1.42 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.43 "Interest Rate" shall mean:
(a) Subject to clauses (b) and (c) of this definition below: as to Prime
Rate Loans, the Prime Rate and, as to Eurodollar Rate Loans, a rate of two
percent per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by Borrower as in
effect two (2) Business Days after the date of receipt by Lender of the request
of Borrower for such Eurodollar Rate Loans in accordance with the terms hereof,
whether such rate is higher or lower than any rate previously quoted to
Borrower);
(b) Subject to clause (c) below, effective as of the first day of the month
after Lender's receipt of the financial statements required to be delivered to
Lender pursuant to Section 9.6(a)(ii) hereof in respect of the fiscal quarter
ending June 30, 2000, the Interest Rate payable by Borrower 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 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 full fiscal
quarter or (ii) Borrower's Fixed Charge Coverage Ratio, calculated on a
quarterly basis, for the immediately preceding four (4) consecutive fiscal
quarters of Borrower, ending June 30, 2000 (except that for purposes of
calculating the Fixed Charge Coverage Ratio for the period ending June 30, 2000:
(A) the Fixed Charge Coverage Ratio shall be calculated on a fiscal year to date
basis as of July 1, 1999, and (B) the Interest Expense paid to Lender in respect
of the Obligations from the date of closing to June 30, 2000 shall be calculated
on an annualized basis) as calculated by Lender 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 Fixed Charge
Coverage Ratio) plus two (2%) percent per annum, at Lender'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 Lender and (ii) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2
13
(whether or not such excess(es) arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
1.44 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.45 "Inventory Loan Limit" shall mean $15,000,000, provided, that, in the
event Lender determines that the number of days of the turnover of the Inventory
for any period has not materially changed, the Inventory Loan Limit shall be (i)
$18,000,000 for the period commencing July 1, 2001 through and including June
30, 2002, and (ii) $20,000,000 for the period commencing July 1, 2002 and at all
times thereafter.
1.46 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer
(including without limitation, the Existing Letters of Credit).
1.47 "Loans" shall mean the Revolving Loans and the Term Loan.
1.48 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in an amount in excess of $1,000,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations or prospects of
Borrower or the validity or enforceability of this Agreement, any of the other
Financing Agreements, or any of the rights and remedies of Lender hereunder or
thereunder.
1.49 "Maximum Credit" shall mean the amount of $35,000,000 subject to
increase as set forth in Section 2.1(d) hereof.
1.50 "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 Borrower to Lender, 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).
1.51 "Mortgages" shall mean, individually and collectively, each of the
following: (a) the Deed of Trust and Security Agreement, dated of even date
herewith, by Borrower in favor of
14
Lender with respect to the Real Property and related assets of Borrower located
in Maiden, North Carolina, (b) the Deed of Trust and Security Agreement, dated
of even date herewith, by Borrower in favor of Lender with respect to the Real
Property and related assets of Borrower located in Knoxville, Tennessee, and (c)
the Open-End Mortgage and Security Agreement, dated of even date herewith, by
Borrower in favor of Lender with respect to the Real Property and related assets
of Borrower located in Edgefield, South Carolina.
1.52 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by Borrower or any
ERISA Affiliate.
1.53 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.54 "Net Income" shall mean, with respect to any Person, for any period,
the aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (excluding to the extent included therein
any extraordinary, one-time or non-recurring gains) after deducting all charges
which should be deducted before arriving at the net income (loss) for such
period and after deducting the Provision for Taxes for such period, all as
determined in accordance with GAAP; provided, that, (a) the net income of any
Person that is not a wholly-owned Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid or payable to such Person or a wholly-owned
Subsidiary of such Person; (b) the effect of any change in accounting principles
adopted by such Person or its Subsidiaries after the date hereof shall be
excluded; and (c) the net income (if positive) of any wholly-owned Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such wholly-owned Subsidiary to such Person or to any other wholly-owned
subsidiary of such Person is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such wholly-owned Subsidiary shall
be excluded. For the purpose of this definition, net income excludes any gain
(but not loss) together with any related Provision for Taxes for such gain (but
not loss) realized upon the sale or other disposition of any assets that are not
sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any Capital
Stock of such Person or a Subsidiary of such Person and any net income realized
as a result of changes in accounting principles or the application thereof to
such Person.
1.55 "Net Proceeds" shall mean the aggregate cash proceeds received by
Borrower, or any of its Subsidiaries 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
15
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 Borrower or any
Subsidiary of Borrower to cash.
1.56 "Obligations" shall mean any and all Revolving Loans, the Term Loan,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower to Lender
and/or its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
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 Lender.
1.57 "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, other than Borrower.
1.58 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.59 "Permits" shall have the meaning set forth in Section 8.7 hereof.
1.60 "Permitted Holders" shall mean the persons listed on Schedule 1.60
hereto and their respective successors and assigns.
1.61 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.62 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multiemployer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
1.63 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
16
1.64 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.65 "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.
1.66 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgages.
1.67 "Receivables" shall mean: (a) all Accounts; (b) all amounts at any
time payable to Borrower in respect of the sale or other disposition by Borrower
of any Account or other obligation for the payment of money; (c) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (d) all letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to Borrower or otherwise in favor of or delivered to
Borrower in connection with any Account; or (e) all other contract rights,
chattel paper, instruments, notes, general intangibles and other forms of
obligations owing to Borrower, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by
Borrower or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries) or otherwise associated with any
Accounts, Inventory or general intangibles of Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
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 liens
of employees on which Borrower is beneficiary.
1.68 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.69 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
17
1.70 "Renewal Date" shall the meaning set forth in Section 12.1 hereof.
1.71 "Reserves" shall mean as of any date of determination, such amounts as
Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks arising after
the date of this Agreement or of which Lender had no actual knowledge as of such
date, which, as determined by Lender 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 Borrower or any Obligor or (iii)
the security interests and other rights of Lender in the Collateral (including
the enforceability, perfection and priority thereof); or (b) to reflect Lender's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof;
(d) $255,000 in respect of deferred compensation liabilities of Borrower for its
employees and those of any member of the Delta Apparel Employee Group (as such
term is defined in the DWI Distribution Agreement) such reserve to terminate
upon Lender's receipt of evidence, in form and substance satisfactory to it that
the option provided to members of the Delta Apparel Employee Group to receive a
distribution of deferred compensation benefits in connection with the
transactions contemplated by the Distribution Agreement has expired; or (e) in
respect of any state of facts which Lender 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 Lender 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
Lender, Lender shall not establish a Reserve for the same purpose. The amount of
any Reserve established by Lender shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as
determined by Lender in good faith.
1.72 "Revolving Loan Limit" shall mean $25,000,000 subject to increase as
provided in Section 2.1(d) hereof.
1.73 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.74 "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
18
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.
1.75 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.76 "Value" shall mean, as determined by Lender 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.
1.77 "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.
1.78 "Woodside" shall mean Delta Woodside Industries, Inc., a South
Carolina corporation, and its successors and assigns.
SECTION 2. CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
----------------
(a) Subject to and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Revolving Loan Limit.
(b) Lender may, in its discretion, from time to time, upon not less than
five (5) days prior notice to Borrower, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender 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 Lender
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 determined by Lender in
good faith. In determining whether to reduce the lending formula(s), Lender may
consider events,
19
conditions, contingencies or risks which are also considered in determining
Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Lender's discretion, (i) the aggregate amount of the
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Limit, (ii) the aggregate amount of Revolving Loans and Letter of Credit
Accommodations 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
Accommodations 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 Accommodations,
exceed the amounts available under the lending formulas, the Revolving Loan
Limit, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(e), the Inventory Loan Limit or the Maximum Credit, as applicable, such
event shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrower shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded.
(d) The Revolving Loan Limit may be permanently increased, one time only,
by $5,000,000 to $30,000,000, upon the written request of Borrower to Lender,
such request shall be irrevocable and shall become effective three (3) Business
Days after such request is received by Lender, provided, that, as of the
proposed effective date of any such increase, Lender has determined that no
Event of Default or any act, condition or event which with notice or passage of
time or both, would constitute an Event of Default, shall exist or have
occurred. To the extent any such increase becomes effective, the Maximum Credit
shall be automatically deemed increased by $5,000,000.
2.2 Letter of Credit Accommodations.
--------------------------------
(a) Subject to and upon the terms and conditions contained herein, at the
request of Borrower, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Borrower pursuant
to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to one and one-half (1
1/2%) percent per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option, without notice, at
a rate equal to three and one-half (3 1/2%) percent per annum on such daily
outstanding balance for: (i) the period from and after the date of termination
or non-renewal hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrower) and
20
(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 Lender. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) Borrower shall give Lender two (2) Business Days' prior written of
Borrower's request for the issuance of a Letter of Credit Accommodation. Such
notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit Accommodation requested, the effective date (which date shall
be a Business Day) of issuance of such requested Letter of Credit Accommodation,
whether such Letter of Credit Accommodations may be drawn in a single or in
partial draws, the date on which such requested Letter of Credit Accommodation
is to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit Accommodation is to be issued, and the beneficiary of the
requested Letter of Credit Accommodation. Borrower shall attach to such notice
the proposed form of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Lender: (i) Borrower shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in such
manner as such proposed issuer may require, an application in form and substance
satisfactory to such proposed issuer and Lender for the issuance of the Letter
of Credit Accommodation and such other documents as may be required pursuant to
the terms thereof, and the form and terms of the proposed Letter of Credit
Accommodation shall be satisfactory to Lender and such proposed issuer, (ii) as
of the date of issuance, no order of any court, arbitrator or other Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit Accommodation, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
the proposed issuer of such Letter of Credit Accommodation refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit Accommodation; and (iii) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit Accommodations, on the
date of the proposed issuance of any Letter of Credit Accommodations, shall be
equal to or greater than: (A) if the proposed Letter of Credit Accommodation is
for the purpose of purchasing Eligible Inventory, the sum of (1) forty-five
(45%) percent multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Lender estimates must be paid by
Borrower in connection with such Inventory upon arrival and for delivery to one
of Borrower's locations for Eligible Inventory within the United States of
America and (iv) if the proposed Letter of Credit Accommodation is for any other
purpose, an amount equal to one hundred (100%) percent of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect
21
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Lender's discretion, the amount of all outstanding Letter of
Credit Accommodations and all other commitments and obligations made or incurred
by Lender in connection therewith shall not at any time exceed $10,000,000. At
any time an Event of Default exists or has occurred and is continuing, upon
Lender's request, Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations.
(f) Borrower shall indemnify and hold Lender harmless from and against any
and all losses, claims, damages, liabilities, costs and expenses which Lender
may suffer or incur in connection with any Letter of Credit Accommodations and
any documents, drafts or acceptances relating thereto, including any losses,
claims, damages, liabilities, costs and expenses due to any action taken by any
issuer or correspondent with respect to any Letter of Credit Accommodation.
Borrower assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes all
risks for, and agrees to pay, all foreign, Federal, State and local taxes,
duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Borrower
hereby releases and holds Lender harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation, except for the gross negligence or wilful misconduct of Lender as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. The provisions of this Section 2.2(e) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of Credit
Accommodations, Borrower will, at Lender's request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Lender holds a
security interest to deliver them to Lender and/or subject to Lender's order,
and if they shall come into Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form. Borrower shall also, at
Lender's request, designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.
(h) Borrower hereby irrevocably authorizes and directs any issuer of a
Letter of Credit Accommodation to name Borrower as the account party therein and
to deliver to Lender all instruments, documents and other writings and property
received by issuer pursuant to the Letter of Credit Accommodations and to accept
and rely upon Lender's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation
22
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall
not: (i) at any time an Event of Default exists or has occurred and is
continuing, (A) approve or resolve any questions of non-compliance of documents,
(B) give any instructions as to acceptance or rejection of any documents or
goods or (C) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders, and (ii) at all times, (A) grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents, and (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
or documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions either in its own name or in
Borrower's name.
(i) Any rights, remedies, duties or obligations granted or undertaken by
Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the original
----------
principal amount of $10,000,000. The Term Loan is (a) evidenced by a Term
Promissory Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, the Term
Promissory Note, and the other Financing Agreements and (c) secured by all of
the Collateral.
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
---------
(a) Borrower shall pay to Lender 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 Revolving Loans at any time outstanding in excess
of the amounts available to Borrower under Section 2 (whether or not such
excess(es), arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default) shall be payable ON DEMAND.
23
(b) Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrower shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (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 Lender of such a
request from Borrower, 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) Borrower shall
have complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $3,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (vi) Lender shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to Lender through the
Reference Bank and can be readily determined as of the date of the request for
such Eurodollar Rate Loan by Borrower. Any request by Borrower 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, Lender and Reference Bank 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 Lender and Reference Bank 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 Lender 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 Lender's option, upon notice by
Lender to Borrower, convert to Prime Rate Loans in the event that this Agreement
shall terminate or not be renewed. Borrower shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in arrears not
later than the first day of each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed. 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
24
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.
(e) On the date hereof, the Prime Rate is nine (9 %) percent and therefore
the rate of interest in effect hereunder for Prime Rate Loans outstanding on the
date of this Agreement, expressed in simple interest terms, is nine (9 %)
percent per annum.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
------------
of $175,000 which shall be fully earned and payable as of the date hereof. Such
closing fee shall not be subject to rebate upon any prepayment of the
Obligations except to the extent required by Section 3.6 of this Agreement or
applicable law. Such closing fee shall compensate Lender for the costs
associated with the origination, structuring, processing, approving and closing
of the transactions contemplated by this Agreement, exclusive of any expenses
for which Borrower has agreed to reimburse Lender pursuant to any other
provision of this Agreement or the other Financing Agreements (such as
attorneys' fees).
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in
--------------
an amount equal to $2,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
----------------
fee at a rate equal to one-quarter of one (1/4%) percent per annum calculated
upon the amount by which the Revolving Loan Limit exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) 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.
3.5 Changes in Laws and Increased Costs of Loans.
---------------------------------------------
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, 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 Lender, Reference Bank or any participant with 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
Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrower shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing,
25
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 Lender setting forth the basis for the determination of such
amount necessary to compensate 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 Lender 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, Borrower shall pay to
Lender upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the Reference
Bank or any participant with 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.
3.6 Maximum Interest.
-----------------
(i) 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 Lender
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 Lender 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 Borrower of any of the
Obligations, or the occurrence of any event or contingency whatsoever, shall
entitle Lender 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 Borrower 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 Borrower to pay interest or such amounts which are
deemed to 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.
(ii) In the event any Interest is charged or received in excess of the
Maximum Interest Rate ("Excess"), 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 Lender
26
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 Borrower, 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 Lender does not intend to collect
any unearned interest in the event of any such acceleration. 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 Lender 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.
(iii) By the execution of this Agreement, Borrower agrees that (A) the
credit or return of any Excess shall constitute the acceptance by Borrower of
such Excess, and (B) Borrower shall not seek or pursue any other remedy, legal
or equitable, against Lender, 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 Lender, all interest at any time contracted for, charged or received
from Borrower 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.
(iv) Borrower and Lender 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.
(v) The provisions of this Section 3.6 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 Borrower and all figures set
forth therein shall, for the sole purpose of computing the extent of the
Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions Precedent to Initial Loans and Letter of Credit
---------------------------------------------------------------------
Accommodations. Each of the following is a condition precedent to Lender making
---------------
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, evidence that the Distribution Agreements have been duly executed and
delivered by and to the appropriate parties thereto and all of the transactions
contemplated under the terms of the
27
Distribution Agreements, including without limitation, all of the reorganization
events described in Section 2.1 of the DWI Distribution Agreement have been
consummated prior to or contemporaneously with the execution of this Agreement
and that Borrower has good and marketable title to all of the assets used in the
operations and business of the Delta Apparel division of Woodside;
(b) Lender shall have received a copy of the summary of the opinion, in
form and substance satisfactory to Lender, addressed and delivered to the Board
of Directors of Woodside as to the solvency of Borrower at the time of the
distribution contemplated by the Distribution Agreements;
(c) Lender shall have received a copy of the opinion, in form and substance
satisfactory to Lender, addressed and delivered to Delta ▇▇▇▇▇, Inc. to the
effect that the sale by Delta ▇▇▇▇▇, Inc. to Borrower of the Rainsford yarn
plant in Edgefield, South Carolina including related inventory is fair from a
financial point of view to the holders of Delta ▇▇▇▇▇, Inc.'s 9 5/8% Senior
Notes in the aggregate principal amount of $150,000,000;
(d) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lenders to
Borrower of their respective financing arrangements with Borrower and the
termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of Borrower and each Obligor, duly authorized,
executed and delivered by it or each of them, including, but not limited to, (i)
UCC termination statements for all UCC financing statements previously filed by
it or any of them or their predecessors, as secured party and Borrower or any
Obligor, as debtor and (ii) satisfactions and discharges of any mortgages, deeds
of trust or deeds to secure debt by Borrower or any Obligor in favor of such
existing lender or lenders, in form acceptable for recording with the
appropriate Governmental Authority;
(e) all requisite corporate action and proceedings in connection with the
transactions contemplated by the Distribution Agreements, this Agreement and the
other Financing Agreements shall be satisfactory in form and substance to
Lender, and Lender shall have received all information and copies of all
documents, including records of requisite corporate action and proceedings which
Lender may have requested in connection therewith, such documents where
requested by Lender or its counsel to be certified by appropriate corporate
officers or Governmental Authorities;
(f) no material adverse change shall have occurred in the assets, business
or financial condition of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
(g) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require to
determine the amount of
28
Revolving Loans available to Borrower (including, without limitation, 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 Lender, together with such supporting documentation as may be
necessary or appropriate, and other documents and information that will enable
Lender to accurately identify and verify the Collateral), the results of which
each case shall be satisfactory to Lender, not more than three (3) Business Days
prior to the date hereof;
(h) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements by
owners and lessors of leased premises of Borrower and by warehouses at which
Collateral is located;
(i) Lender shall have received, in form and substance satisfactory to
Lender, duly authorized, executed and delivered by Woodside and Borrower the
agreement of Woodside consenting to the collateral assignment by Borrower to
Lender of all of its rights and remedies and claims for damages and other relief
under the Distribution Agreements and granting Lender such other rights as
Lender may require, duly authorized, executed and delivered by Woodside;
(j) Lender shall have received, in form and substance satisfactory to
Lender, a pro-forma consolidated balance sheet of Borrower reflecting the
initial transactions contemplated under the Distribution Agreements and
hereunder, including, but not limited to, (i) the consummation of the transfer
of the assets by Woodside to Borrower and the other transactions contemplated by
the Distribution Agreements and (ii) the Loans and Letter of Credit
Accommodations provided by Lender to Borrower on the date hereof and the use of
the proceeds of the initial Loans as provided herein, accompanied by a
certificate, dated of even date herewith, of the chief financial officer of
Borrower stating that such pro-forma balance sheet annexed thereto represents
the reasonable, good faith opinion of such officer as to the subject matter
thereof as of the date of such certificate;
(k) the Excess Availability as determined by Lender, as of the date hereof,
shall be not less than $8,000,000 after giving effect to the initial Loans made
or to be made and Letter of Credit Accommodations issued or to be issued in
connection with the initial transactions hereunder;
(l) Lender shall have received, in form and substance satisfactory to
Lender, all agreements with the depository banks and Borrower with respect to
the Blocked Accounts as Lender may require pursuant to Section 6.3 hereof, duly
authorized, executed and delivered by such depository banks and Borrower;
(m) Lender shall have received evidence, in form and substance satisfactory
to Lender, that Lender has a valid perfected first priority security interest in
all of the Collateral;
29
(n) Lender shall have received and reviewed UCC search results for all
jurisdictions in the United States and Canada which assets of Borrower are
located, which search results shall be in form and substance satisfactory to
Lender;
(o) Lender shall have received any existing environmental audits of
Borrower's plants and the Real Property conducted by an independent
environmental engineering firm acceptable to Lender, and in form, scope and
methodology satisfactory to Lender, confirming (i) Borrower is in compliance
with all material applicable Environmental Laws and (ii) the absence of any
material potential or actual liability of Borrower for any remedial action with
respect to any environmental condition or any other material environmental
problems;
(p) Lender shall have received, in form and substance satisfactory to
Lender, valid and effective title insurance policy with respect to the Real
Property of Borrower located in Edgefield, South Carolina, issued by a company
and agent acceptable to Lender (i) insuring the priority, amount and sufficiency
of the Mortgages, (ii) insuring against matters that would be disclosed by
surveys and (iii) containing any legally available endorsements, assurances or
affirmative coverage requested by Lender for protection of its interests;
(q) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(r) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Distribution Agreements, the Financing Agreements and such other matters as
Lender may request; and
(s) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
-----------------------------------------------------------------------
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan or providing each such Letter of
Credit Accommodation and after giving effect thereto, except to the extent that
such representations and warranties expressly relate solely to an earlier date
(in which case such representations and warranties shall have been true and
accurate on and as of such earlier date);
30
(b) no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letter of Credit
Accommodations, 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 Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
or of Lender to enforce any Obligations or realize upon any of the Collateral;
and
(c) no Event of Default and no 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 on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by
Lender, collectively, the "Collateral"):
5.1 Receivables;
5.2 all other present and future general intangibles (including
Intellectual Property and existing and future leasehold interests in equipment,
real estate and fixtures), chattel paper, documents, instruments, investment
property (including securities, whether certificated or uncertificated,
securities accounts, security entitlements, commodity contracts or commodity
accounts), letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities and other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Lender or its
Affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (a) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lien or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
31
reclaimed goods, and (d) deposits by and property of account debtors or other
persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Real Property;
5.7 Records; and
5.8 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 any or all of the foregoing.
5.9 Notwithstanding anything to the contrary contained in Section 5.1
through 5.8 above, the types or items of Collateral described in such Section
shall not include any Equipment which is, or at the time of Borrower's
acquisition thereof shall be, subject to a purchase money mortgage or other
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 Lender in such item of Equipment is prohibited by the terms
of the agreement between Borrower and the holder of such purchase money mortgage
or other purchase money lien or security interest or under applicable law and
such prohibition has not been or is not waived, or the consent of the holder of
the purchase money mortgage or other purchase money lien or security interest
has not been or is not otherwise obtained, or under applicable law such
prohibition cannot be waived and (b) the purchase money mortgage or other
purchase money lien or security interest on such item of Equipment is or shall
become valid and perfected.
SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
--------------------------
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
-----------
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to
32
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to Lender
by Borrower.
6.3 Collection of Accounts.
-----------------------
(a) Borrower shall establish and maintain, at its expense, blocked accounts
or lockboxes and related blocked accounts (in either case, "Blocked Accounts"),
as Lender may specify, with such banks as are acceptable to Lender into which
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Receivables and all payments constituting proceeds of Inventory
or other Collateral in the identical form in which such payments are made,
whether by cash, check or other manner. The banks at which the Blocked Accounts
are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, 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 Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether in respect of the Receivables, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Lender in respect of the
Obligations and therefore shall constitute the property of Lender to the extent
of the then outstanding Obligations.
(b) For the purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Revolving Loans available to Borrower,
such payments will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Lender of immediately available
funds in the Payment Account, if such payments are received in sufficient time
(in accordance with Lender's usual and customary practices as in effect from
time to time) to credit Borrower's loan account on such day, and if not, then on
the next Business Day.
(c) Borrower and all of shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive,
as the property of Lender, 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
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender 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
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to
33
reimburse Lender 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 Payment Account as
---------
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender shall apply payments received or collected from Borrower or for the
account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Lender from Borrower; second, to pay
interest due in respect of any Loans; third, to pay principal due in respect of
the Loans; fourth, to pay or prepay any other Obligations whether or not then
due, in such order and manner as Lender determines. Notwithstanding anything to
the contrary contained in this Agreement, unless so directed by Borrower, or
unless an Event of Default shall exist or have occurred and be continuing,
Lender 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 Lender's option, all principal, interest, fees,
costs, expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments to Lender 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, 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 Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender 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 Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans and
----------------------------
provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. Atlanta, Georgia time on any day shall be deemed to have been made as
of the opening of business on the immediately following Business Day. All Loans
and Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
34
6.6 Use of Proceeds. The initial Revolving Loan under this Agreement shall
-----------------
be in an amount that is not less than $250,000. Borrower shall use the initial
proceeds of the Loans provided by Lender to Borrower hereunder only for:
(a) payments to each of the persons listed in the disbursement direction letter
furnished by Borrower to Lender on or about the date hereof and (b) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements. All other Loans
made or Letter of Credit Accommodations provided by Lender to Borrower pursuant
to the provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans to be considered a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 Collateral Reporting.
---------------------
(a) Borrower shall provide Lender with the following documents in a form
satisfactory to Lender:
(i) on a weekly basis or more frequently, as required by Lender, a
schedule of sales made, credits issued and cash received;
(ii) on a monthly basis or more frequently as Lender may request, (A)
perpetual inventory reports, (B) inventory reports by location and
category, (C) agings of accounts payable (and including information
indicating the status of payments to owners and lessors of the leased
premises of Borrower) and (D) agings of accounts receivable (together with
a reconciliation to the previous month's aging and general ledger);
(iii) upon Lender's request, (A) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips
and bank statements, (B) copies of shipping and delivery documents, and
(C) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by Borrower;
(iv) such other reports as to the Collateral as Lender shall request
from time to time; and
(b) If any of Borrower's records or reports of the Collateral are prepared
or maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
35
7.2 Accounts Covenants.
-------------------
(a) Borrower shall notify Lender promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any account debtor involving
an Account exceeding $100,000 or the assertion of any claims, offsets, defenses
or counterclaims by any account debtor involving an 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 Borrower's knowledge would cause
Lender 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 Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower 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, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender 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, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and
(iv) not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender 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 Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender 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.
36
(d) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender 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 Lender and that Lender has a security interest
therein and Lender may direct any or all accounts debtors to make payment of
Accounts directly to Lender, (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 payment of any Accounts or
such other obligations, but without any duty to do so, and Lender 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 Lender 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 Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
--------------------
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location and except for Inventory shipped from
the manufacturer thereof to Borrower which is in transit to the locations set
forth or permitted herein; (d) upon Lender's request, Borrower shall, at its
expense, twice in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender and upon which Lender is expressly permitted to
rely; (e) Borrower shall produce, use, store and maintain the Inventory with all
37
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) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory except for the right of
return given to customers of Borrower consistent with its current policies as of
the date hereof; (h) Borrower shall keep the Inventory in good and marketable
condition; and (i) Borrower shall not, without prior written notice to Lender,
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) at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment and/or the Real Property in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender and upon which Lender is expressly permitted to rely; (b)
Borrower shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrower shall use the
Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in Borrower's business
and not for personal, family, household or farming use; (e) Borrower shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of Borrower or to move Equipment directly from
one location set forth or permitted herein to another such location except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business and Borrower 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 Borrower 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) Borrower assumes all responsibility and liability arising from
the use of the Equipment and Real Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
------------------
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Receivable, (vii) prepare, file and sign Borrower's name on any
proof of claim in bankruptcy or other similar document against an account debtor
other obligor in respect of any Receivables or other Collateral, (viii) notify
the post office authorities to change the address for
38
delivery of remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral to an address designated by Lender,
and open and dispose of all mail addressed to Borrower and handle and store all
mail relating to the Collateral; and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Lender, (ii) have access to any lockbox or
postal box into which remittances from account debtors or other obligors in
respect of Receivables or other proceeds of Collateral are sent or received,
(iii) endorse Borrower's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Lender and
deposit the same in Lender's account for application to the Obligations, (iv)
endorse Borrower's name upon any chattel paper, document, instrument, invoice,
or similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
(v) clear Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs in Borrower's name, Lender's name or the
name of Lender's designee, and to sign and deliver to customs officials powers
of attorney in Borrower's name for such purpose, and to complete in Borrower's
or Lender's name, any order, sale or transaction, obtain the necessary documents
in connection therewith and collect the proceeds thereof, (vi) sign Borrower's
name on any verification of Receivables and notices thereof to account debtors
or other obligors in respect thereof and (vii) execute in Borrower's name and
file any UCC financing statements or amendments thereto. Borrower hereby
releases Lender and its 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 Lender's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) upon notice to Borrower,
--------------
cure any default by Borrower under any material agreement with a third party
which affects the Collateral, its value or the ability of Lender to collect,
sell or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower to perform its obligations under the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against
Borrower, (c) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Lender with respect thereto. Lender may add any amounts so
expended to the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower on demand. Lender shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
39
7.7 Access to Premises. From time to time as requested by Lender, at the
-------------------
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender or its designee may use during normal business hours
such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing (provided, that, Borrower shall make such
personnel, equipment, supplies and premises available to Lender or its designee
in such manner so as to minimize any interference with the operations of
Borrower and so as to enable Lender 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.
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 Borrower as described in the definition of Eligible
Inventory, constitutes Eligible Inventory then (a) Borrower shall cause all
bills of lading and other documents of title relating to goods being purchased
by Borrower which are outside the United States and in transit to the premises
of Borrower or the premises of a Customs Broker in the United States to name
Borrower as consignee, unless and until Lender may direct otherwise; (b) at such
time and from time to time as Lender may direct, Borrower shall cause Lender or
such financial institution or other person as Lender may specify to be named as
consignee; (c) without limiting any other rights of Lender hereunder, Lender
shall have the right to endorse and negotiate on behalf of, and as
attorney-in-fact for, Borrower any ▇▇▇▇ of lading or other document of title
with respect to such goods naming Borrower as consignee to Lender; (d) there
shall be three (3) originals of each of such ▇▇▇▇ of lading or other document of
title which unless and until Lender shall direct otherwise shall be delivered as
follows: (i) one (1) original to such Customs Broker as Borrower may specify (so
long as Lender has received a Collateral Access Agreement duly authorized,
executed and delivered by such Customs Broker), and (ii) two (2) originals to
Lender or to such other person as Lender may designate for such purpose; (e)
Borrower shall obtain a copy (but not the originals) of such ▇▇▇▇ of lading or
other documents from the Customs Broker; and (f) Borrower shall cause all bills
of lading or other documents of title relating to goods purchased by Borrower
which are outside the United States and in transit to the premises of 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 Uniform
Commercial Code.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing
40
condition of the making of Loans and providing Letter of Credit Accommodations
by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. 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 Borrower's financial condition,
results of operation or business or the rights of Lender 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 Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does 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 Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender 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 Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
(b) The pro forma balance sheets and future cash flow projections attached
as Schedule 8.2 for Borrower and its Subsidiaries (together with the summaries
of assumptions and projected assumptions, based on historical performance with
respect thereto) furnished by Borrower to Lender prior to the date of this
Agreement represent the reasonable, good faith opinion of Borrower and its
management as to the subject matter thereof.
8.3 Chief Executive Office; Collateral Locations. The chief executive
-------------------------------------------------
office of Borrower and 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
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof and to the
best of 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 Lender under this Agreement and the other Financing Agreements
constitute valid and perfected
41
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 Borrower's locations
outside of the United States as set forth in item 9 of the Information
Certificate and Mexico, pursuant to Section 9.10 hereof. 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 Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
-------------
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
-----------
is no present investigation by any Governmental Authority pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
-----------------------------------------------------
(a) Borrower is not in default in any material respect under, or in
violation in any 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, without
limitation, 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, without limitation, 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, rules
and orders promulgated thereunder).
42
(b) 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 Borrower as of the date
hereof by any Federal, State or local governmental agency and any applications
pending by Borrower with such federal, state or local governmental agency. The
Permits constitute all permits, licenses, approvals, consents, certificates,
orders or authorizations necessary for 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 Borrower or the legality, validity or enforceability
of this Agreement or the other Financing Agreements or the ability of Borrower
to perform its obligations under the Agreement or any of the other Financing
Agreements or the rights and remedies of Lender under this Agreement or any of
the other Financing Agreements. All of the 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, Borrower and any Subsidiary
have not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrower and any Subsidiary
complies in all material respects with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder.
(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 Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower and any Subsidiary or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower and its Subsidiaries have all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of
43
Borrower 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 the
Borrower, nothing has occurred which would cause the loss of such qualification.
Borrower and its ERISA Affiliates have made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or to the best knowledge of 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) Borrower and its ERISA Affiliate have not incurred and do not reasonably
expect to incur, any liability under Title IV of ERISA with respect to any Plan
(other than premiums due and not delinquent under Section 4007 of ERISA);
(iv) Borrower and its ERISA Affiliates have not incurred and do not reasonably
expect to incur, any liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) Borrower and its ERISA Affiliates have not engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
--------------
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has the
----------------------
right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrower does not have any Intellectual Property registered, or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 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
44
both, the revocation, suspension or termination of such rights. To the best of
the knowledge of 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 Borrower infringes any patent, trademark, servicemark, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting Borrower
contesting its right to sell or use any such Intellectual Property. Schedule
8.11 sets forth all of the agreements or other arrangements of Borrower pursuant
to which Borrower has a license or other right to use any trademarks, logos,
designs, representations or other Intellectual Property owned by another person
as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of Borrower as in effect on the date hereof. No
trademark, servicemark or other Intellectual Property at any time used by
Borrower which is owned by another person, or owned by Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Lender, is affixed to any Eligible Inventory,
except to the extent permitted under the term of the license agreements listed
on Schedule 8.11 hereto.
8.12 Acquisition of Assets.
----------------------
(a) The Distribution Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed (except to the
extent that the Distribution Agreements as in effect on the date hereof
expressly contemplate performance after the date hereof) 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 Distribution Agreements and the assignments to
be executed and delivered by Woodside (or any of its affiliates or subsidiaries)
thereunder, Borrower has acquired and has good and marketable title to the
assets of the Delta Apparel division of Woodside, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as permitted hereunder.
Borrower has acquired all of the assets consisting of the Delta Apparel Company
division of all of the various subsidiaries of Woodside.
(b) All actions and proceedings, required by the Distribution Agreements in
respect of the Intercompany Reorganization (as such term is defined in the DWI
Distribution Agreement), applicable law or regulation (including, but not
limited to, 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
(except for those provisions thereof that are solely for the benefit of Woodside
and not for Borrower and which do not otherwise affect or relate to Borrower).
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Distribution Agreements 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 Distribution Agreements.
45
(d) Borrower has delivered, or caused to be delivered, to Lender, true,
correct and complete copies of the Distribution Agreements.
8.13 Solvency. Borrower is solvent and will continue to be solvent after
---------
the creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present salable value are, and will be, greater than the
Indebtedness of Borrower, and including subordinated and contingent liabilities
computed at the amount which, to the best of Borrower's knowledge, represents an
amount which can reasonably be expected to become an actual or mature liability.
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 Borrower and any union, labor organization or other bargaining
agent in respect of the employees of Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice complaint pending
against Borrower or, to the best of the knowledge of 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 Borrower
or, to best of the knowledge of Borrower, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of the knowledge of Borrower, threatened against
Borrower.
8.15 Corporate Name; Prior Transactions. Borrower has not, 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 Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or
(b) the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
8.17 Material Contracts. Schedule 8.17 hereto sets forth all Material
--------------------
Contracts to which Borrower is a party or is bound as of the date hereof.
Borrower has delivered true, correct and complete copies of such Material
Contracts to Lender on or before the date hereof. Borrower is
46
not in breach of or in default under any Material Contract and has not received
any notice of the intention of any other party thereto to terminate any Material
Contract.
8.18 Accuracy and Completeness of Information. All information furnished by
-----------------------------------------
or on behalf of Borrower in writing to 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 Borrower, which has not been fully and
accurately disclosed to Lender 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 Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 Maintenance of Existence. 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. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within the
-------------------------
continental United States provided Borrower (a) gives Lender 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 Lender such
agreements, documents, and instruments as Lender 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) Borrower shall, and shall cause any Subsidiary to, at all times, comply
in all material respects with all laws, rules, regulations, licenses, permits,
approvals and orders
47
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 Lender and in any event, to the extent
required by applicable law, 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 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
Borrower to Lender. Borrower shall take prompt and appropriate action to respond
to any non-compliance with any of the Environmental Laws and shall regularly
report to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise obtaining
knowledge of, (i) the occurrence of any event involving the release, spill or
discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge, threatened
or actual, of any Hazardous Material 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 Borrower or its business, operations or assets or any properties
at which Borrower transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any material
non-compliance, with any Environmental Law, Borrower shall, at Lender's request
and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender 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 Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees 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
48
remedial work with respect to any property of Borrower and the preparation and
implementation of any closure, remedial or other required plans. All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
------------------------------
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary to, at all
----------
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Borrower
shall cause Lender to be named as a loss payee and an additional insured (but
without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance satisfactory to Lender. Such lender's
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Lender as its interests may appear and further specify that
Lender shall be paid regardless of any act or omission by Borrower or any of its
Affiliates. At its option, Lender may apply any insurance proceeds received by
Lender 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 Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
-------------------------------------------
(a) Borrower shall, and shall cause any Subsidiary to, keep proper books
and records in which true and complete entries shall be made of all dealings or
transactions of or in
49
relation to the Collateral and the business of Borrower and its Subsidiaries in
accordance with GAAP. Borrower shall promptly furnish to Lender all such
financial and other information as Lender shall reasonably request relating to
the Collateral and the assets, business and operations of Borrower, and to
notify the auditors and accountants of Borrower that Lender is authorized to
obtain such information directly from them. Without limiting the foregoing,
Borrower shall furnish or cause to be furnished to Lender, 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 Borrower and its Subsidiaries as of the end of and through
such fiscal month, certified to be correct by the chief financial officer of
Borrower, 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 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 Borrower and its Subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrower and its Subsidiaries
as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender 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 Borrower's business,
properties, assets, goodwill or condition, financial or otherwise, (ii) any
Material Contract of Borrower being terminated or amended or any new Material
Contract entered into (in which event Borrower shall provide Lender with a copy
of such Material Contract), (iii) any order, judgment or decree in excess of
$500,000 shall have been entered against Borrower or any of its properties or
assets, (iv) any notification of violation of laws or regulations received by
Borrower, (v) any ERISA Event, and (vi) the occurrence of any Event of Default
or act, condition or event which, with notice or the passage of time or giving
of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower sends to
its stockholders generally and copies of all reports and registration statements
which Borrower files with the Securities and Exchange Commission, any national
securities exchange or the National Association of Securities Dealers, Inc.
(d) Borrower shall deliver, or cause to be delivered, to Lender, within
ninety (90) days from the date hereof, an opening unaudited consolidated balance
sheet of Borrower and its
50
Subsidiaries after giving effect to the transactions contemplated by this
Agreement and the Distribution Agreements, which present fairly the financial
condition of Borrower as of such date.
(e) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrower, as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or any
other information relating to the business of Borrower to any court or other
Government Authority to the extent required by statute, rule, regulation,
subpoena or court order or to any participant or assignee or prospective
participant or assignee. Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's expense, copies of
the financial statements of Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of Borrower and to disclose
to Lender such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall
--------------------------------------------------------
not, and shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with any other Person or permit any
other Person to merge into or with or consolidate with it; 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 Lender and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $100,000 all such
Equipment disposed of in any fiscal year of Borrower;
(iii) the issuance and sale by Borrower of Capital Stock of Borrower
after the date hereof; provided, that, (A) Lender shall have received not
less than ten (10) Business Days prior written notice of such issuance and
sale by Borrower, which notice shall specify the parties to whom such
shares are to be sold, the terms of such sale, the total amount which it is
anticipated will be realized from the issuance and sale of such stock and
the net cash proceeds which it is anticipated will be received by Borrower
from such sale, (B) Borrower shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other
payments in respect thereof 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 Borrower to request or receive Loans or Letter
of Credit Accommodations or the right of Borrower to amend or modify any of
the terms
51
and conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the arrangements of Borrower with
Lender are more restrictive or burdensome to 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 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;
(iv) the issuance of Capital Stock of Borrower consisting of common stock
pursuant to a stock option plan, 401(k) plan, or incentive stock award plan of
Borrower for the benefit of its employees, directors and consultants, provided,
that, in no event shall Borrower be required to issue, or shall 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;
(v) sales of Existing Real Property (other than Existing 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) Lender 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 Lender, the parties to such
sale, the Existing Real Property to be sold, the purchase price and the manner
of payment thereof and such other information with respect thereto as Lender 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 Lender or (ii) to
Borrower, provided, that, the entire amount of the Net Proceeds are used to
repay the outstanding amount of Revolving Loans which amounts may be reborrowed,
(D) Borrower 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 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.
(c) form or acquire any Subsidiaries other than those listed on the
Information Certificate and as permitted in accordance with Section 9.10 hereof;
(d) wind up, liquidate or dissolve; or
(e) agree to do any of the foregoing.
9.8 Encumbrances. 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) the security interests and liens of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and
52
available to Borrower or such Subsidiary, as the case may be and with respect to
which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the payment
of taxes) arising in the ordinary course of Borrower's or such Subsidiary's
business to the extent: (i) such liens secure Indebtedness which is not overdue
or (ii) such liens secure Indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including Capital
Leases) to secure Indebtedness permitted under Section 9.9(b) hereof; and
(f) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
-------------
to, incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any Indebtedness, except:
(a) the Obligations;
(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 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 Borrower under interest swap agreements, interest rate
cap agreements, interest rate collar agreements, interest rate exchange
agreements and similar contractual 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) the Indebtedness set forth on Schedule 9.9 hereto; provided, that, (i)
Borrower may only make regularly scheduled payments of principal and interest in
respect of such Indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving
53
rise to such Indebtedness as in effect on the date hereof, (ii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof except, that, Borrower may, after prior written notice
to Lender, 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 Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. 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
Revolving Loans are then outstanding and (ii) as to any of the foregoing, unless
waived in writing by Lender, Borrower shall take such actions as are deemed
necessary by Lender to perfect the security interest of Lender in such
investments;
(c) the existing equity investments of Borrower as of the date hereof in
its Subsidiaries, provided, that, 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 Borrower of the Obligations in favor
of Lender; (e) equity investment of Borrower in a wholly-owned Subsidiary
organized under the laws of Mexico (the "Mexican Subsidiary"), provided, that,
each of the following conditions is satisfied (i) Borrower shall execute and
deliver to Lender in form and substance satisfactory to Lender, a pledge and
security agreement granting to Lender a first pledge of and lien on at least
sixty-five (65%) of all of the issued and outstanding shares of Capital Stock of
such Subsidiary, (ii) Borrower shall deliver the original stock certificates
evidencing such shares of Capital Stock (or such other evidence as may be issued
in the case of a limited liability company) together with stock powers with
respect thereto duly executed in blank, and (iii) as of the date of such
investment and after giving effect thereto, no Event of Default, or act,
condition or event which
54
with notice or passage of time or both would constitute an Event of Default
shall exist or have occurred;
(f) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrower
as Lender may request;
(g) obligations or account debtors to Borrower arising from Accounts which
are past due evidenced by a promissory note made by such account debtor payable
to Borrower; provided, that, promptly upon the receipt of the original of any
such promissory note by Borrower, such promissory note shall be endorsed to the
order of Lender by Borrower and promptly delivered to Lender as so endorsed;
(h) the loans, advances and guarantees set forth on Schedule 9.10 hereto;
provided, that, as to such loans, advances and guarantees, (i) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other Indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
--------------------------
declare or pay any dividends on account of any shares of class of Capital Stock
of 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 Borrower may pay dividends to Borrower;
(b) 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 amount paid to shareholders does not exceed twenty-five (25%) percent
of its cumulative Net Income (calculated from the date of this Agreement to date
of determination), provided, that, (i) Lender shall have received ten (10) days
prior to any payment thereof, a certificate signed by Borrower's chief financial
officer (A) setting forth Borrower's cumulative Net Income with respect to which
the
55
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 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 Event of Default or any act, condition or event which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred;
(c) 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 Event of Default or any act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred 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 Borrower is a party or by which 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 during the term of this
Agreement shall not exceed $3,000,000.
9.12 Transactions with Affiliates. 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 Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to the 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 Borrower, except,
(i) reasonable compensation to officers, employees and directors for
services rendered to Borrower in the ordinary course of business;
(ii) dividends permitted under Section 9.11 (b) above;
(iii) payments by Borrower to Delta Apparel Honduras, S.A. for (A)
actual and necessary reasonable out-of-pocket administrative, operating and
capital expenditures of Delta Apparel Honduras, S.A. for the business of
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 (iii)(A) in respect of capital expenditures shall not exceed
$250,000 in the aggregate in any fiscal year of Borrower, and (B) actual
and necessary reasonable out-of-pocket legal, accounting, insurance
56
(including premiums for such insurance), marketing, payroll and similar
types of services paid for by Delta Apparel Honduras, S.A. in the ordinary
course of its business as conducted as of the date hereof or as the same
may be directly attributable to Borrower; provided, that, (1) such expenses
are in the ordinary course of and pursuant to the reasonable requirements
of Borrower's business as conducted on the date hereof, and (2) to the
extent such expenses are payable to Delta Apparel Honduras, S.A., such
expenses shall be payable upon terms no less favorable to Borrower, than
Borrower, could obtain in a comparable arm's length transaction with a
person who is not an Affiliate; and
(iv) payments by 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 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 (iv)(A) in respect
of capital expenditures shall not exceed $750,000 in the aggregate in any
fiscal year of 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 Borrower;
provided, that, (1) such expenses are in the ordinary course of and
pursuant to the reasonable requirements of 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 Borrower, than Borrower, could obtain in a comparable arm's
length transaction with a person who is not an Affiliate.
9.13 Additional Bank Accounts. 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 Lender and subject to such conditions thereto as Lender may establish and
(b) as to any accounts used by Borrower to make payments of payroll, taxes or
other obligations to third parties, after prior written notice to Lender.
9.14 Compliance with ERISA. Borrower shall and shall cause each of its
------------------------
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) not terminate any of such Plans so as
to incur any liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any of such Plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such Plan; or (g) allow or suffer to exist any occurrence of a
reportable event or any other event or condition
57
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. 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. Borrower shall not engage in any business other
-------------------
than the business of Borrower on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which Borrower is engaged
on the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
-----------------------------------------------------
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans
or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its
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 Borrower or any of its Subsidiaries,
(iv) customary restrictions on dispositions of real property interests found in
reciprocal easement agreements of Borrower or its Subsidiary, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of Borrower prior to
the date on which such Subsidiary was acquired by Borrower and outstanding on
such acquisition date, and (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 Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
9.18 Existing Real Property; After Acquired Real Property. (a) In the event
-----------------------------------------------------
that Lender determines that (i) the average daily Excess Availability of the
Borrower shall have been less than $3,000,000 during any consecutive thirty (30)
day period, or (ii) an Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default exists,
without limiting any other rights of Lender, or duties or obligations of
Borrower, upon Lender's request, Borrower shall promptly, execute and deliver to
Lender (A) a mortgage, deed of trust or deed to secure debt, as Lender may
determine, in form and substance substantially similar to the Mortgages in
respect of any or all of the Existing Real Property (as Lender shall determine
in its sole discretion, exercised in good faith), and as to any provisions
relating to specific state laws satisfactory to Lender and in form appropriate
for recording in the real estate records of the jurisdiction in which such
Existing Real Property is located granting to
58
Lender a first and only lien and mortgage on and security interest in such
Existing Real Property, fixtures or other property located thereon, and (B) such
other agreements, surveys, title insurance policies, documents and instruments
as Lender may require in connection therewith.
(b) If 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 an Event of Default, or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default exists, then regardless of the fair market value
of such assets), without limiting any other rights of Lender, or duties or
obligations of Borrower, upon Lender's request, Borrower shall execute and
deliver to Lender a mortgage, deed of trust or deed to secure debt, as Lender
may determine, in form and substance substantially similar to the Mortgages and
as to any provisions relating to specific state laws satisfactory to Lender 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 Lender a
first and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as Borrower would otherwise be permitted to
incur hereunder or under the Mortgages or as otherwise consented to in writing
by Lender) and such other agreements, documents and instruments as Lender may
require in connection therewith.
9.19 Costs and Expenses. Borrower shall pay to Lender 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, Lender'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
Lender's customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, 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 Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $650 per person per day for
Lender's examiners in the field and office; and (g) the fees and disbursements
of counsel (including legal assistants) to Lender in connection with any of the
foregoing.
59
9.20 Further Assurances. At the request of Lender at any time and from time
-------------------
to time, Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
9.21 Year 2000 Compliance. Borrower shall take all action which may be
----------------------
required so that its computer-based information systems, including, without
limitation, all of its proprietary computer hardware and software (and whether
supplied by others or with which Borrower's systems interface) are able to
operate effectively and correctly process data using dates on or after January
1, 2000. Compliance with the foregoing shall mean that the systems will operate
and correctly process data without human intervention such that (a) there is
correct century recognition, (b) calculations properly accommodate same century
and multi-century formulas and date values, and (c) all leap years shall be
calculated correctly. Upon Lender's request, Borrowers shall certify to Lender
in writing that its information systems have been modified, updated and
programmed as required by this Section. On and after January 1, 2000, the
computer-based information systems of Borrower shall be, and with ordinary
course upgrading and maintenance, will continue to be sufficient to permit
Borrower to conduct its business without any adverse effect as a result of the
year 2000.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 Events of Default. The occurrence or existence of any one or more of
------------------
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations within three (3)
Business Days after the same becomes due and payable or (ii) Borrower or any
Obligor fails to perform any of the covenants contained in Sections 9.3, 9.4,
9.6, 9.13, 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 Borrower or any Obligor of any such covenant or (iii) 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;
60
(b) any representation, warranty or statement of fact made by Borrower to
Lender 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 Lender;
(d) any judgment for the payment of money is rendered against Borrower or
any Obligor in excess of $500,000 in any one case or in excess of $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 Borrower or any Obligor or any of
their assets having a value in excess of $500,000 in the aggregate;
(e) any Obligor (being a natural person or a general partner of an Obligor
which is a partnership) dies or Borrower or any Obligor, which is a partnership,
limited liability company, limited liability partnership or a corporation,
dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against Borrower or any Obligor or all or any part of its properties and
such petition or application is not dismissed within forty-five (45) days after
the date of its filing or Borrower or any Obligor shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by Borrower or any Obligor or for all or any part of its property; or
(i) any default by Borrower or any Obligor under any agreement, document or
instrument relating to any Indebtedness for borrowed money owing to any person
other than 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 Lender, in any case in an amount in
excess of $500,000, which default continues for more
61
than the applicable cure period, if any, with respect thereto, or any material
default under any of the Distribution Agreements by Borrower, ▇▇▇▇▇▇▇▇, ▇▇
Apparel Company, Inc. or any other party thereto or under any other material
contract, lease, license or other obligation to any person other than Lender,
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 Borrower in an aggregate amount in excess of
$500,000;
(k) any Change of Control;
(l) the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower of which Borrower or Lender receives notice,
in either case, as to which there is a reasonable possibility of an adverse
determination, in the good faith determination of Lender, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against Borrower, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral with an aggregate value in excess of $500,000 or more, or (ii) any
other property of 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 Borrower or any Obligor after the date hereof; or
(n) there shall be an event of default under any of the other Financing
Agreements.
10.2 Remedies.
---------
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender'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 Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any 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, Lender may, in its discretion and without
limitation, (i) accelerate the payment of the principal balance of the
Obligations and all interest accrued thereon and
62
demand immediate payment thereof to Lender (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), (ii) 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,
(iii) require Borrower, at Borrower's expense, to assemble and make available
to Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) 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, (vi)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, public or private sales at any exchange, broker's board, at any office
of Lender or elsewhere) at such prices or terms as Lender may deem reasonable,
for cash, upon credit or for future delivery, with the Lender having the right
to purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby expressly waived and released by
Borrower and/or (vii) terminate this Agreement. If any of the Collateral is sold
or leased by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by Lender. If notice of disposition of Collateral is required by law,
five (5) days prior notice by Lender to Borrower designating the time and place
of any public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) For the purpose of enabling Lender to exercise the rights and remedies
hereunder, Borrower hereby grants to Lender, to the extent assignable, an
irrevocable, non- exclusive license (exercisable without payment of royalty or
other compensation to Borrower) to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by Borrower, wherever
the same maybe located, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.
(d) Lender may apply the cash proceeds of Collateral actually received by
Lender 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 Lender
may elect, whether or not then due. Borrower shall remain liable to Lender 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
attorneys' fees and legal expenses.
63
(e) 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, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
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) Borrower and Lender irrevocably consent and submit to the non-exclusive
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 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 Lender shall have the
right to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).
(c) Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth 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 Lender's
option, by service upon Borrower in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER 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
64
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR 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) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, 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. Borrower hereby expressly waives demand,
--------------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances. Without limiting the generality of the foregoing, Borrower waives
(i) notice prior to Lender'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 Lender to exercise any of Lender'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. Neither this Agreement nor any provision
------------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
65
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
-------------------------
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
----------------
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or 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 fees and expenses of
counsel, except for such losses, claims, damages, liabilities, costs or expenses
resulting from the gross negligence or wilful misconduct of Lender, its
directors, agents, employees or counsel as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in this Section
may be unenforceable because it violates any law or public policy, Borrower
shall pay the maximum portion which it is permitted to pay under applicable law
to Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
12.1 Term.
-----
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrower may terminate
this Agreement and the other Financing Agreements 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, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which 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 Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the
66
next Business Day, if the amounts so paid by Borrower to the bank account
designated by Lender are received in such bank account later than 12:00 noon,
Atlanta, Georgia time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender 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 Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount equal
to one (1%) percent of the Maximum Credit. Such early termination fee shall be
presumed to be the amount of damages sustained by Lender as a result of such
early termination and Borrower agrees that it is reasonable under the
circumstances currently existing. In addition, Lender 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 Lender does not exercise its right
to terminate this Agreement, but elects, at its option, to provide financing to
Borrower or permit the use of cash collateral under the United States Bankruptcy
Code. The early termination fee provided for in this Section 12.1 shall be
deemed included in the Obligations.
(d) Notwithstanding anything to the contrary contained in Section 12.1(c)
above, in the event of the termination of this Agreement at the request of
Borrower prior to the end of the term of this Agreement and the full and final
repayment of all Obligations and the receipt by Lender of cash collateral all as
provided in Section 12.1(a) above, Borrower shall not be required to pay to
Lender an early termination fee if such payments are made to Lender with the
initial proceeds of a financing transaction provided or underwritten by First
Union National Bank to Borrower.
12.2 Interpretative Provisions.
--------------------------
(a) All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the singular and to
the singular shall also mean the plural unless the context otherwise requires.
(c) All references to Borrower and Lender pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns.
67
(d) The words "hereof", "herein", "hereunder", "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean "including,
without limitation".
(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 Lender, if such Event of Default is capable of being
cured as determined by Lender.
(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 Borrower most recently received by
Lender 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
(ii) references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or regulation.
(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.
(l) This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
68
12.3 Notices. All notices, requests and demands hereunder shall be in
--------
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, 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.
12.4 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.
12.5 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 Lender, Borrower and their respective
successors and assigns, except that Borrower may not 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 Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.6 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.
69
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER
------
CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ ▇▇▇▇▇▇ Cott
-------------------------
Title: Executive Vice President
Address:
--------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
BORROWER
--------
DELTA APPAREL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Title: Vice President & CFO
Chief Executive Office:
-----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
70
EXHIBIT B
---------
Applicable Margins for Interest Rate Calculations
-------------------------------------------------
The applicable margins will be determined as set forth below:
When Excess Availability or Applicable Applicable
Fixed Charge Coverage Ratio Is: Prime Rate Margin Eurodollar Margin
$20,000,000 or more
or equal to or greater than 2.0 to 1.0 - 2.00%
$10,000,000 to $19,999,999
or equal to or greater than 1.5 to 1 but
less than 2.0 to 1 .25% 2.25%
Less than $10,000,000
or less than 1.5 to 1 .50% 2.50%
Borrower need only meet either the Excess Availability test or the Fixed Charge
Coverage Ratio test to qualify for the corresponding applicable margin.