THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT by and among DELTA APPAREL, INC. M. J. SOFFE CO. and JUNKFOOD CLOTHING COMPANY, as Borrowers WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent and THE FINANCIAL INSTITUTIONS NAMED HEREIN, as Lenders...
Exhibit 10.1
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
DELTA APPAREL, INC.
X. X. XXXXX CO.
X. X. XXXXX CO.
and
JUNKFOOD CLOTHING COMPANY,
as Borrowers
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
as Lenders
Dated: September ___, 2007
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated September ___, 2007 (this
“Agreement”), is entered into by and among DELTA APPAREL, INC., a Georgia corporation (“Delta”), X.
X. XXXXX CO. a North Carolina corporation (“Soffe”), and JUNKFOOD CLOTHING COMPANY, a Georgia
corporation (“JCC”; Delta, Soffe, and JCC being hereinafter collectively called “Borrowers” and
individually a “Borrower”); the parties hereto from time to time as Lenders, whether by execution
of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively,
“Lenders”); and WACHOVIA BANK, NATIONAL ASSOCIATION, a national bank (“Wachovia”), in its capacity
as agent for Lenders (together with its successors in such capacity, “Agent”).
W I T N
E S S E T H:
WHEREAS, Borrowers, certain financial institutions (collectively, “Lenders”) and Agent, in its
capacity as agent for the Lenders entered into that certain Second Amended and Restated Loan and
Security Agreement dated August 22, 2005 (as amended, modified or supplemented from time to time
prior to the date hereof, the “Existing Loan Agreement”); and
WHEREAS, each Borrower has requested that Lenders amend and restate the Existing Loan
Agreement and make available an amended and restated Credit Facility to Borrowers, which shall be
used by Borrowers to finance their mutual and collective enterprise of marketing, designing,
manufacturing and distributing branded and private-label apparel. In order to utilize the
financial powers of each Borrower in the most efficient and economical manner, and in order to
facilitate the financing of each Borrower’s needs, Lenders will, at the request of any Borrower,
make loans to all Borrowers under the amended and restated Credit Facility on a combined basis and
in accordance with the provisions hereinafter set forth. Borrowers’ business is a mutual and
collective enterprise and Borrowers believe that the consolidation of all Loans under this
Agreement will enhance the aggregate borrowing powers of each Borrower and ease the administration
of their loan relationship with Lenders, all to the mutual advantage of Borrowers. Lenders’
willingness to extend credit to Borrowers and to administer each Borrower’s collateral security
therefor, on a combined basis as more fully set forth in this Agreement, is done solely as an
accommodation to Borrowers and at Borrowers’ request in furtherance of Borrowers’ mutual and
collective enterprise; and
WHEREAS, each Borrower has agreed to be jointly and severally liable for loans and all
outstanding other obligations under this Agreement and to guarantee the obligations of each of the
other Borrowers under this Agreement and each of the other Financing Agreements; and
WHEREAS, Agent and Lenders are willing to amend and restate the Existing Loan Agreement, as
hereinafter set forth, to, among other things, increase the maximum amount of credit that may be
obtained thereunder by Borrowers; and
WHEREAS, each of Borrowers, Agent and Lenders acknowledges and agrees that (i) the Obligations
represent, among other things, the amendment, restatement, renewal, extension, consolidation and
modification of the Existing Obligations arising in connection with the Existing Loan Agreement and
the other Existing Financing Agreements executed in connection therewith; (ii) it intends that the
collateral pledged under the Existing Loan Agreement and the other Existing Financing Agreements
executed in connection therewith shall secure, without interruption or
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impairment of any kind, all Existing Obligations under the Existing Loan Agreement and the
other Existing Financing Agreements executed in connection therewith, as amended, restated,
renewed, extended, consolidated and modified hereunder, together with all other Obligations
hereunder; and (iii) all security interests and liens evidenced by the Existing Loan Agreement and
the other Existing Financing Agreements executed in connection therewith are hereby ratified,
confirmed and continued; and
WHEREAS, Borrowers, Agent and Lender intend that (i) the provisions of the Existing Loan
Agreement and the other Existing Financing Agreements executed in connection therewith, to the
extent restated, renewed, extended, consolidated, amended and modified hereby and by the other
Financing Agreements dated as of the date hereof, be hereby superseded and replaced by the
provisions hereof and of the other Financing Agreements; and (ii) by entering into and performing
their respective obligations hereunder, this transaction shall not constitute a novation; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and
provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment
(as defined below) on the terms and conditions set forth herein and Agent is willing to act as
agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the respective meanings
given to them below:
“Accounts” shall mean, as to each Borrower, all present and future rights of such Borrower to
payment of a monetary obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or
charge card or information contained on or for use with the card.
“Acquisition Agreement” shall mean, with respect to each Acquisition Transaction, each stock
purchase agreement or asset purchase agreement, as the context may require, to be executed and
delivered by and among a Borrower or an Acquisition Subsidiary, as purchaser, and each owner, as
seller, of the Capital Stock or assets to be sold to such Borrower or Acquisition Subsidiary,
together with any and all permitted amendments, modifications and supplements thereto, restatements
thereof and substitutes therefor.
“Acquisition Consideration” shall mean the consideration given and to be given by a Borrower
or any Acquisition Subsidiary for or in an Acquisition Transaction, including the fair market value
of any cash, property, Capital Stock or services given and the amount of any Funded Debt assumed or
incurred by such Borrower or Acquisition Subsidiary in connection with such Acquisition
Transaction.
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“Acquisition Documents” shall mean, individually and collectively, as the context may require,
each Acquisition Agreement and any and all other agreements, documents or instruments at any time
executed and delivered by a Borrower or an Acquisition Subsidiary, an Acquisition Target or any
other Person in connection with an Acquisition Transaction.
“Acquisition Subsidiary” shall mean a Subsidiary formed by a Borrower after the Closing Date
to purchase all of the issued and outstanding Capital Stock, or all or substantially all of the
assets, of an Acquisition Target or a division or separate line of business of an Acquisition
Target, subject to the satisfaction of each of the following conditions as determined by Agent:
(i) no Default or Event of Default exists at the time or would result therefrom; (ii) such Borrower
and such Subsidiary deliver to Agent any and all documents, agreements, financial statements,
projections and instruments reasonably requested by Agent, in form and substance reasonably
satisfactory to Agent in all respects, in connection with such formation, including (a) such
documents and instruments as may be necessary to grant or confirm to Agent a first priority
perfected lien on and security interest in all of the assets of the Subsidiary, including the
Capital Stock in such Subsidiary owned by such Borrower (and subject to any permitted liens), and
(b) a joinder agreement executed by such Subsidiary, together with such other collateral documents
and opinions of counsel as may be requested by Agent, each in form and substance satisfactory to
Agent; and (iii) such Borrower shall give Agent at least 7 days prior written notice before forming
such Subsidiary and provide copies of all organizational documents of such Subsidiary to Agent.
“Acquisition Target” shall mean a Person whose Capital Stock or assets are to be purchased
pursuant to the terms of an Acquisition Agreement.
“Acquisition Transaction” shall mean the transaction pursuant to an Acquisition Agreement for
the purchase of all of the issued and outstanding Capital Stock of, or all or substantially all of
the assets of, an Acquisition Target, or for the purchase of all or substantially all of the assets
of a division or separate line of business of an Acquisition Target.
“Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar
Rate Loan, the rate per annum (rounded upwards, if necessary, to the next onesixteenth (1/16) of
one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve
Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United
States or foreign banking authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a nonUnited States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such
deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
“Administrative Borrower” shall mean Delta, in its capacity as Administrative Borrower on
behalf of itself and the other Borrowers pursuant to Section 6.11 hereof and its successors and
assigns in such capacity.
“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
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(5%) percent or more of the Voting Stock or other equity interest is beneficially owned or
held by such specified Person or a Subsidiary of such specified Person. For purposes of this
definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled
by” and “under common control with”) when used with respect to any specified Person shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock, by agreement or
otherwise.
“Agent” shall mean Wachovia Bank, National Association, in its capacity as agent on behalf of
Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.
“Agent Payment Account” shall mean the bank account of Agent as Agent may from time to time
designate for wiring or otherwise transferring, in immediately available funds, the items received
for deposit in, and the funds from time to time on deposit in, the Blocked Accounts.
“Agreement Date” shall mean as of September ___, 2007.
“Alternate Excess Availability” shall mean the amount, as determined by Agent, calculated at
any time, equal to: (a) the Borrowing Base minus (b) the amount of all then outstanding and
unpaid Obligations.
“Amount Due From Factor” shall mean (a)(i) at the date in question, if a current Factor Status
Statement has been delivered by Factor to Agent on such date, an amount equal to the aggregate
credit balances due from Factor to JCC under the Factoring Agreement on such date as reflected on
the Factor Status Statement from Factor, or (ii) if a current Factor Status Statement has not been
delivered to Agent on such date, an amount equal to the aggregate credit balances due to JCC under
the Factoring Agreement on such date as reflected on the Due From Factor Report delivered to Agent
by Borrowers on such date or (iii) in the absence of delivery of the Due From Factor Report, an
amount determined by Agent in its sole discretion, minus (b) at the date in question, the
Factor Reserve.
“Anti-Terrorism Law” shall mean the USA PATRIOT Act or any other statute, regulation,
executive order, or other law pertaining to the prevention of future acts of terrorism, in each
case as such law may be amended from time to time.
“Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form
of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in
connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of
Section 13.7 hereof.
“Average Daily Balance” shall have the meaning set forth in Section 3.2(b) hereof.
“Bank Products” shall mean any one or more of the following types of products, services or
facilities extended to any Borrower by Wachovia or any Affiliate of Wachovia: (i) commercial credit
cards; (ii) merchant card services; (iii) products or services under Cash Management Agreements;
(iv) Hedging Agreements; (v) interstate depository network services; and (vi) such other banking
products or services provided by Wachovia or any Affiliate of Wachovia as may be requested by any
Borrower, other than Letters of Credit.
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“Banking Relationship Debt” shall mean Indebtedness or other obligations of a Borrower to
Wachovia (or any Affiliate of Wachovia) arising out of or relating to Bank Products.
“Blocked Accounts” shall have the meaning set forth in Section 6.3(a) hereof
“Blocked Person” shall have the meaning given to such term in Section 8.8.
“Borrowing Base” shall mean, at any time, an amount equal:
(a) the sum of:
(i) eighty-five percent (85%) of the Net Amount of the Eligible
Accounts, plus
(ii) eighty-five percent (85%) of the Amount Due From Factor on
such date that is attributable to Factored Accounts, plus
(iii) the lesser of:
| (1) | the Inventory Loan Limit, or | ||
| (2) | the lesser of (A) sixty percent (60%) of the Value of Eligible Inventory consisting of finished goods, Borrowers’ raw materials consisting of raw cotton and yarn for such finished goods and finished yarn categorized as work-in-process; or (B) eighty-five percent (85%) of the Net Orderly Liquidation Value of such Eligible Inventory, plus |
(iv) the lesser of: (1) $9,537,500; or (2) 70% of the appraised
fair market value (based on an appraisal that is in form, contains
assumptions and utilizes methods acceptable to Agent and that is performed
by an appraiser acceptable to Agent) of Eligible Real Property of Borrowers
located in the State of North Carolina, which amount, in the case of either
(1) or (2), as applicable, shall be reduced on the first day of each month,
commencing October 1, 2007, by an amount equal to $87,500; plus
(v) the lesser of (1) $5,500,000; or (2) 85% multiplied by the Net
Orderly Liquidation Value of the Eligible Equipment of Borrowers, which
amount, in the case of either (1) or (2), as applicable, shall be reduced on
the first day of each month, commencing October 1, 2007, by an amount equal
to $91,667; plus
(vi) the lesser of: (1) $1,445,826; or (2) 70% of the appraised fair
market value (based on an appraisal that is in form, contains assumptions
and utilizes methods acceptable to Agent and that is performed by an
appraiser acceptable to Agent) of Eligible Real Property of Borrowers
located in the State of Tennessee, which amount, in the case of either (1)
or (2), as applicable, shall be reduced on the first day of each month,
commencing October 1, 2007, by an amount equal to $15,278; plus
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(g) the lesser of: (i) $7,500,000; or (ii) 45% multiplied by the Net
Orderly Liquidation Value of the Eligible Trademarks; minus
(b) the Reserves.
“Business Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State of New York or the
State of Georgia or the State of North Carolina, and a day on which the Reference Bank and Agent
are open for the transaction of business, except that if a determination of a Business Day shall
relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
“Capital Expenditures” shall mean, with respect to any Person, all expenditures made and
liabilities incurred for the acquisition of assets which are not, in accordance with GAAP, treated
as expense items for such Person in the year made or incurred or as a prepaid expense applicable to
a future year or years.
“Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee
which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of
such Person.
“Capital Stock” shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person’s capital stock, or
partnership, limited liability company or other equity interests at any time outstanding, and any
and all rights, warrants or options exchangeable for or convertible into such capital stock or
other interests (but excluding any debt security that is exchangeable for or convertible into such
capital stock).
“Cash Dominion Trigger Date” shall mean (i) the date on which an Event of Default exists, or
(ii) the date on which Excess Availability is less than $5,000,000.
“Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity
date of one hundred eighty (180) days or less issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof; provided, that, the full
faith and credit of the United States of America is pledged in support thereof; (b) certificates of
deposit or bankers’ acceptances with a maturity of one hundred eighty (180) days or less of any
financial institution that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including
variable rate demand notes) with a maturity of one hundred eighty (180) days or less issued by a
corporation (except an Affiliate of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings
Service, a division of The XxXxxx-Xxxx Companies, Inc. or at least P-1 by Xxxxx’x Investors
Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into with any financial
institution having combined capital and surplus and undivided profits of not less than
$250,000,000; ‘(e) repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of America or issued
by any governmental agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one
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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.
“Cash Management Agreements” shall mean any agreement entered into from time to time between
any Borrower or any of its Subsidiaries, on the one hand, and Wachovia or any of its Affiliates, on
the other, in connection with cash management services for operating, collections, payroll and
trust accounts of such Borrower or its Subsidiaries provided by such banking or financial
institution, including automatic clearinghouse services, controlled disbursement services,
electronic funds transfer services, information reporting services, lockbox services, stop payment
services and wire transfer services.
“Change of Control” shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or Guarantor to any Person
or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in
Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or Guarantor relating to the dissolution or
liquidation of Borrower or any Guarantor, other than as permitted in Section 9.7 hereof; (c) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act),
except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any Borrower or Guarantor or
the Board of Directors of any Borrower or Guarantor; or (d) during any period of two (2)
consecutive years, individuals who at the beginning of such period constituted the Board of
Directors of any Borrower or Guarantor (together with any new directors who have been appointed by
any Permitted Holder, or whose nomination for election by the stockholders of such Borrower or
Guarantor, as the case may be, was approved by a vote of at least sixty-six and two-thirds (66
2/3%) percent of the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of any Borrower then still in office.
“CIT” shall mean The CIT Group/Commercial Services, Inc., a New York corporation.
“Closing Date” shall mean the date on which all the conditions precedent in Section 4 hereof
are satisfied or waived and the initial Loans are made under this Agreement.
“Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time
to time hereafter be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
“Collateral” shall have the meaning set forth in Section 5.1 hereof.
“Collateral Access Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, from any lessor of premises to any Borrower, or any other Person to whom any
Collateral (including Inventory, Equipment, bills of lading or other documents of title) is
consigned or who has custody, control or possession of any such Collateral or is otherwise the
owner or operator of any premises on which any of such Collateral is located, pursuant to which
such lessor, consignee or other Person, inter alia, acknowledges the first priority security
interest of Agent in such
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Collateral, agrees to waive any and all claims such lessor, consignee or other Person may, at
any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to
permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other
Person so as to exercise Agent’s rights and remedies and otherwise deal with such Collateral and in
the case of any consignee or other Person who at any time has custody, control or possession of any
Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit
of Agent and Lenders and agrees to follow all instructions of Agent with respect thereto.
“Commitment” shall mean, at any time, as to each Lender, the principal amount set forth beside
such Lender’s name on Schedule 1.21 hereto or in the Assignment and Acceptance pursuant to
which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7
hereof, as the same may be adjusted from time to time in accordance with the terms hereof;
sometimes being collectively referred to herein as “Commitments.”
“Credit Facility” shall mean the Loans and Letters of Credit provided to or for the benefit of
Borrowers pursuant to Sections 2.1 and 2.2 hereof.
“Current Hedging Exposure” means, as of any date of determination, one hundred percent (100%)
of the aggregate xxxx-to-market exposure then owing by Borrowers and Obligors under Hedging
Agreements, determined by the Lender or Affilate of such Lender that is counterparty to each
Hedging Agreement, based on termination value after netting, using a mutually satisfactory method,
and furnished to the Agent on a monthly basis (or more frequently, in the reasonable discretion of
the Agent).
“Customs Broker” shall mean each Person listed on Schedule 1.24 hereto or such other
Person as may be selected by any Borrower after the date hereof and after written notice by such
Borrower to Agent who is reasonably acceptable to Agent, provided, that, as to each
such Person (including those listed on Schedule 1.24), such Borrower has used reasonable
efforts to obtain a Collateral Access Agreement duly authorized, executed and delivered by such
Person.
“Default” shall mean an act, condition or event which with notice or passage of time or both
would constitute an Event of Default.
“Default Rate” shall mean the interest rate referred to in clause (c) of the definition of
“Interest Rate”.
“Defaulting Lender” shall have the meaning set forth in Section 6.9(d) hereof.
“Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, by and among Agent, any Borrower with a deposit account at any bank and the
bank at which such deposit account is at any time maintained which provides that such bank will
comply with instructions originated by Agent directing disposition of the funds in the deposit
account without further consent by such Borrower and such other terms and conditions as Agent may
require, including as to any such agreement with respect to any Blocked Account, providing that all
items received or deposited in the Blocked Accounts are the property of Agent, that the bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit
therein, or the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the Agent Payment Account
all funds received or deposited into the Blocked Accounts.
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“Dilution Reserve” shall mean a reserve established by Agent in such amount as Agent may
determine at any time that (a) the percentage equal to; (i) bad debt write-downs or write-offs,
discounts, returns, promotions, credit, credit memos and other dilutive items with respect to
Accounts, divided by (ii) gross sales, exceeds (b) five percent (5%) on a consolidated
basis.
“Due From Factor Report” shall mean a report based on information provided to JCC by Factor
and prepared by JCC concurrently with each request for a Loan under this Agreement (but no less
frequently than monthly) that reflects the status of Factored Accounts under the Factoring
Agreement on such date.
“EBITDA” shall mean, as to Borrowers, with respect to any period, an amount equal to: (a) the
Net Income of Borrowers and their Subsidiaries for such period on a consolidated basis determined
in accordance with GAAP, plus (b) to the extent deducted in the computation of Net Income, (i)
depreciation, amortization and other non-cash charges (including imputed interest and deferred
compensation) for such period, all in accordance with GAAP, plus (ii) the Interest Expense for such
period, plus (iii) charges for Federal, Provincial, State, district, municipal, local and foreign
income taxes.
“Eligible Accounts” shall mean Accounts created by a Borrower which are and continue to be
acceptable to Agent based on the criteria set forth below. In general, Accounts shall be Eligible
Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery of goods by such
Borrower or rendition of services by such Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions contained in any documents
related thereto;
(b) such Accounts are not unpaid more than the earlier of (i) sixty (60) days after the
original due date or for them (ii) one hundred twenty (120) days after the date of the original
invoice for them (or one hundred fifty (150) days after the date of the original invoice for them
for certain account debtors of such Borrower which are pre-approved by Agent, on terms and
conditions acceptable to Agent);
(c) such Accounts comply with the terms and conditions contained in Section 7.2(c) of this
Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return,
sale on approval, or other terms under which payment by the account debtor may be conditional or
contingent;
(e) the chief executive office of the account debtor with respect to such Accounts is located
in the United States of America or Canada (provided, that, at any time promptly upon Agent’s
request, such Borrower shall execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Agent to perfect the security interests
of Agent in those Accounts of an account debtor with its chief executive office or principal place
of business in Canada in accordance with the applicable laws of the Province of Canada in which
such chief executive office or principal place of business is located and take or cause to be taken
such other and further actions as Agent may request to enable Agent as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at
Agent’s
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option, if the chief executive office and principal place of business of the account debtor
with respect to such Accounts is located other than in the United States of America or Canada, then
if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Agent and payable only in the United States of
America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory
to Agent and if required by Agent, the original of such letter of credit has been delivered to
Agent or Agent’s agent and such Borrower has complied with the terms of Section 5.2(h) hereof with
respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as
transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit
insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent,
or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending
formula with respect thereto as Agent may determine);
(f) such Accounts do not consist of progress xxxxxxxx (such that the obligation of the account
debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion
of any further performance under the agreement giving rise thereto), xxxx and hold invoices or
retainage invoices, except as to xxxx and hold invoices, if (i) such xxxx and hold invoices
constitute Quiksilver Xxxx and Hold Accounts, or (ii) Agent shall have received an agreement in
writing from the account debtor, in form and substance satisfactory to Agent, confirming the
unconditional obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense
or dispute and does not have, and does not engage in transactions which may give rise to any right
of setoff or recoupment against such Accounts (but the portion of the Accounts of such account
debtor in excess of the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the validity, enforceability
or collectability of such Accounts or reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected security interest of
Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof,
subject to any liens except those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the account debtor with respect
to such Accounts is an officer, employee, agent or other Affiliate of any Borrower;
(k) the account debtors with respect to such Accounts are not any foreign government, the
United States of America, any State, political subdivision, department, agency or instrumentality
thereof, unless, (i) the account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, and (ii) the Federal Assignment of
Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied
with in a manner satisfactory to Agent, or Agent, in its discretion, has expressly waived such
compliance with respect to Accounts, the aggregate amount of which do not exceed $7,500,000 at any
time;
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(l) there are no proceedings or actions which are threatened or pending against the account
debtors with respect to such Accounts which might result in any material adverse change in any such
account debtor’s financial condition;
(m) such Accounts of a single account debtor or its affiliates do not constitute more than
fifteen (15%) percent of all otherwise Eligible Accounts (but the portion of the Accounts not in
excess of such percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts unpaid more than the
earlier of (i) sixty (60) days after the original due date or for them (ii) one hundred twenty
(120) days after the original invoice date for them (or one hundred fifty (150) days after the date
of the original invoice for them for certain account debtors of such Borrower which are
pre-approved by Agent, on terms and conditions acceptable to Agent) which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;
(o) the account debtor is not located in a state requiring the filing of a Notice of Business
Activities Report or similar report in order to permit such Borrower to seek judicial enforcement
in such State of payment of such Account, unless such Borrower has qualified to do business in such
state or has filed a Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is capable of being
remedied without any material delay or material cost;
(p) such Accounts are not Factored Accounts; and
(q) such Accounts are owed by account debtors deemed creditworthy at all times by such
Borrower consistent with its current practice and who are reasonably acceptable to Agent.
General criteria for Eligible Accounts may be established and revised from time to time by Agent in
good faith based on an event, condition or other circumstance arising after the date hereof, or
existing on the date hereof to the extent Agent has no written notice thereof from a Borrower,
which adversely affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Agent. Any Accounts which are not Eligible Accounts shall nevertheless
be part of the Collateral.
“Eligible Equipment” shall mean Equipment owned or operated in the ordinary course of the
business of a Borrower, in each case which is acceptable to Agent based on the criteria set forth
below. In general, Eligible Equipment shall not include: (a) components which are not part of
operating Equipment; (b) Equipment which is uninsured, damaged, obsolete, in disrepair or under
repair; (c) spare parts for Equipment; (d) Equipment at premises other than those owned and
controlled by such Borrower, except any Equipment which would otherwise be deemed Eligible
Equipment that is not located at premises owned and operated by such Borrower may nevertheless be
considered Eligible Equipment: (i) as to locations which are leased by such Borrower if Agent shall
have received a Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor or if Agent shall not have received a
Collateral Access Agreement (in a form reasonably acceptable to Agent), Agent may, at its option,
nevertheless consider Equipment at such location to be Eligible Equipment to the extent Agent shall
have established such Reserves in respect of amounts at any time payable by such Borrower to the
owner and lessor thereof as Agent shall determine, and (ii) as to locations owned and operated by a
third Person, (A) if Agent shall have received a Collateral Access Agreement from such owner and
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operator with respect to such location, duly authorized, executed and delivered by such owner
and operator or if Agent shall not have received a Collateral Access Agreement (in a form
reasonably acceptable to Agent), Agent may, at its option, nevertheless consider Equipment at such
location to be Eligible Equipment to the extent Agent shall have established such Reserves in
respect of amounts at any time payable by such Borrower to the owner and operator thereof as Agent
shall determine, and (B) in addition, as to locations owned and operated by a third Person, Agent
shall have received, if required by Agent: (1) UCC-1 financing statements between the owner and
operator, as consignee or bailee, and such Borrower, as consignor or xxxxxx, in form and substance
satisfactory to Agent, which are duly assigned to Agent and (2) a written notice to any lender to
the owner and operator of the first priority security interest in such Equipment of Agent; (e)
Equipment subject to a security interest or lien in favor of any Person other than Agent except
those permitted in this Agreement (but without limiting the right of Agent to establish any
Reserves with respect to amounts secured by such security interest or lien in favor of any Person
even if permitted herein); (f) Equipment which is not subject to the first priority, valid and
perfected security interest of Agent; (g) Equipment which has become part of, or affixed to, any
Real Property; or (h) Equipment located outside the United States of America. The criteria for
Eligible Equipment set forth above may only be changed and any new criteria for Eligible Equipment
may only be established by Agent in good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior
to the date hereof, in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Equipment in the good faith determination of Agent.
Any Equipment which is not Eligible Equipment shall nevertheless be part of the Collateral.
“Eligible Inventory” shall mean Inventory consisting of finished goods held for resale in the
ordinary course of the business of a Borrower, raw materials for such finished goods and finished
yarn categorized as work-in-process, which are acceptable to Agent based on the criteria set forth
below. In general, Eligible Inventory shall not include (a) work-in-process (other than finished
yarn); (b) raw materials other than yarn and raw cotton; (c) spare parts for Equipment; (d)
packaging and shipping materials; (e) supplies used or consumed in such Borrower’s business; (f)
Inventory at premises other than those owned and controlled by such Borrower, except any Inventory
which would otherwise be deemed Eligible Inventory at locations in the United States of America
which are not owned and operated by such Borrower may nevertheless be considered Eligible
Inventory: (i) as to locations which are leased by such Borrower if Agent shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly authorized, executed
and delivered by such owner and lessor, except that notwithstanding that Agent shall not have
received such an agreement for a particular leased location, Agent may consider Inventory at such
leased location which would otherwise be Eligible Inventory to be Eligible Inventory and in such
event, Agent may at any time establish such Reserves as Agent may determine in respect of amounts
at any time payable by such Borrower to the owner or lessor of such location, without limiting any
other rights and remedies of Agent under this Agreement or under the other Financing Agreements
with respect to the establishment of Reserves or otherwise and (ii) as to premises of third parties
(including consignees and processors), Agent shall have received a Collateral Access Agreement duly
authorized, executed and delivered by the owner and operator of such premises (except that
notwithstanding that Agent shall not have received such an agreement as to a particular third party
location, Agent may consider Inventory at such location which would otherwise be Eligible Inventory
to be Eligible Inventory and in such event, Agent may at any time establish such Reserves as Agent
may determine in respect of amounts at any time payable by such Borrower to such third party,
without limiting any other rights or remedies of Agent under this Agreement or under the other
Financing Agreements with respect to the establishment of Reserves or otherwise), and in addition,
if
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required by Agent, as to premises of third parties where assets of such Borrower are located:
(A) the owner and operator executes appropriate UCC-1 financing statements in favor of such
Borrower, which financing statements are duly assigned to Agent and (B) any secured Agent to the
owner and operator is properly notified of the first priority lien on such Inventory of Agent; (g)
Inventory located outside the United States of America shall only be Eligible Inventory if it is
Eligible In-Transit Inventory; (h) Inventory subject to a security interest or lien in favor of any
Person other than Agent, except those permitted in this Agreement; (i) xxxx and hold goods; (j)
Inventory which is not subject to the first priority, valid and perfected security interest of
Agent, (k) damaged and/or defective Inventory which is unsaleable or which such Borrower has not
marked down to its realizable value; (l) Inventory purchased or sold on consignment; (m) samples;
(n) Inventory to be returned to vendors; (o) Inventory subject to any License Agreement or other
agreement that limits, conditions or restricts such Borrower’s or Agent’s right to sell or
otherwise dispose of such Inventory unless the Licensor has entered into a Licensor/Lender
Agreement with Agent, except that notwithstanding that Agent shall not have received such a
Licensor/Lender Agreement for a particular License Agreement, Agent may consider Inventory subject
to such License Agreement which would otherwise be Eligible Inventory to be Eligible Inventory and
in such event, Agent may at any time establish such Reserves as Agent may determine in respect of
amounts at any time payable by such Borrower to the Licensor of such Inventory, without limiting
any other rights and remedies of Agent under this Agreement or under the other Financing Agreements
with respect to the establishment of Reserves or otherwise; or (p) Inventory that is the subject of
an Intellectual Property Claim. General criteria for Eligible Inventory may be established and
revised from time to time by Agent in good faith based on an event, condition or other circumstance
arising after the date hereof, or existing on the date hereof to the extent Agent has no written
notice thereof from a Borrower, which adversely affects or could reasonably be expected to
adversely affect the Inventory in the good faith determination of Agent. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
“Eligible In-Transit Inventory” shall mean Inventory of a Borrower that would constitute
Eligible Inventory but for the fact that it is in transit to the premises of a Borrower or a
Customs Broker located within the United States, and which is acceptable to Agent based on the
criteria set forth below. In general, inventory in transit shall only be deemed Eligible
In-Transit Inventory if: (a) it is in the United States in transit to the premises of a Borrower in
the United States and the requirements of clauses (i) through (v) below are satisfied in form and
substance satisfactory to Agent, or (b) it is outside of the United States in transit to either the
premises of a Customs Broker or the premises of a Borrower in the United States and the
requirements of clauses (i) through (vii) below are satisfied in form and substance satisfactory to
Agent: (i) as to premises which are not owned and controlled by a Borrower (and in the case of
inventory in transit from a location outside of the United States, the premises of a Customs
Broker), either (A) Agent has received a Collateral Access Agreement duly authorized, executed and
delivered by the owner, lessor and operator of such other premises (or by the Customs Broker) to
which the inventory is in transit, as the case may be, or (B), in Agent’s discretion, Agent
shall have established such Reserves as Agent may determine in respect of amounts at any time
payable by such Borrower to such owner, lessor and operator of such other premises (or to
the Customs Broker), (ii) title and risk of loss to the inventory shall have passed to such
Borrower, (iii) the seller of such inventory (A) has no right, to reclaim, divert the shipment of,
reroute, repossess, stop delivery or otherwise assert any lien rights or title retention with
respect to such inventory and (B) has entered into an agreement with Agent waiving its lien rights
and any retention of title in respect of such inventory and such agreement is in full force and
effect, (iv) such inventory is insured against types of loss, damage, hazards, and risks, and in
amounts, satisfactory to Agent, (v) such inventory is not subject to any letter of credit
(including any Letter of Credit issued
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hereunder); (vi) such inventory is subject to a tangible, negotiable xxxx of lading that: (A)
was issued by the carrier or, if a freight forwarder is engaged by a Borrower, by the freight
forwarder, (B) is endorsed to the order of Agent, (C) bears a notation on its face that such xxxx
of lading is subject to the security interest of Agent, and (D) is in the United States in the
possession of Agent or the Customs Broker dealing with such inventory and from whom Agent has
received a Collateral Access Agreement, 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; and (vii) Agent has received (A) a copy of the certificate of marine cargo
insurance in connection therewith in which Agent has been named as an additional insured and loss
payee in a manner acceptable to Agent, (B) a certificate duly executed by an officer of such
Borrower that such Inventory satisfies all criteria to be otherwise deemed Eligible Inventory
hereunder, and (C) if requested by Agent, a copy of the invoice, packing slip and manifest with
respect thereto.
“Eligible Real Property” shall mean Real Property of Borrowers owned in fee subject to a
Mortgage in favor of Agent; provided, however, that Eligible Real Property shall
not include (a) Real Property subject to pending or threatened (in writing to a Borrower)
condemnation by any Governmental Authority or any pending or threatened (in writing to a Borrower)
enforcement action by any Governmental Authority with respect to the environmental condition of
such Real Property; (b) Real Property subject to a security interest or lien in favor of any Person
other than Agent except those permitted in this Agreement (but without limiting the right of Agent
to establish any Reserves with respect to amounts secured by such security interest or lien in
favor of any Person even if permitted herein); (c) Real Property which is not subject to the first
priority, valid and perfected security interest or lien of Agent; (d) Real Property with respect to
which improvements thereon are uninsured; (e) Real Property located outside the United States of
America; or (f) Real Property with respect to which Agent has not received an appraisal pursuant to
Section 7.4(a) hereof. The criteria for Eligible Real Property set forth above may only be changed
and any new criteria for Eligible Real Property may only be established by Agent in good faith
based on either (i) an event, condition or other circumstance arising after the date hereof; or
(ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has
no written notice thereof from a Borrower prior to the date hereof, in either case under clause (i)
or (ii) which adversely affects or could reasonably be expected to adversely affect the Real
Property in the good faith determination of Agent. Any Real Property which is not Eligible Real
Property shall nevertheless be part of the Collateral.
“Eligible Trademark” shall mean any federally registered trademark of Borrowers used in the
ordinary course of Borrowers’ business which is acceptable to Agent based on the criteria set forth
below. In general, Eligible Trademarks shall not include (a) any trademark subject to an
Intellectual Property Claim, any trademark securing Permitted Trademark Financing Debt, or any
trademark otherwise subject to a security interest or lien in favor of any Person other than Agent
except those permitted in this Agreement (but without limiting the right of Agent to establish any
Reserves with respect to amounts secured by such security interest or lien in favor of any Person
even if permitted herein); (b) any trademark which is not subject to the first priority, valid and
perfected security interest or lien of Agent; (c) any trademark registered exclusively outside the
United States of America; or (d) any trademark with respect to which Agent has not received an
appraisal in form, scope and methodology acceptable to Agent and by an appraiser acceptable to
Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to
rely. General criteria for Eligible Trademarks may be established and revised from time to time by
Agent in good faith based on an event, condition or other circumstance arising after the date
hereof, or existing on the date hereof to the extent Agent has no written notice thereof from a
Borrower, which adversely affects or could reasonably be expected to adversely affect the trademark
in the good faith
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determination of Agent. Any trademark which is not an Eligible Trademark shall nevertheless be
part of the Collateral.
“Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or
any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its
parent company; (c) any Person (whether a corporation, partnership, trust or otherwise) that is
engaged in the business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar
extensions of credit, any other fund that invests in bank loans and similar extensions of credit
and is managed by the same investment advisor as such Lender or by an institutional Affiliate of
such investment advisor, and in each case is approved by Agent and after the initial syndication of
the Credit Facility by Wachovia or its Affiliates, unless a Default or Event of Default exists,
Borrowers; and (d) any other commercial bank, financial institution or institutional “accredited
investor” (as defined in Regulation D under the Securities Act of 1993) approved by Agent;
provided, that, neither any Borrower nor any Guarantor nor any Affiliate of any Borrower or
Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which
is in any way subordinated in right of payment to any other Indebtedness of any Borrower or
Guarantor shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree
“Environmental Laws” shall mean all foreign, Federal, State and local laws (including common
law), legislation, rules, codes, licenses, permits (including any conditions imposed therein),
authorizations, judicial or administrative decisions, injunctions or agreements between any
Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation
or restoration of the environment (including air, water vapor, surface water, ground water,
drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any
other natural resource), or to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials,
or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term “Environmental Laws” includes (i) the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal
Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal
and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such
laws, and (iii) any common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
“Equipment” shall mean, as to each Borrower, all of such Borrower’s now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and computer equipment
and computer hardware and software (whether owned or licensed, and including embedded software),
vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and replacements thereof,
wherever located.
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“ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, together
with all rules, regulations and interpretations thereunder or related thereto.
“ERISA Affiliate” shall mean any Person required to be aggregated with any Borrower or any
Subsidiaries of such Borrower under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a
Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for
a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a
“prohibited transaction” with respect to which any Borrower or any Subsidiaries of such Borrower is
a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which
any Borrower or any Subsidiaries of such Borrower could otherwise be liable; (f) a complete or
partial withdrawal by any Borrower or any ERISA Affiliate from a Multiemployer Plan or a cessation
of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings
by the Pension Benefit Guaranty Corporation to terminate a Plan or Multiemployer Plan; (h) an event
or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer
Plan; (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit
Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower
or any ERISA Affiliate; and 0) any other event or condition with respect to a Plan or Multiemployer
Plan or any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate
that could reasonably be expected to result in liability of any Borrower.
“Eurodollar Rate” shall mean with respect to the Interest Period for a Eurodollar Rate Loan,
the interest rate per annum equal to the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which
Reference Bank is offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected, by Borrowers and approved by Agent) on or about 9:00 a.m.
(New York time) two (2) Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available
to Borrowers in accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrowers.
“Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable
based on the Adjusted Eurodollar Rate in accordance with the terms hereof.
“Event of Default” shall mean the occurrence or existence of any event or condition described
in Section 10.1 hereof.
“Excess Availability” shall mean the amount, as determined by Agent, calculated at any time,
equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the Maximum Credit, minus (b) the
amount of all then outstanding and unpaid Obligations.
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“Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.
“Excluded Real Property” shall mean all now owned real property of Borrowers, including
leasehold interests, together with the buildings, structures and other improvements located
thereon, and all licenses, easements and appurtenances relating thereto, wherever located, as more
particularly described on Schedule 1.47 hereto, but not including the Real Property subject
to the Mortgages.
“Executive Order 13224” shall mean Executive Order 13224 of September 21, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001).
“Existing Financing Agreements” shall mean the “Financing Agreements” as defined in the
Existing Loan Agreement.
“Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the
account of any Borrower pursuant to the Existing Loan Agreement or for which any Borrower is
otherwise liable.
“Existing Loan Agreement” shall have the meaning set forth in the recitals to this Agreement.
“Existing Loans” shall mean the “Loans” under (and as defined in) the Existing Loan Agreement.
“Existing Obligations” shall mean the “Obligations” under (and as defined in) the Existing
Loan Agreement.
“Factor “ shall mean CIT.
“Factor Documents” shall mean the Factoring Agreement and any and all other documents,
agreements and instruments executed in connection therewith or relating thereto.
“Factor Intercreditor Agreement” shall mean that certain Intercreditor and Assignment
Agreement dated August 6, 2007, among Agent, Factor, and JCC pursuant to which, among other things,
(a) JCC has assigned to Agent, for its benefit and for the benefit of Lenders, all sums at any time
due or to become due from Factor to JCC under the Factoring Agreement and other Factor Documents
and (b) Factor and Agent have established the relative priorities of their security interests and
liens with respect to JCC’s Accounts and other property.
“Factor Reserve” shall mean the amount which at any time may be charged to JCC under the
Factoring Agreement or withheld from sums otherwise due to JCC under the Factoring Agreement,
including interest, fees, commissions, ledger debt and other charges due Factor under the Factoring
Agreement and the amount of any actual or anticipated disputes or claims arising with respect to
any Factored Account.
“Factor Status Statement” shall mean an account current statement or similar report issued by
Factor on a monthly basis under the Factoring Agreement and setting forth the status of the
Factored Accounts with Factor.
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“Factored Account” shall mean an Account of JCC which is factored by Factor under the
Factoring Agreement.
“Factoring Agreement” shall mean that certain Factoring Agreement dated August 6, 2007,
between Factor and JCC as in effect on the date hereof and as amended in compliance with the Factor
Intercreditor Agreement.
“Fee Letter” shall mean collectively, the letter agreements, each dated August 31, 2007, by
and among Borrowers and Agent, setting forth certain fees payable by Borrowers to Agent for its
benefit and for the benefit of Lenders.
“Financing Agreements” shall mean, collectively, this Agreement, the Factor Intercreditor
Agreement, the Junkfood Subordination Agreement, the Pledge Agreement, the Guarantees, the
Mortgages and all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any Borrower or Obligor in
connection with this Agreement.
“Fixed Charge Coverage Ratio” shall mean, with respect to Borrowers and their Subsidiaries, on
a consolidated basis, for any period of determination, the ratio of (a) EBITDA of Borrowers during
such period minus the amount of any taxes paid in cash, cash dividends to the equity
holders of such Person, other distributions to equity holders of such Person, and redemptions with
respect to the Capital Stock of such Person (including, but not limited to stock repurchases)
during the period in question minus all Unfinanced Capital Expenditures made during such
period to (b) Fixed Charges of Borrowers and their Subsidiaries for the same period.
“Fixed Charges” for any Person during any period shall mean the sum of, without duplication,
(a) cash interest paid during such period, (b) all regularly scheduled (as determined at the
beginning of the respective period) principal payments of Indebtedness for borrowed money and
Indebtedness with respect to the Capital Leases (and, without duplicating any item included in
clause (a) of this definition, the interest component with respect to Indebtedness under Capital
Leases), and (c) an amount equal to the product of: (i) $194,445 (which represents the aggregate
monthly reduction of the Eligible Real Property and Eligible Equipment components of the Borrowing
Base in effect under this Agreement multiplied by the (ii) the cumulative number of months that
elapsed during such period of determination since the Closing Date.
“Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction
other than that in which a Borrower is resident for tax purposes. For purposes of this definition,
the United States of America, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.
“Funded Debt” shall mean collectively, (a) the aggregate principal amount of Indebtedness for
borrowed money which would, in accordance with GAAP, be classified as long-term Indebtedness,
together with the current maturities thereof and the face amount of all outstanding letters of
credit; (b) all Indebtedness outstanding under any revolving credit, line of credit or renewals
thereof, notwithstanding that any such Indebtedness is created within one year of the expiration of
such agreement; and (c) all Indebtedness with respect to Capital Leases.
“Funding Bank” shall have the meaning given to such term in Section 3.3 hereof.
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“GAAP” shall mean generally accepted accounting principles in the United States of America as
in effect from time to time as set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that, for purposes of
Section 9.22 hereof and for purposes of calculating “Net Income” as defined in this Agreement,
until such time as Administrative Borrower notifies Agent of a change in GAAP that would have a
material effect on the calculation of Net Income or the covenant set forth in Section 9.22 and
Borrowers and Agent mutually agree on the treatment of such change or the recalculation of such
covenant, GAAP shall be determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the most recent audited financial statements
delivered to Agent prior to the date hereof.
“Governmental Authority” shall mean any nation or government, any state, province, or other
political subdivision thereof, any central bank (or similar monetary or regulatory authority)
thereof, any entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of the foregoing.
“Guarantee” shall mean, individually, any guarantee executed by a Guarantor substantially in
the form of Exhibit C attached hereto, and “Guarantees” shall collectively refer to all
such guarantees.
“Guarantors” shall mean any Person that at any time after the date hereof becomes party to a
guarantee in favor of Agent or any Lender or otherwise liable on or with respect to the Obligations
or who is the owner of any property which is security for the Obligations (other than Borrowers);
each sometimes being referred to herein individually as a “Guarantor”.
“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and
wastes, including hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or
type of pollutants or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes
and including any other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or toxic under any
Environmental Law).
“Hedging Agreement” shall mean any interest rate protection agreement, foreign currency
exchange agreement, forward contract, curency swap agreement, commodity price protection agreement
or other interest or currency exchange rate or commodity price hedging arrangement.
“Honduras JV” shall mean Green Valley Industrial Park, S.A.
“Honduras Subsidiary” shall mean each of Delta Apparel Honduras, S.A., a Honduran sociedad
anónima, Delta Xxxxxx, X.X., a Honduran sociedad anónima, Atled Holding Company Honduras, S de RL,
a Honduran company, La Paz Honduras, S de RL, a Honduran company, and Ceiba Textiles, S de RL, a
Honduran company.
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“Hostile Acquisition” shall mean any investment in a Person, resulting in control of such
Person, involving a tender offer or proxy contest that has not been recommended or approved by the
board of directors or similar body of such Person that is the subject of the investment prior to
the first public announcement or disclosure relating to such investment.
“Immaterial Subsidiary” means any Subsidiary of a Borrower which accounted for less than (a)
two percent (2%) of the consolidated assets of the Borrowers and their Subsidiaries, on a
consolidated basis, as of the end of the Borrowers’ most recent fiscal year and (b) two percent
(2%) of the consolidated revenues of the Borrowers and their Subsidiaries, on a consolidated basis,
for the four fiscal quarters ending as of the Borrowers’ most recent fiscal year.
“Increase Effective Date” shall have the meaning given to such term in Section 2.5(b) hereof.
“Indebtedness” shall mean, with respect to any Person, any liability, whether or not
contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes,
debentures or similar instruments; (b) representing, the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed
by such Person in, the ordinary course of business of such Person in connection with obtaining
goods, materials or services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under leases which have
been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this definition of another Person, including, without limitation, any
such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or
otherwise acquire such indebtedness, obligation or liability or any security therefor, or to
provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of
income, or other financial condition; (e) all obligations with respect to redeemable stock and
redemption or repurchase obligations under any Capital Stock or other equity securities issued by
such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances or
similar documents or instruments issued for such Person’s account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on
any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed
by or are a personal liability of such Person, all as of such time; (h) Banking Relationship Debt;
(i) all obligations, liabilities and indebtedness of such Person (marked to market) arising under
swap agreements, cap agreements and collar agreements and other agreements or arrangements designed
to protect such Person against fluctuations in interest rates or currency or commodity values; (j)
all obligations owed by such Person under License Agreements with respect to non-refundable,
advance or minimum guarantee royalty payments; (k) indebtedness of any partnership or joint venture
in which such Person is a general partner or a joint venturer to the extent such Person is liable
therefor as a result of such Person’s ownership interest in such entity, except to the extent that
the terms of such indebtedness expressly provide that such Person is not liable therefor or such
Person has no liability therefor as a matter of law and (l) the principal and interest portions of
all rental obligations of such Person under any synthetic lease or similar off-balance sheet
financing where such transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.
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“Indemnitee” shall have the meaning given to such term in Section 11.5 hereof.
“Information Certificate” shall mean the Information Certificate of Borrowers constituting
Exhibit D hereto containing material information with respect to Borrowers and their
respective businesses and assets provided by or on behalf of Borrowers to Agent in connection with
the preparation of this Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
“Intellectual Property” shall mean, as to each Borrower, such Borrower’s now owned and
hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which
are the subject matter of copyrights, copyright applications, copyright registrations, trademarks,
servicemarks, trade names, trade styles, trademark and service xxxx applications, and licenses and
rights to use any of the foregoing and all applications, registrations and recordings relating to
any of the foregoing as may be filed in the United States Copyright Office, the United States
Patent and Trademark Office or in any similar office or agency of the United States, any State
thereof, any political subdivision thereof or in any other country or jurisdiction, together with
all rights and privileges arising under applicable law with respect to any Borrower’s use of any of
the foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past, present and future
infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds,
drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or servicemark, or the license of any
trademark or servicemark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain name registration;
software and contract rights relating to computer software programs, in whatever form created or
maintained.
“Intellectual Property Claim” shall mean the assertion by any Person of a claim (whether
asserted in writing, by action, suit or proceeding or otherwise) that any Borrower’s ownershp, use,
marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other
property is violative of any ownership or right to use any Intellectual Property of such Person.
Without limiting the generality of the foregoing, an Intellectual Property Claim shall include any
claim by an purchaser of Intellectual Property from a Borrower or other Person, and any claim by a
secured party holding a Lien on Intellectual Property pursuant to any Permitted Trademark Financing
Debt or otherwise.
“Interest Expense” shall mean, for any period, as to any Person, all of the following as
determined on a consolidated basis in accordance with GAAP: (a) total interest expense, whether
paid or accrued during such period (including the interest component of Capital Leases for such
period), including all bank fees, commissions, discounts and other fees and charges owed with
respect to letters of credit (but excluding amortization of discount and amortization of deferred
financing fees paid in cash in connection with the transactions contemplated hereby, interest paid
in property other than cash and any other interest expense not payable in cash), minus (b) any net
payments received during such period as interest income received in respect of its investments in
cash.
“Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1),
two (2), or three (3) months duration as Borrowers (or Administrative Borrower on behalf of
Borrowers) may elect, the exact duration to be determined in accordance with the customary practice
in the applicable Eurodollar Rate market; provided, that, Borrowers (or Administrative Borrower on
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behalf of Borrowers) may not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
“Interest Rate” shall mean:
(a) Subject to clauses (b) and (c) of this definition below: as to Prime Rate Loans, the Prime
Rate plus zero percent (0.0%) and, as to Eurodollar Rate Loans, a rate of one and
three-quarters percent (1.75%) per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by Borrowers (or Administrative
Borrower on behalf of Borrowers) as in effect two (2) Business Days after the date of receipt by
Agent of the request of Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to any Borrower);
(b) Subject to clause (c) below, effective as and when set forth in Exhibit B hereto,
and each fiscal quarter ending thereafter, the Interest Rate payable by Borrowers shall be
increased or decreased, as the case may be, to the rate equal to the applicable margin set forth in
Exhibit B hereto, on a per annum basis, in excess of the Prime Rate as to Prime Rate Loans,
and in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, in each case, based on
either (i) the quarterly average of the Alternate Excess Availability of Borrower for the
immediately preceding three (3) calendar months or (ii) Borrowers’ Fixed Charge Coverage Ratio,
calculated on a quarterly basis, for the immediately preceding four (4) consecutive fiscal quarters
of Borrowers as calculated by Agent in good faith.
(c) Notwithstanding anything to the contrary contained in clauses (a) and (b) above, the
applicable margin otherwise used to calculate the Interest Rate shall be the highest percentage set
forth on Exhibit B hereto for each category of Loans (without regard to the amount of
Alternate Excess Availability or the Fixed Charge Coverage Ratio) plus two (2%) percent per annum,
at Agent’s option, without notice, (i) either (A) for the period on and after the date of
termination hereof until such time as all Obligations are indefeasibly paid and satisfied in full,
or (B) for the period from and after the date of the occurrence of any Event of Default, and for so
long as such Event of Default is continuing as determined by Agent and (ii) on the Loans at any
time outstanding in excess of the amounts available to Borrowers under Section 2 (whether or not
such excesses) arise or are made with or without Agent’s knowledge or consent and whether made
before or after an Event of Default).
“Inventory” shall mean, as to each Borrower, all of such Borrower’s now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by such Borrower as lessor; (b)
are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are
furnished by such Borrower under a contract of service; or (d) consist of raw materials, work in
process, finished goods or materials used or consumed in its business.
“Inventory Loan Limit” shall mean $60,000,000.
“Investment Property Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, any Borrower and any securities intermediary,
commodity intermediary or other Person who has custody, control or possession of any investment
property of such Borrower acknowledging that such securities intermediary, commodity intermediary
or other Person has custody, control or possession of such investment property on behalf of Agent,
that it will comply with entitlement orders originated by Agent with respect to such investment
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property, or other instructions of Agent, or (as the case may be) apply any value distributed
on account of any commodity contract as directed by Agent, in each case, without the further
consent of such Borrower and including such other terms and conditions as Agent may require.
“Issuing Bank” shall mean Wachovia or any Lender that is approved by Agent that shall issue a
Letter of Credit for the account of a Borrower and have agreed in a manner satisfactory to Agent to
be subject to the terms hereof as an Issuing Bank.
“Junkfood Acquisition” shall mean the acquisition by JCC of all or substantially all of the
assets of Junkfood Seller pursuant to the Junkfood Purchase Documents.
“Junkfood Asset Purchase Agreement” shall have the meaning set forth in the recitals to this
Agreement.
“Junkfood Purchase Documents” shall mean, individually and collectively, the Junkfood Asset
Purchase Agreement, Junkfood Seller Note, Junkfood Seller Guaranty and other documents, instruments
and agreements executed in connection therewith or relating thereto.
“Junkfood Seller” shall have the meaning set forth in the recitals to this Agreement.
“Junkfood Seller Guaranty” shall mean that certain Guaranty dated as of August 22, 2005, made
by Delta in favor of Junkfood Seller as in effect on the date hereof and as amended in compliance
with the Junkfood Subordination Agreement.
“Junkfood Seller Note” shall mean that certain Promissory Note dated as of August 22, 2005, in
the original principal amount of $2,500,000 executed and delivered by JCC in favor of Junkfood
Seller as in effect on the date hereof and as amended in compliance with the Junkfood Subordination
Agreement.
“Junkfood Subordination Agreement” shall mean that certain Debt Subordination Agreement dated
August 22, 2005, among Borrowers, Junkfood Seller and Agent.
“Lenders” shall mean the financial institutions who are signatories hereto as Lenders and
other Persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof,
and their respective successors and assigns; each sometimes being referred to herein individually
as a “Lender”.
“Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection therewith, any application
therefor, and any agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing for (a) the rights
and obligations of the parties concerned or at risk or (b) any collateral security for such
obligations.
“Letter of Credit Limit” shall mean $20,000,000.
“Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate undrawn
amount of all Letters of Credit outstanding at such time, plus (b) the aggregate amount of
all drawings under Letters of Credit for which Issuing Bank has not at such time been reimbursed,
plus (c) without duplication, the aggregate amount of all payments made by each Lender to
Issuing Bank
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with respect to such Lender’s participation in Letters of Credit as provided in Section 2.2
for which Borrowers have not at such time reimbursed the Lenders, whether by way of a Loan or
otherwise.
“Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and
whether for the purchase of Inventory, Equipment or otherwise) issued by an Issuing Bank for the
account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or
replacements thereof and including the Existing Letters of Credit.
“License Agreement” shall mean any agreement between a Borrower and a Licensor pursuant to
which such Borrower is authorized to use any Intellectual Property in connection with the
manufacturing, marketing, sale or other distribution of any Inventory of such Borrower.
“Licensor” shall mean any Person from whom a Borrower obtains the right to use (whether on an
exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s
manufacture, marketing, sale or other distribution of any Inventory.
“Licensor/Lender Agreement” shall mean an agreement between Agent and a Licensor by which
Agent is given the unqualified right, vis-à-vis such Licensor, to enforce Agent’s security
interests and liens with respect to and to dispose of a Borrower’s Inventory with the benefit of
any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any
License Agreement with such Licensor and which is otherwise in form and substance reasonably
satisfactory to Agent.
“Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent
for the benefit of Borrower on a revolving basis (involving advances, repayments and readvances) as
set forth in Section 2.1 hereof.
“Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition,
business, performance or operations of Borrowers, taken as a whole; (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements; (c) the legality,
validity, enforceability, perfection or priority of the security interests and liens of Agent upon
the Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to repay the
Obligations or of any Borrower to perform its obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; or (f) the ability of Agent or any Lender to
enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and
remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements.
“Material Contract” shall mean (a) any contract or other agreement (other than the Financing
Agreements), written or oral, of any Borrower involving monetary liability of or to any Person in
an amount in excess of $1,000,000 in any fiscal year and (b) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which any Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any party thereto would
have a Material Adverse Effect.
“Maximum Credit” shall mean the amount of $100,000,000, subject to increase from time to time
pursuant to Section 2.5.
“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,
-25-
reserved, charged or received in respect of the indebtedness of Borrowers to Agent and
Lenders, or to the extent that at any time such applicable law may thereafter permit a higher
maximum non-usurious rate of interest, then such higher rate. Notwithstanding any other provision
hereof, the Maximum Interest Rate shall be calculated on a daily basis (computed on the actual
number of days elapsed over a year of three hundred sixty-five (365) or three hundred sixty-six
(366) days, as the case may be).
“Mexican Subsidiary” shall mean Delta Campeche, S.A. de C.V., a company organized under the
laws of Mexico.
“Monthly Average Excess Availability” shall mean, at any time, the average of the amount of
the Excess Availability for the immediately preceding thirty (30) days as calculated by Agent based
on the amount of the Excess Availability on each date during such period.
“Mortgages” shall mean, individually and collectively, each of the following, as each may be
amended, modified, supplemented, extended or restated from time to time: (a) that certain Amended
and Restated Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing,
dated October 3, 2003, by Delta in favor of Agent with respect to the Real Property and related
assets of Delta located in Catawba County, North Carolina; (b) that certain Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated November 1, 2004, by
Delta in favor of Agent with respect to the Real Property and related assets of Delta located in
Xxxxxxxx County, Tennessee; (c) that certain First Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing, dated as of October 3, 2003, by Soffe in favor of Agent with
respect to the Real Property and related assets of Soffe located in Cumberland County, North
Carolina; and (d) that certain First Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, dated as of October 3, 2003, by Soffe in favor of Agent with respect
to the Real Property and related assets of Soffe located in Xxxxxxx County, North Carolina.
“Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately preceding six (6)
years contributed to by any Borrower or ERISA Affiliate, or with respect to which any Borrower,
Guarantor or any ERISA Affiliate may incur any liability.
“Net Amount of Eligible Accounts” shall mean the gross amount of Eligible Accounts less (a)
sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
“Net Income” shall mean, with respect to any Person, for any period, the aggregate of the net
income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period
(excluding to the extent included therein any extraordinary, one-time or nonrecurring gains) after
deducting all charges which should be deducted before arriving at the net income (loss) for such
period and after deducting the Provision for Taxes for such period, all as determined in accordance
with GAAP; provided, that, (a) the net income of any Person that is not a
wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid or payable to such
Person or a wholly-owned Subsidiary of such Person; (b) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded; and
(c) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration
or payment of dividends or similar
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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; provided, the Honduras Subsidiaries and the Mexican Subsidiary shall be
considered to be wholly-owned Subsidiaries of Delta for purposes of the calculation of Net Income
hereunder so long as Delta owns at least 97% of the Capital Stock of each such Subsidiaries.
“Net Orderly Liquidation Value” shall mean with respect to a Borrower’s Equipment, Inventory
and trademarks, the value that is estimated to be recoverable in an orderly liquidation of such
Equipment, Inventory or trademarks net of estimated liquidation expenses as determined from time to
time by an appraisal of such Equipment, Inventory or trademarks in form and containing assumptions
and appraisal methods satisfactory to Agent that is performed by a qualified appraisal company
selected by or acceptable to Agent; provided, that, with respect to any Eligible Trademark
registered both in and outside the United States of America, only the appraised value of such
Eligible Trademark in the United States shall be included in the Net Orderly Liquidation Value
therefor.
“Net Proceeds” shall mean the aggregate cash proceeds received by any Borrower, or any
Subsidiaries of a Borrower, in respect of any asset sale permitted under Section 9.7 hereof, net of
the direct costs relating to such asset sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), amounts applied to the repayment of
indebtedness secured by a lien on the asset or assets that are the subject of such asset sale and
any other indebtedness required to be repaid in connection with such transaction and any reserve
for adjustment in respect of the sale price of such asset or assets. Net Proceeds shall exclude any
non-cash proceeds received from any asset sale, but shall include such proceeds when and as
converted by any Borrower or any Subsidiary of a Borrower to cash.
“Notice of Default or Failure of Condition” shall have the meaning given to such term in
Section 12.3(a) hereof.
“Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and all other
obligations, liabilities and indebtedness of every kind, nature and description owing by any or all
of the Borrowers to Agent or any Lender or any of their Affiliates or Issuing Bank, including
principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before, during or after the initial or
any renewal term of this Agreement or after the commencement of any case with respect to any or all
of the Borrowers under the United States Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Agent or
Lenders and (b) for purposes
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only of Sections 5 and 6.4 hereof, any and all Banking Relationship Debt. From and after the
Closing Date, all Existing Obligations outstanding on the Closing Date shall be deemed to be
outstanding, and to constitute Obligations, under this Agreement, and shall be subject to all of
the terms and conditions hereof. Notwithstanding anything to the contrary contained herein, the
term “Obligations” as used in the Loan Agreement and other Financing Agreements shall not include
any indebtedness, liabilities or obligations owing by any Borrower to Factor pursuant to the
Factoring Agreement
“Obligor” shall mean any guarantor, endorser, acceptor, surety or other Person liable on or
with respect to the Obligations or who is the owner of any property which is security for the
Obligations (including Guarantors), other than a Borrower.
“Other Taxes” shall have the meaning given to such term in Section 6.13 hereof.
“Participant” shall mean any financial institution that acquires and holds a participation in
the interest of any Lender in any of the Loans and Letters of Credit in conformity with the
provisions of Section 13.6 of this Agreement governing participations.
“Permits” shall have the meaning set forth in Section 8.7(b) hereof.
“Permitted Acquisition” shall mean any Acquisition Transaction, provided that:
(a) the Acquisition Target’s business is in a Permitted Business Field;
(b) Agent shall have received copies of (i) the definitive Acquisition Documents and related
due diligence documents (including lien search reports, title insurance commitments and
environmental assessments), (ii) historical financial statements or other financial information of
the Acquisition Target in form and substance reasonably acceptable to Agent and (iii) all other
financial information, and such other documents and information, of the Acquisition Target as Agent
may reasonably request, all of which shall be reasonably acceptable to Agent;
(c) if the acquired assets are to be included in the Borrowing Base simultaneously with the
consummation of the Permitted Acquisition, Agent’s examiners shall have completed a field exam and
audit of the Acquisition Target, in scope and with results reasonably acceptable to Agent, or if
such field exam and audit are not conducted, then the assets of such Acquisition Target shall not
be included in the Borrowing Base and shall be ineligible for borrowing purposes until such exam
and audit are conducted in scope and with results reasonably acceptable to Agent;
(d) the Acquisition Consideration for all Acquisition Transactions during the term of this
Agreement shall not exceed $20,000,000;
(e) no Default or Event of Default shall exist at the time of the Acquisition Transaction or
after giving effect thereto;
(f) Borrowers shall have delivered to Agent a certificate executed by the chief financial
officer of Borrowers which demonstrates to the reasonable satisfaction of Agent that (a) at the
time of such Acquisition Transaction Borrowers shall have Monthly Average Excess Availability of
not less than $15,000,000 and (b) at the time of and after giving effect to such Acquisition
Transaction Borrowers shall have Excess Availability of not less than $15,000,000;
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(g) any Indebtedness incurred to any or all of the sellers in connection with any such
Acquisition Transaction shall be subordinated to the prior payment and performance of the
Obligations pursuant to a debt subordination agreement that is in all respects acceptable to Agent;
(h) the Acquisition Transaction is not a Hostile Acquisition;
(i) Borrower shall have notified Agent in writing of the Acquisition Transaction (and provided
to Agent and each Lender a complete information package with respect to the Acquisition
Transaction) at least 14 days prior to the scheduled closing date of the Acquisition Transaction;
(j) the structure of the Acquisition Transaction shall be reasonably acceptable to Agent and
Lenders in all material respects, including the requirement that, after giving effect to the
Acquisition Transaction, all of the Capital Stock of the Acquisition Target and/or Acquisition
Subsidiary, as appropriate, shall be directly or indirectly owned (legally and beneficially) by a
Borrower and a Borrower shall control all Voting Stock of any such Acquisition Target; and
(k) Agent contemporaneously with the closing of such Acquisition Transaction shall have
received (i) such documents and instruments as may be necessary to grant or confirm to Agent a
first priority perfected lien on and security interest in all of the assets (including Capital
Stock) of the Acquisition Target and/or Acquisition Subsidiary, as appropriate, so acquired, and
(ii) if the Acquisition Target and/or Acquisition Subsidiary, as appropriate, acquired is not
merged into a Borrower or an Acquisition Subsidiary that already is a “Borrower” under the
Agreement, a Joinder Agreement executed by such Acquisition Target and/or Acquisition Subsidiary,
as appropriate,, together with such other collateral documents and opinions of counsel as may be
requested by Agent, each in form and substance satisfactory to Agent
“Permitted Business Field” shall mean the business engaged in by Borrowers on the Closing Date
or a business substantially similar to the business engaged in by Borrowers on the Closing Date.
“Permitted Central American Working Capital Debt” means Indebtedness incurred by the Mexican
Subsidiary or the Honduras Subsidiaries (or any other Subsidiaries organized under the laws of
Mexico or Honduras which are formed by Borrowers or their Subsidiaries in compliance with this
Agreement), with respect to one or more working capital credit facilities for use in the operations
of the Mexican Subsidiary, the Honduras Subsidiaries or such other Subsidiaries described above at
any time after the Closing Date with respect to a credit facility in an aggregate principal amount
acceptable to Agent; provided that (i) such Indebtedness is unsecured by any stock
or assets of any Borrower or Obligor, and any Lien in the Inventory of any of the Mexican
Subsidiary, the Honduras Subsidiaries or such other Subsidiaries described above granted to secure
such Indebtedness shall not extend or continue following the sale of any such Inventory to a
Borrower, and the secured party holding any such Lien (and its successors and assigns), if required
by Agent, is a party with Agent to an intercreditor agreement that is in all respects acceptable to
Agent, (ii) such Indebtedness matures on a date not earlier than six (6) months after the last day
of the Credit Facility and does not include any amortization payments, (iii) such Indebtedness
accrues interest at a rate determined in good faith by the Board of Directors (or applicable
governing authority) of such Mexican Subsidiary, such Honduras Subsidiaries or such other
Subsidiaries described above to be a market rate of interest for such Indebtedness at the time of
issuance thereof, (iv) at the time of the incurrence of such Indebtedness, such Indebtedness is
permitted under the Material Contracts as in effect on the date hereof without the need to obtain
any waivers thereunder, and (v) such Indebtedness is otherwise on terms and conditions satisfactory
to the Agent, acting reasonably.
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“Permitted Holders” shall mean the Persons listed on Schedule 1.89 hereto and their
respective successors and assigns.
“Permitted Indebtedness” shall have the meaning given to such term in Section 9.9 hereof.
“Permitted Liens” shall have the meaning given to such term in Section 9.8 hereof.
“Permitted Trademark Financing Debt” means Indebtedness incurred by one or more Borrowers at
any time after the Closing Date with respect to a credit facility in an aggregate principal amount
acceptable to Agent; provided that (i) such Indebtedness is unsecured by any stock
or assets of any Borrower or Obligor other than certain or all of the trademarks of Borrowers, (ii)
the secured party holding any Lien securing such Indebtedness (and its successors and assigns), if
required by Agent, is a party with Agent to an intercreditor agreement that is in all respects
acceptable to Agent, and specifically in which Agent is given the unqualified right, vis-à-vis such
secured party (and its successors and assigns), to enforce Agent’s security interests and liens
with respect to and to dispose of a Borrower’s Inventory with the benefit of any trademarks
applicable thereto, irrespective of such Borrower’s default under any financing agreements or other
documents with such secured party, (iii) any subsequent purchaser or licensor of the trademarks
(from either a Borrower or any other Person), if required by Agent, is a party to an intercreditor
agreement or other agreement that is in all respects acceptable to Agent, and specifically in which
Agent is given the unqualified right, vis-à-vis such purchaser or licensor (and its successors and
assigns), to enforce Agent’s security interests and liens with respect to and to dispose of a
Borrower’s Inventory with the benefit of any trademarks applicable thereto, irrespective of such
Borrower’s default under any agreements or other documents with such purchaser or licensor, (iii)
such Indebtedness matures on a date not earlier than six (6) months after the last day of the
Credit Facility and does not include any amortization payments, (iv) such Indebtedness accrues
interest at a rate determined in good faith by the Board of Directors (or applicable governing
authority) of the applicable Borrower to be a market rate of interest for such Indebtedness at the
time of issuance thereof, (v) at the time of the incurrence of such Indebtedness, such Indebtedness
is permitted under the Material Contracts as in effect on the date hereof without the need to
obtain any waivers thereunder, and (vi) such Indebtedness is otherwise on terms and conditions
satisfactory to the Agent, acting reasonably.
“Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation
(including any corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.
“Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any
Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multiemployer Plan has made contributions at any time during the
immediately preceding six (6) plan years.
“Pledge Agreement” shall mean that certain Amended and Restated Stock Pledge Agreement by
Borrowers in favor of Agent dated the date hereof.
“Prime Rate” shall mean the rate from time to time publicly announced by Wachovia Bank,
National Association, or its successors, as its prime rate, whether or not such announced rate is
the best rate available at such bank.
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“Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based
on the Prime Rate in accordance with the terms thereof.
“Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the
numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount
of all of the Commitments of Lenders, as adjusted from time to time in accordance with the
provisions of Section 13.6 hereof; provided, that, if the Commitments have been
terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the
Letters of Credit and the denominator shall be the aggregate amount of all unpaid Loans and Letters
of Credit.
“Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net
income, whether Federal, State, Provincial, municipal or local, and whether foreign or domestic,
that are paid or payable by any Person in respect of any period in accordance with GAAP.
“Qualified Factor” shall mean Factor and any other Person that Agent deems to be acceptable,
and so long as Factor or such other Person is a party with Agent to an intercreditor agreement that
is in all respects acceptable to Agent. For the purposes hereof, the Factor Intercreditor
Agreement shall be deemed to be an intercreditor agreement that Agent deems to be acceptable in all
respects.
“Quiksilver Xxxx and Hold Accounts” shall means Accounts for which Quiksilver, Inc. is the
account debtor in an aggregate amount not to exceed $3,000,000 and which would otherwise constitute
Eligible Accounts but for the fact that such Accounts are evidenced by xxxx and hold invoices.
“Real Property” shall mean all now owned and hereafter acquired real property of each
Borrower, including leasehold interests, together with all buildings, structures, and other
improvements located thereon and all licenses, easements and appurtenances relating thereto,
wherever located, including the real property and related assets more particularly described in the
Mortgages.
“Receivables” shall mean, as to each Borrower, all of the following now owned or hereafter
arising or acquired property of such Borrower: (a) all Accounts; (b) all amounts at any time
payable to such Borrower in respect of the sale or other disposition by such Borrower of any
Account or other obligation for the payment of money; (c) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise payable in
connection with any Account; (d) all payment intangibles of such Borrower, letters of credit,
indemnities, guarantees, security or other deposits and proceeds thereof issued payable to such
Borrower or otherwise in favor of or delivered to such Borrower in connection with any Account; or
(e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and
other forms of obligations owing to such Borrower, whether from the sale and lease of goods or
other property, licensing of any property (including Intellectual Property or other general
intangibles), rendition of services or from loans or advances by such Borrower or to or for the
benefit of any third Person (including loans or advances to any Affiliates or Subsidiaries of such
Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of such
Borrower (including choses in action, causes of action, tax refunds, tax refund claims, any funds
which may become payable to such Borrower in connection with the termination of any Plan or other
employee benefit plan and any other amounts payable to Borrower from any Plan or other employee
benefit plan, rights and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar
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types of insurance and any proceeds thereof and proceeds of insurance covering the lives of
employees on which such Borrower is a beneficiary).
“Records” shall mean, as to each Borrower, all of such Borrower’s present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or containers in or on which
the foregoing are stored (including any rights of such Borrower with respect to the foregoing
maintained with or by any other Person).
“Reference Bank” shall mean Wachovia Bank, National Association, or such other bank as Agent
may from time to time designate.
“Register” shall have the meaning set forth in Section 13.7(b) hereof.
“Report” shall have the meaning set forth in Section 12.10 hereof.
“Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all
Lenders, or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and
two-thirds (66 2/3%) percent of the then outstanding Obligations are owing.
“Reserves” shall mean as of any date of determination, such amounts as Agent may from time to
time establish and revise in good faith reducing the amount of Loans and Letters of Credit which
would otherwise be available to Borrowers under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks arising after the date of this Agreement or of
which Agent had no actual knowledge as of such date, which, as determined by Agent in good faith,
adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the
Collateral or any other property which is security for the Obligations or its value, including any
Dilution Reserve and a reserve for Current Hedging Exposure, (ii) the assets, business or financial
condition of any Borrower or Obligor or (iii) the security interests and other rights of Agent or
any Lender in the Collateral (including the enforceability, perfection and priority thereof); or
(b) to reflect Agent’s good faith belief that any collateral report or financial information
furnished by or on behalf of any Borrower or Obligor to Agent is or may have been incomplete,
inaccurate or misleading in any material respect; or (c) to reflect outstanding Letters of Credit
as provided in Section 2.2 hereof; or (d) in the amount of any Banking Relationship Debt; or (e) in
respect of any state of facts which Agent determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of Default. To the extent Agent
may revise the lending formulas used to determine the Borrowing Base or establish new criteria or
revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any
circumstances, condition, event or contingency in an manner satisfactory to Agent, Agent shall not
establish a Reserve for the same purpose. The amount of any Reserve established by Agent shall have
a reasonable relationship to the event, condition or other matter which is the basis for such
reserve as determined by Agent in good faith.
“Secured Parties” shall mean Agent, Lenders, Issuing Bank, and Wachovia or any other Lender or
Affiliate as the obligee with respect to any Banking Relationship Debt, and each counterparty to
any Hedging Agreement that is (or at the time such Hedging Agreement was entered into, was) a
Lender or an Affiliate of a Lender.
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“Settlement Period” shall have the meaning set forth in Section 6.9(b) hereof.
“Solvency Certificate” shall mean an officer’s certificate of Borrowers prepared by the chief
financial officer of Borrowers as to the financial condition, solvency and related matters of the
Obligors, in each case on a pro forma basis after giving effect to the initial borrowings under the
Financing Agreements, in form and substance satisfactory to Agent.
“Solvent” shall mean, at any time with respect to any Person, that at such time such Person
(a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will
continue to have) sufficient capital (and not unreasonably small capital) to carry on its business
consistent with its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights
of subrogation, contribution or indemnification arising pursuant to any guarantees given by such
Person) are greater than the Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to believe, represents
an amount which can reasonably be expected to become an actual or matured liability (and including
as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as
reduced to reflect the probability of it becoming a matured liability).
“Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.
“Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited
liability company, limited liability partnership or other limited or general partnership, trust,
association or other business entity of which an aggregate of at least a majority of the
outstanding Capital Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency), managers, trustees or other controlling Persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such
Person and/or one or more subsidiaries of such Person.
“Taxes” shall have the meaning set forth in Section 6.13(a) hereof.
“Trading with the Enemy Act” shall have the meaning set forth in Section 9.22 hereof.
“UCC” shall mean the Uniform Commercial Code as in effect in the State of Georgia, and any
successor statute, as in effect from time to time (except that terms used herein which are defined
in the Uniform Commercial Code as in effect in the State of Georgia on the date hereof shall
continue to have the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise determine).
“Unfinanced Capital Expenditures” shall mean Capital Expenditures made and not financed with
the proceeds of money borrowed.
“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 (Public Law 107-56),
as in effect from time to time.
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“Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower
of (a) cost computed on a first-in, first-out basis in accordance with GAAP or (b) market value;
provided, that, for purposes of the calculation of the Borrowing Base, (i) the
Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the
profit earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or write-downs
in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary
contained herein, the cost of the Inventory shall be computed in the same manner and consistent
with the most recent appraisal of the Inventory received and accepted by Agent prior to the date
hereof, if any.
“Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital
Stock of such Person having general voting powers to elect at least a majority of the board of
directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock
of any other class or classes have or might have voting power by reason of the happening of any
contingency, and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such Person described in
clause (a) of this definition.
“Wachovia” shall mean Wachovia Bank, National Association, a national bank, in its individual
capacity, and its successors and assigns.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained herein, each Lender
severally (and not jointly) agrees to fund its Pro Rata Share of Loans to Borrowers from time to
time in amounts requested by Borrowers up to the amount outstanding at any time equal to the lesser
of: (i) the Borrowing Base or (ii) the Maximum Credit at such time. Except as otherwise provided
herein or permitted hereunder, (x) the aggregate principal amount of the sum of the Loans and
Letter of Credit Obligations outstanding at any time to Borrowers shall not exceed the lesser of
the Borrowing Base or the Maximum Credit, and (y) the aggregate principal amount of the Loans
outstanding at any time to Borrowers based on the Eligible Inventory of Borrowers shall not exceed
the Inventory Loan Limit. If Agent shall determine, in its sole discretion, that a material
adverse change in the financial condition of any Borrower has occurred, or if a Default or Event of
Default exists, then Agent shall have the right (exercisable at such time or times as Agent deems
appropriate) to require that separate Borrowing Base calculations be made for each Borrower, as
well as the right to limit the use of proceeds of the Loans by each Borrower to an amount equal to
such Borrower’s Borrowing Base.
(b) Agent may, in its discretion, from time to time, upon not less than five (5) days’ prior
notice to Borrowers, (i) reduce the lending formula with respect to Eligible Accounts to the extent
that Agent determines in good faith that (A) the dilution with respect to the Accounts for any
period (based on the ratio of (1) the aggregate amount of reductions in Accounts other than as a
result of payments in cash to (2) the aggregate amount of total sales) has increased in any
material respect or may be reasonably anticipated to increase in any material respect above
historical levels, or (B) the general creditworthiness of account debtors has materially declined
or (ii) reduce the lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines that: (A) the number of days of the turnover of the Inventory for any period has changed
or (B) the liquidation value of the Eligible Inventory, or any category thereof, has decreased, or
(C) the nature, quality or mix of the Inventory has materially deteriorated. The amount of any
decrease in the lending formulas
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shall have a reasonable relationship to the event, condition or circumstance which is the basis for
such decrease as determined by Agent in good faith. In determining whether to reduce the lending
formula(s), Agent may consider events, conditions, contingencies or risks which.are also considered
in determining Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Agent’s discretion, (i) the aggregate amount of the Loans outstanding at any
time shall not exceed the Maximum Credit, (ii) the aggregate amount of Loans and Letter of Credit
Obligations based on Eligible Inventory consisting of yarn classified as work-in-process
outstanding at any time shall not exceed $1,000,000 at any time and (iii) the aggregate amount of
the Loans and the Letter of Credit Obligations outstanding at any time shall not exceed the Maximum
Credit. In the event that the outstanding amount of any component of the Loans, or the aggregate
amount of the outstanding Loans and Letter of Credit Obligations, exceed the amounts available
under the lending formulas, the Letter of Credit Limit, the Inventory Loan Limit or the Maximum
Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Agent or
Lenders in that circumstance or on any future occasions and Borrowers shall, upon demand by Agent,
which may be made at any time or from time to time, immediately repay to Agent the entire amount of
any such excess(es) for which payment is demanded.
(d) From and after the Closing Date, all Existing Loans outstanding on the Closing Date shall
be deemed to be made and outstanding, and to constitute Loans, under this Agreement, and shall be
subject to all of the terms and conditions hereof.
2.2 Letter of Credit.
(a) Subject to and upon the terms and conditions contained herein and in the Letter of
Credit Documents, at the request of a Borrower (or Administrative Borrower on behalf of such
Borrower), Agent agrees to cause Issuing Bank to issue, and Issuing Bank agrees to issue, for the
account of such Borrower one or more Letters of Credit, for the ratable risk of each Lender
according to its Pro Rata Share, containing terms and conditions acceptable to Agent and Issuing
Bank. From and after the Closing Date, all Existing Letters of Credit outstanding on the Closing
Date shall be deemed to be issued and outstanding, and to constitute Letters of Credit, under this
Agreement and all Letter of Credit Obligations (as defined in the Existing Loan Agreement)
outstanding on the Closing Date shall be deemed to be and constitute Letter of Credit Obligations
under this Agreement, and shall be subject to all of the terms and conditions hereof.
(b) The Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of
such Borrower) shall give Agent and Issuing Bank two (2) Business Days’ prior written notice of
such Borrower’s request for the issuance of a Letter of Credit. Such notice shall be irrevocable
and shall specify the original face amount of the Letter of Credit requested, the effective date
(which date shall be a Business Day and in no event shall be a date less than ten (10) days prior
to the end of the then current term of this Agreement) of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the date on
which such requested Letter of Credit is to expire (which date shall be a Business Day and shall
not be more than one year from the date of issuance), the purpose for which such Letter of Credit
is to be issued, and the beneficiary of the requested Letter of Credit. The Borrower requesting
the Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall attach to such
notice the proposed terms of the Letter of Credit. The renewal or extension of any Letter of
Credit shall, for purposes hereof be treated in all respects the same as the issuance of a new
Letter of Credit hereunder.
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(c) In addition to being subject to the satisfaction of the applicable conditions precedent
contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of
Credit shall be available unless each of the following conditions precedent have been satisfied in
a manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall have delivered to Issuing Bank at such
times and in such manner as Issuing Bank may require, an application, in form and substance
satisfactory to Issuing Bank and Agent, for the issuance of the Letter of Credit and such other
Letter of Credit Documents as may be required pursuant to the terms thereof, and the form and terms
of the proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank, (ii) as of the
date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport
by its terms to enjoin or restrain money center banks generally from issuing letters of credit of
the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over money center banks generally
shall prohibit, or request that Issuing Bank refrain from, the issuance of letters of credit
generally or the issuance of such Letter of Credit, (iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations shall not exceed the Letter of Credit
Limit, and (iv) the Excess Availability, prior to giving effect to any Reserves with respect to
such Letter of Credit, on the date of the proposed issuance of any Letter of Credit shall be equal
to or greater than: (A) if the proposed Letter of Credit is for the purpose of purchasing Inventory
that would constitute Eligible Inventory but for the fact that it is or will be in transit to the
premises of a Borrower located with the United States, and the documents of title with respect
thereto are consigned and delivered to Issuing Bank at a location in the United States, the sum of
(1) the percentage equal to one hundred percent (100%) minus the then applicable percentage
with respect to Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other
amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for
delivery to one of such Borrower’s locations for Eligible Inventory within the United States of
America and (B) if the proposed Letter of Credit is for any other purpose or the documents of title
are not consigned and delivered to Issuing Bank at a location in the United States in connection
with a Letter of Credit for the purpose of purchasing Inventory, an amount equal to one hundred
(100%) percent of the Letter of Credit Obligations with respect thereto. Effective on the issuance
of each Letter of Credit, a Reserve shall be established in the applicable amount set forth in
Section 2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).
(d) Except in Agent’s discretion, with the consent of all Lenders, the amount of all
outstanding Letter of Credit Obligations shall not at any time exceed the Letter of Credit Limit.
(e) Each Borrower shall reimburse immediately Issuing Bank for any draw under any Letter of
Credit issued for the account of such Borrower and pay Issuing Bank the amount of all other charges
and fees payable to Issuing Bank in connection with any Letter of Credit issued for the account of
such Borrower immediately when due, irrespective of any claim, setoff, defense or other right which
such Borrower may have at any time against Issuing Bank or any other Person. Each drawing under
any Letter of Credit or other amount payable in connection therewith when due shall constitute a
request by the Borrower for whose account such Letter of Credit was issued to Agent for a Prime
Rate Loan in the amount of such drawing or other amount then due, and shall be made by Agent on
behalf of Lenders as a Loan (or Special Agent Advance, as the case may be). The date of such Loan
shall be the date of the drawing or as to other amounts, the due date therefor. Any payments made
by or on behalf of Agent or any Lender to Issuing Bank and/or related parties in
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connection with any Letter of Credit shall constitute additional Loans to such Borrower
pursuant to this Section 2 (or Special Agent Advances as the case may be).
(f) Borrowers and Guarantors shall indemnify and hold Agent and Lenders harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any
Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by Issuing Bank or correspondent with respect to any Letter of
Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant
to a final non-appealable order of a court of competent jurisdiction. Each Borrower and Guarantor
assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit and for such purposes the drawer or beneficiary shall be deemed such Borrower’s
agent. Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or
any documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby releases and
holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions
with respect to or relating to any Letter of Credit, except for the gross negligence or willful
misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment
of Obligations and the termination of this Agreement.
(g) In connection with Inventory purchased pursuant to any Letter of Credit, Borrowers and
Guarantors shall, at Agent’s request, instruct all suppliers, carriers, forwarders, Customs
Brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Agent holds a security interest that upon Agent’s request, such items are to
be delivered to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s
or Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their original form.
Except as otherwise provided herein, Agent shall not exercise such right to request such items so
long as no Default or Event of Default shall exist or have occurred and be continuing. Except as
Agent may otherwise specify, Borrowers and Guarantors shall designate Issuing Bank as the consignee
on all bills of lading and other negotiable and non-negotiable documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes and directs Issuing Bank to name
such Borrower or Guarantor as the account party therein and to deliver to Agent all instruments,
documents and other writings and property received by Issuing Bank pursuant to the Letter of Credit
and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising
in connection with the Letter of Credit or the Letter of Credit Documents with respect thereto.
Nothing contained herein shall be deemed or construed to grant any Borrower or Guarantor any right
or authority to pledge the credit of Agent or any Lender in any manner. Borrowers and Guarantors
shall be bound by any reasonable interpretation made in good faith by Agent, or Issuing Bank under
or in connection with any Letter of Credit or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any instructions of any Borrower
or Guarantor.
(i) Immediately upon the issuance or amendment of any Letter of Credit, each Lender shall be
deemed to have irrevocably and unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of
the liability with respect to such Letter of Credit and the obligations of Borrowers with
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respect thereto (including all Letter of Credit Obligations with respect thereto). Each
Lender shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to Issuing Bank therefor and discharge when due, its Pro Rata Share
of all of such obligations arising under such Letter of Credit. Without limiting the scope and
nature of each Lender’s participation in any Letter of Credit, to the extent that Issuing Bank has
not been reimbursed or otherwise paid as required hereunder or under any such Letter of Credit,
each such Lender shall pay to Issuing Bank its Pro Rata Share of such unreimbursed drawing or other
amounts then due to Issuing Bank in connection therewith.
(j) The obligations of Borrowers to pay each Letter of Credit Obligations and the obligations
of Lenders to make payments to Agent for the account of Issuing Bank with respect to Letters of
Credit shall be absolute, unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances, whatsoever,
notwithstanding the occurrence or continuance of any Default, Event of Default, the failure to
satisfy any other condition set forth in Section 4 or any other event or circumstance. If such
amount is not made available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date such amount was due
until the date such amount is paid to Agent at the interest rate then payable by any Borrower in
respect of Loans that are Prime Rate Loans. Any such reimbursement shall not relieve or otherwise
impair the obligation of Borrowers to reimburse Issuing Bank under any Letter of Credit or make any
other payment in connection therewith.
2.3 [Intentionally Omitted.]
2.4 Commitments. The aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter
of Credit Obligations shall not exceed the amount of such Lender’s Commitment, as the same may from
time to time be amended in accordance with the provisions hereof.
2.5 Voluntary Increase in Commitments .
(a) Upon the terms and subject to the conditions set forth herein, on any Business Day during
the period from the Closing Date through the ninetieth (90th) day immediately prior to
the last calendar day of the term of this Agreement, and so long as no Default or Event of Default
exists, Borrowers may request that the Commitments be increased and, upon such request, Agent shall
use reasonable efforts in light of then-current market conditions to solicit additional Eligible
Transferees to become Lenders for the purposes of this Agreement, or to encourage any Lender to
increase its Commitment; provided, that (a) each Lender that is a party to this
Agreement immediately prior to such increase shall have the first option, and may elect, to fund
its Pro Rata Share of the amount of the increase in the Commitment (or any such greater amount in
the event that one or more Lenders does not elect to fund its respective Pro Rata Share of the
amount of the increase in the Commitment), thereby increasing its Commitment hereunder, but no
Lender shall have any obligation to do so, (b) in the event that it becomes necessary to include a
new Eligible Transferee to fund the amount of the requested increase in the Commitment, each such
Eligible Transferee shall become a Lender hereunder and agree to become party to, and shall assume
and agree to be bound by, this Agreement, subject to all terms and conditions hereof; (c) no Lender
shall have an obligation to Borrowers, Agent or any other Lender to increase its Commitment or its
Pro Rata Share of the Commitments, which decision shall be made in the sole discretion of each
Lender; and (d) in no event shall the addition of any Lender or Lenders or the increase in the
Commitment of any Lender under this Section 2.5 increase the Commitments to an aggregate amount
greater than $110,000,000. Upon the addition of any Lender, or the increase in the Commitment of
any Lender, the dollar
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amount of the Commitment set forth opposite each Lender’s name on Schedule 1.21 to this
Agreement shall be amended by Agent and Borrowers to reflect such addition or such increase, and
Agent shall deliver to Lenders and Borrowers a copy of such amendment. Lenders shall be entitled
to receive and Borrowers shall be obligated to pay a mutually agreeable amendment fee to Agent for
the pro rata benefit of those Lenders who increase their Commitment and any new Lenders, such fee
to be based upon the increase in their Commitments only and not on their aggregate Commitments
after giving effect to such increase.
(b) If any requested increase in the Commitments is agreed to in accordance with subsection
(a) above, Agent and Borrowers shall determine the effective date of such increase (the “Increase
Effective Date”). Agent, with the consent and approval of Borrowers, shall promptly confirm in
writing to Lenders the final allocation of such increase as of the Increase Effective Date, and
each new Lender and each existing Lender that has increased its Commitment shall purchase Loans and
Letter of Credit Obligations from each other Lender in an amount such that, after such purchase or
purchases, the amount of outstanding Loans and Letter of Credit Obligations from each Lender shall
equal such Lender’s respective Pro Rata Share of the Commitments, as modified to give effect to
such increase, multiplied by the aggregate amount of Loans outstanding and Letter of Credit
Obligations from all Lenders. As condition precedents to the effectiveness of such increase,
Borrowers shall deliver to Agent (i) a certificate dated as of the Increase Effective Date (in
sufficient copies for each Lender) signed by the Chief Financial Officer of Borrowers, including a
compliance certificate demonstrating compliance with the terms of this Agreement and certification
that, both before and after giving effect to such increase, each representation and warranty
contained in Section 8 is true and correct in all material respects on and as of the Increase
Effective Date (except to the extent that any such representation or warranty is stated to relate
solely to an earlier date), that the requested increase is permitted under all Material Contracts,
and that no Default or Event of Default exists, and (ii) legal opinions from counsel to Borrowers
in form and substance acceptable to Agent that, among other things, the requested increase in the
Commitments provided for herein does not violate any Material Contract. Upon the request of any
Lender, Borrowers shall deliver one or more promissory notes reflecting the new or increased
Commitment of each such Lender as of the Increase Effective Date.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Agent, for the benefit of Lenders, interest on the
outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on
and after the date of any Event of Default or termination hereof or on the principal amount of the
Loans at any time outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Agent’s knowledge or consent and
whether made before or after an Event of Default) shall be payable ON DEMAND.
(b) Borrowers (or Administrative Borrower on behalf of Borrowers) may from time to time
request Eurodollar Rate Loans or that Prime Rate Loans be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request
from Borrowers (or Administrative Borrower on behalf of Borrowers) shall specify the amount of the
Eurodollar Rate Loan or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans
or the amount of the Eurodollar Rate Loan to be continued (subject to the limits set forth below)
and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject
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to the terms and conditions contained herein, two (2) Business Days after receipt by Agent of such
a request from Borrowers (or Administrative Borrower on behalf of Borrowers), such Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, provided, that, (i) no Event of Default, or act, condition or event which with notice
or passage of time or both would constitute an Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination of this Agreement, (iii)
Borrowers (or Administrative Borrower on behalf of Borrowers) shall have complied with such
customary procedures as are established by Agent and specified by Agent to Borrowers from time to
time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than four (4) Interest
Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $3,000,000 or an integral multiple of $1,000,000 in excess
thereof, and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by Borrowers (or Administrative Borrower on behalf of
Borrowers). Any request by Borrowers (or Administrative Borrower on behalf of Borrowers) for a
Eurodollar Rate Loan or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits
in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar
Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had
purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last
day of the applicable Interest Period, unless Agent has received and approved a request to continue
such Eurodollar Rate Loan at least two (2) Business Days prior to such last day in accordance with
the terms hereof. Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to
convert to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed.
Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at
its option, charge any loan account of Borrowers) any amounts required to compensate any Lender or
participant with Lender for any loss (including loss of anticipated profits), cost or expense
incurred by such Person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans
pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the account of Agent and Lenders, as
applicable, 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. Interest
shall also be payable with respect to any Eurodollar Rate Loans on the last day of each applicable
Interest Period with respect to such Loans. Borrower acknowledges and understands that the
calculation of interest on the basis of the actual days elapsed over the period of a three hundred
sixty (360) day year as opposed to a year of three hundred sixty-five (365) or three hundred
sixty-six (366) days results in a higher effective rate of interest. The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day
of the month in which any such change occurs. In no event shall charges constituting interest
payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be deemed amended to
conform thereto.
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3.2 Fees.
Borrowers agree to pay to Agent the following non-refundable fees as follows:
(a) the fees set forth in the Fee Letter; and
(b) on the first day of each month in arrears for the benefit of Lenders, an unused line fee
at a rate equal to one quarter of one percent (0.250%) per annum calculated upon the amount by
which the Maximum Credit exceeds the average daily principal balance of the outstanding Loans and
Letter of Credit Obligations during the immediately preceding month (or part thereof) (the “Average
Daily Balance”) while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of each month in arrears
and shall be fully earned when due; and
(c) in addition to any charges, fees or expenses charged by Issuing Bank in connection with
the Letters of Credit, Borrowers shall pay to Agent, for the benefit of Lenders, (i) a fronting fee
equal to 0.125% of the stated amount of each Letter of Credit, which fee shall be payable upon
issuance of the Letter of Credit and on each anniversary date of such issuance, and shall be
payable on any increase in stated amount made between any such dates, and (ii) a letter of credit
fee at a rate equal to the applicable margin set forth in Exhibit B hereto, on a per annum
basis, in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, on the daily
outstanding balance of the Letter of Credit Obligations for the immediately preceding month (or
part thereof), payable in arrears as of the first day of each succeeding month, except that Agent
may, and upon the written direction of Required Lenders shall, require Borrowers to pay to Agent
for the ratable benefit of Lenders such letter of credit fee, at a rate equal to the Default Rate
per annum on such daily outstanding balance for: (x) the period from and after the date of
termination hereof until Agent and Lenders have received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrowers) and (y) the period from and after the date
of the occurrence of an Event of Default for so long as such Event of Default is continuing as
determined by Agent. Such letter of credit fee shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall
survive the termination of this Agreement.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the interpretation of,
any law or regulation is introduced, including, without limitation, with respect to reserve
requirements, applicable to any Lender or any banking or financial institution from whom any Lender
borrows funds or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies
with any future guideline or request from any central bank or other Governmental Authority or (iii)
a Funding Bank, any Lender or Issuing Bank determines that the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would have the effect
described below, or a Funding Bank, any Lender or Issuing Bank complies with any request or
directive regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set forth in this clause
(iii), such adoption, change or compliance has or would have the direct or indirect effect of
reducing the rate of return on any Lender’s or Issuing Bank’s capital as a consequence of its
obligations hereunder to a level below that which such Lender or Issuing Bank could have achieved
but for such adoption, change or compliance (taking
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into consideration the Funding Bank’s or Lender’s or Issuing Bank’s policies with respect to
capital adequacy) by an amount deemed by such Lender or Issuing Bank to be material, and the result
of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase
in the cost to any Lender or Issuing Bank of funding or maintaining the Loans, the Letters of
Credit or its Commitment, then Borrowers and Guarantors shall from time to time upon demand by
Agent pay to Agent additional amounts sufficient to indemnify such Lender or Issuing Bank, as the
case may be, against such increased cost on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount indemnified). A certificate as to the
amount of such increased cost shall be submitted to Administrative Borrower by Agent or the
applicable Lender and shall be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (a) Agent shall have determined in good
faith (which determination shall be conclusive and binding upon Borrowers and Guarantors) that, by
reason of circumstances affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Adjusted Eurodollar Rate for such Interest Period, (b) Agent has received
notice from the Required Lenders that the Adjusted Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to Lenders of making or
maintaining Eurodollar Rate Loans during such Interest Period, or (c) Dollar deposits in the
principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable
are not generally available in the London interbank market, Agent shall give telecopy or telephonic
notice thereof to Administrative Borrower as soon as practicable thereafter, and will also give
prompt written notice to Administrative Borrower when such conditions no longer exist. If such
notice is given (i) any Eurodollar Rate Loans requested to be made on the first day of such
Interest Period shall be made as Prime Rate Loans, (ii) any Loans that were to have been converted
on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be
converted to or continued as Prime Rate Loans and (iii) each outstanding Eurodollar Rate Loan shall
be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans.
Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or
continued as such, nor shall any Borrower (or Administrative Borrower on behalf of any Borrower)
have the right to convert Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of or any change in any law,
treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or
other Governmental Authority or in the interpretation or application thereof occurring after the
date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (a) Agent or such Lender shall promptly give written
notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever
such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such
Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to
make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (c) such Lender’s Loans then
outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans
on the respective last days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period with respect thereto,
Borrowers and Guarantors shall pay to such Lender such amounts, if any, as may be required pursuant
to Section 3.3(d) below.
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(d) Borrowers and Guarantors shall indemnify Agent and each Lender and shall hold Agent and
each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a
consequence of (d) default by any Borrower in making a borrowing of, conversion into or extension
of Eurodollar Rate Loans after such Borrower (or Administrative Borrower on behalf of such
Borrower) has given a notice requesting the same in accordance with the provisions of this
Agreement, (e) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after
such Borrower has given a notice thereof in accordance with the provisions of this Agreement, and
(f) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification
may include an amount equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from
the date of such prepayment or of such failure to borrow, convert or extend to the last day of the
applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest
Period that would have commenced on the date of such failure) in each case at the applicable rate
of interest for such Eurodollar Rate Loans provided for herein over (ii) the amount of interest (as
determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such
amount by placing such amount on deposit for a comparable period with leading banks in the
interbank Eurodollar market. This covenant shall survive the termination of this Agreement and the
payment of the Obligations.
3.4 Maximum Interest.
(a) Notwithstanding anything to the contrary contained in this Agreement or any of the
other Financing Agreements, in no event whatsoever shall the aggregate of all amounts that are
contracted for, charged or received by Lenders pursuant to the terms of this Agreement or any of
the other Financing Agreements and that are deemed interest under applicable law exceed the Maximum
Interest Rate (including, to the extent applicable, the provisions of Section 5197 of the Revised
Statutes of the United States of America as amended, 12 U.S.C. Section 85, as amended). No
agreements, conditions, provisions or stipulations contained in this Agreement or any of the other
Financing Agreements, or any Event of Default, or the exercise by Lenders of the right to
accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of
any option whatsoever contained in this Agreement or any of the other Financing Agreements, or the
prepayment by Borrowers of any of the Obligations, or the occurrence of any event or contingency
whatsoever shall entitle Agent or Lenders to contract for, charge or receive in any event, interest
or any charges, amounts, premiums or fees deemed interest by applicable law in excess of the
Maximum Interest Rate. In no event shall Borrowers be obligated to pay interest or such amounts as
may be deemed interest under applicable law in amounts which exceed the Maximum Interest Rate. All
agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever
operate to bind, obligate or compel Borrowers to pay interest or such amounts which are deemed to
constitute interest in amounts which exceed the Maximum Interest Rate shall be without binding
force or effect, at law or in equity, to the extent of the excess of interest or such amounts which
are deemed to constitute interest over such Maximum Interest Rate.
(b) In the event any Interest is charged or received in excess of the Maximum Interest Rate
(“Excess”), each Borrower acknowledges and stipulates that any such charge or receipt shall be the
result of an accident and bona fide error, and that any Excess received by Agent and Lenders shall
be applied first, to the payment of the then outstanding and unpaid principal hereunder; second to
the payment of the other Obligations then outstanding and unpaid; and third, returned to Borrowers,
it being the intent of the parties hereto not to enter into a usurious or otherwise illegal
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relationship. The right to accelerate the maturity of any of the Obligations does not include the
right to accelerate any interest that has not otherwise accrued on the date of such acceleration,
and Agent and Lenders does not intend to collect any unearned interest in the event of any such
acceleration. Each Borrower recognizes that, with fluctuations in the rates of interest set forth
in Section 3.1 of this Agreement and the Maximum Interest Rate, such an unintentional result could
inadvertently occur. All monies paid to Agent or Lenders hereunder or under any of the other
Financing Agreements, whether at maturity or by prepayment, shall be subject to any rebate of
unearned interest as and to the extent required by applicable law.
(c) By the execution of this Agreement, each Borrower agrees that (A) the credit or return of
any Excess shall constitute the acceptance by Borrowers of such Excess, and (B) no Borrower shall
seek or pursue any other remedy, legal or equitable, against Agent and Lenders, based in whole or
in part upon contracting for, charging or receiving any interest or such amounts which are deemed
to constitute interest in excess of the Maximum Interest Rate. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by Agent and Lenders, all
interest at any time contracted for, charged or received from Borrowers in connection with this
Agreement or any of the other Financing Agreements shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread during the entire term of this Agreement in
accordance with the amounts outstanding from time to time hereunder and the Maximum Interest Rate
from time to time in effect in order to lawfully charge the maximum amount of interest permitted
under applicable laws.
(d) Borrowers, Agent and Lenders shall, to the maximum extent permitted under applicable law,
(i) characterize any non-principal payment as an expense, fee or premium rather than as interest
and (ii) exclude voluntary prepayments and the effects thereof.
(e) The provisions of this Section 3.4 shall be deemed to be incorporated into each of the
other Financing Agreements (whether or not any provision of this Section is referred to therein).
Each of the Financing Agreements and communications relating to any interest owed by Borrowers and
all figures set forth therein shall, for the sole purpose of computing the extent of the
Obligations, be automatically recomputed by Borrowers, and by any court considering the same, to
give effect to the adjustments or credits required by this Section.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letters of Credit. Each of the following is a
condition precedent to Agent and Lenders making the initial Loans and providing the initial Letters
of Credit hereunder:
(a) all requisite corporate action and proceedings in connection with the transactions
contemplated by this Agreement and the other Financing Agreements shall be satisfactory in form and
substance to Agent, and Agent shall have received all information and copies of all documents,
including records of requisite corporate action and proceedings which Agent may have requested in
connection therewith, such documents where requested by Agent or its counsel to be certified by
appropriate corporate officers or Governmental Authorities;
(b) all financial information, projections, budgets, business plans, cash flows and such other
information as Agent shall request from time to time, including (i) projected quarterly balance
sheets, income statements, statements of cash flows and Excess Availability of Borrowers
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and Guarantors for the period commencing July 1, 2007 through the end of the 2008 fiscal year of
Borrowers, (ii) projected annual balance sheets, income statements, statements of cash flows and
Excess Availability of Borrowers and Guarantors for the period commencing July 1, 2007 through the
end of the 2010 fiscal year of Borrowers (and in addition thereto, further projected income
statements of Borrowers and Guarantors commencing July 1, 2007 through the end of the 2011 and 2012
fiscal years of Borrowers), in each case as to the projections described in clauses (i) and (ii),
with the results and assumptions set forth in all of such projections in form and substance
satisfactory to Agent, and an opening pro forma balance sheet for Borrowers and Guarantors in form
and substance satisfactory to Agent, (iii) any updates or modifications to the projected financial
statements of Borrowers and Guarantors described hereinabove heretofore received by Agent, in each
case in form and substance satisfactory to Agent, and (iv) an aging of Accounts as of August 31,
2007, perpetual Inventory records as of August 31, 2007 and/or rollforwards of Accounts and
Inventory through the Closing Date, together with supporting documentation, each in form and
substance satisfactory to Agent;
(c) no material adverse change shall have occurred in the assets, business or financial
condition of Borrowers and their Subsidiaries, taken as a whole, since the date of Agent’s latest
field examination and no change or event shall have occurred which would impair the ability of
Borrowers or any Obligor to perform their obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Agent to enforce the Obligations or realize upon the
Collateral;
(d) Agent shall have completed its business and legal due diligence, with results satisfactory
to Agent, including (i) receipt and review of third party appraisals, in form and containing
assumptions and appraisal methods satisfactory to Agent by an appraiser acceptable to Agent on
which Agent and Lenders are permitted to rely, (ii) field examinations of the business and
Collateral of Borrowers in accordance with Agent’s customary procedures and practices and as
otherwise required by the nature and circumstances of the businesses of Borrowers, and (iii) to the
extent not delivered in connection with the Existing Loan Agreement, environmental assessments of
the Real Property of Borrowers conducted by an independent environmental engineering firm
acceptable to Agent and in form, scope and methodology acceptable to Agent, and Agent shall be
satisfied with the corporate and capital structure and management of Borrowers and with all legal,
tax, accounting and other matters relating to Borrowers;
(e) Agent shall have received, in form and substance satisfactory to Agent, all consents,
waivers, acknowledgments and other agreements from third Persons which Agent may deem necessary or
desirable in order to permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including Collateral Access Agreements by owners and lessors of leased premises of
Borrower and by warehouses at which Collateral is located;
(f) the Excess Availability as determined by Agent, as of the date hereof, shall be not less
than $10,000,000 after giving effect to the initial Loans made or to be made and Letters of Credit
issued or to be issued in connection with the initial transactions contemplated hereunder;
(g) Agent shall have received, in form and substance satisfactory to Agent, Deposit Account
Control Agreements by and among Agent, each Borrower and each bank where such Borrower has a
deposit account, in each case, duly authorized, executed and delivered by such
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bank and such Borrower (or Agent shall be the bank’s customer with respect to such deposit account
as Agent may specify);
(h) Agent shall have received evidence, in form and substance satisfactory to Agent, that
Agent has a valid perfected first priority security interest and lien in all of the Collateral;
(i) Agent shall have received and reviewed UCC search results for all jurisdictions in the
United States and Canada which assets of each Borrower and Guarantor are located, which search
results shall be in form and substance satisfactory to Agent;
(j) Agent shall have received, in form and substance satisfactory to Agent, an amendment to
the Factor Intercreditor Agreement duly executed and delivered by the parties thereto;
(k) Agent shall have received, in form and substance satisfactory to Agent, a Uniform
Commercial Code financing statements on Form UCC-1 or Form UCC-3, as applicable, duly filed in such
office or offices as may be necessary or, in the opinion of Agent, desirable to perfect Agent’s
liens in and to the collateral of Borrowers and their domestic Subsidiaries, and Agent shall have
received confirmation of the filing of all such financing statements;
(l) Agent shall have received the Solvency Certificate and all financial statements attached
as exhibits thereto;
(m) Agent shall have received, at least five (5) Business Days prior to the Closing Date, a
certificate reasonably satisfactory to the Agent, for benefit of itself and the Lenders, provided
by Borrowers that sets forth information required by the USA PATRIOT Act including, without
limitation, the identity of the Obligors, the name and address of the Obligors and other
information that will allow the Administrative Agent or any Lender, as applicable, to identify the
Obligors in accordance with the USA PATRIOT Act;
(n) Agent shall have received evidence of insurance and loss payee endorsements required
hereunder and under the other Financing Agreements, in form and substance satisfactory to Agent,
and certificates of insurance policies and/or endorsements naming Agent as loss payee;
(o) Agent shall have received, in form and substance satisfactory to Agent, such opinion
letters of counsel to Borrowers and Guarantors with respect to the Financing Agreements and such
other matters as Agent may request; and
(p) the other Financing Agreements and all instruments and documents hereunder, including
amendments to the Mortgages, shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letters of Credit. Each of the following is an
additional condition precedent to Agent and Lenders making Loans and/or providing Letters of Credit
to Borrowers, including the initial Loans and Letters of Credit and any future Loans and Letters of
Credit:
(a) all representations and warranties contained herein and in the other Financing Agreements
shall be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of the making of each such Loan
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or providing each such Letter of Credit, and after giving effect thereto, except to the extent that
such representations and warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist,
and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any
court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit,
restrain or otherwise affect (A) the making of the Loans or providing the Letters of Credit, or (B)
the consummation of the transactions contemplated pursuant to the terms hereof or the other
Financing Agreements or (ii) has or could reasonably be expected to have a Material Adverse Effect;
and
(c) no Default or Event of Default shall exist or have occurred and be continuing on and as of
the date of the making of such Loan or providing each such Letter of Credit and after giving effect
thereto.
4.3 Conditions Subsequent to All Loans and Letters of Credit. The obligation of Agent and
Lenders to continue to make Loans and/or provide Letters of Credit to Borrowers is subject to the
fulfillment, on or before the date appliable thereto, of the condition subsequent set forth below
(the failure by Borrowers to so perform or cause to be performed constituting an Event of Default):
(a) on or before October ___, 2007, Agent shall have received, reviewed and found acceptable
fully paid endorsements to Agent’s mortgagee title insurance policies (or binding commitments to
issue endorsements to Agent’s mortgagee title insurance policies, marked to Agent’s satisfaction to
evidence the form of such endorsements to be delivered after the Closing Date) with respect to the
title insurance policies that insure the Mortgages to create a valid lien on all Real Property
subject thereto, which endorsements (and commitments therefor) shall give effect to the
transactions contemplated by this Agreement, shall “down-date” the effective date of the title
insurance policy (or policies) to which they relate and shall not have a specific survey exception
SECTION 5. GRANT OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all Obligations, (i) each
Borrower hereby confirms the pledge and assignment to Agent, for itself and the benefit of Secured
Parties, of the Collateral under (and as defined in) the Existing Loan Agreement and the other
Financing Agreements (as defined in the Existing Loan Agreement), and the creation in favor of
Agent, for the benefit of the Secured Parties, under the Existing Loan Agreement and such other
Financing Agreements of a continuing security interest in and Lien upon such Collateral, all as
security for the Obligations, and (ii) each Borrower hereby grants to Agent, for itself and the
benefit of Secured Parties, a continuing security interest in, a lien upon, and a right of set off
against, and hereby assigns to Agent, for itself and the benefit of Lenders, as security, all
personal and real property and fixtures, and interests in property and fixtures, of each Borrower,
whether now owned or hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or acquired by Agent or any
Lender, collectively, the “Collateral”), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all Intellectual Property
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(c) all goods, including, without limitation, Inventory and Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper including, without limitation, all tangible and electronic chattel
paper;
(f) all instruments including, without limitation, all promissory notes;
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker’s acceptances and similar instruments and including all
letter-of-credit rights;
(j) all supporting obligations and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Receivables and other Collateral, including
(i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit
and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, (iii) goods described in invoices, documents, contracts or instruments with respect
to, or otherwise representing or evidencing, Receivables or other Collateral, including returned,
repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other
Persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether certificated or uncertificated,
securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii)
monies, credit balances, deposits and other property of such Borrower now or hereafter held or
received by or in transit to Agent, any Lender or its Affiliates or at any other depository or
other institution from or for the account of such Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise;
(1) all commercial tort claims, including, without limitation, those identified in the
Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form, including insurance proceeds and
all claims against third parties for loss or damage to or destruction of or other involuntary
conversion of any kind or nature of any or all of the other Collateral.
Subject to the restrictions on the incurrence of purchase money Indebtedness in Section 9.9(b)
hereof but notwithstanding anything to the contrary contained in clause (c) above, the types or
items of Collateral described in such clause shall not include any Equipment purchased with the
proceeds of such purchase money Indebtedness which is, or at the time of any Borrower’s
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acquisition thereof shall be, subject to a purchase money lien or security interest (including
capitalized or finance leases) permitted under Section 9.8 hereof if: (a) the valid grant of a
security interest or lien to Agent, for itself and the ratable benefit of Lenders, in such item of
Equipment is prohibited by the terms of the agreement between such Borrower and the holder of such
purchase money lien or security interest and the consent of such holder to Agent’s lien has not
been or is not waived, or the consent of such holder has not been or is not otherwise obtained, or
under applicable law such prohibition cannot be waived and (b) the purchase money lien on such item
of Equipment is or shall become and remain valid and perfected.
5.2 Perfection of Security Interests.
(a) Each Borrower irrevocably and unconditionally authorizes Agent (or its agent) to
file at any time and from time to time such financing statements with respect to the Collateral
naming Agent or its designee as the secured party and such Borrower as debtor, as Agent may
require, and including any other information with respect to such Borrower or otherwise required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine,
together with any amendment and continuations with respect thereto, which authorization shall apply
to all financing statements filed on, prior to or after the date hereof. Each Borrower hereby
ratifies and approves all financing statements naming Agent or its designee as secured party and
such Borrower as debtor with respect to the Collateral (and any amendments with respect to such
financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and
confirms the authorization of Agent to file such financing statements (and amendments, if any).
Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In the event that the description of the collateral in any
financing statement naming Agent or its designee as the secured party and any Borrower as debtor
includes assets and properties of such Borrower that do not at any time constitute Collateral,
whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such
financing statement shall nonetheless be deemed authorized by such Borrower to the extent of the
Collateral included in such description and it shall not render the financing statement ineffective
as to any of the Collateral or otherwise affect the financing statement as it applies to any of the
Collateral. In no event shall any Borrower at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing statement (or amendment
or continuation with respect thereto) naming Agent or its designee as secured party and such
Borrower as debtor.
(b) No Borrower has any chattel paper (whether tangible or electronic) or instruments as of
the date hereof, except as set forth in the Information Certificate. In the event that any
Borrower shall be entitled to or shall receive any chattel paper or instrument after the date
hereof, such Borrower shall promptly notify Agent thereof in writing. Promptly upon the receipt
thereof by or on behalf of any Borrower (including by any agent or representative), such Borrower
shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that
such Borrower has or may at any time acquire, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent’s option, each Borrower shall, or Agent may at any time on
behalf of such Borrower, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Agent with the following legend referring
to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the
security interest of Wachovia Bank, National Association, as Agent, and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured
party.”
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(c) In the event that any Borrower shall at any time hold or acquire an interest in any
electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent’s request, each Borrower shall take,
or cause to be taken, such actions as Agent may request to give Agent control of such electronic
chattel paper under Section 9-105 of the UCC and control of such transferable record under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) No Borrower has any deposit accounts as of the date hereof, except as set forth in the
Information Certificate. No Borrower shall, directly or indirectly, after the date hereof
open, establish or maintain any deposit account unless each of the following conditions is
satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice
of the intention of such Borrower to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Agent the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened or established, the
individual at such bank with whom such Borrower is dealing and the purpose of the account, (ii) the
bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or
before the opening of such deposit account, such Borrower shall as Agent may specify either (A)
deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly
authorized, executed and delivered by such Borrower and the bank at which such deposit account is
opened and maintained or (B) arrange for Agent to become the customer of the bank with respect to
the deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d)
shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of any Borrower’s salaried
employees.
(e) No Borrower owns or holds, directly or indirectly, beneficially or as record owner or
both, any investment property, as of the date hereof, or have any investment account, securities
account, commodity account or other similar account with any bank or other financial institution or
other securities intermediary or commodity intermediary as of the date hereof, in each case except
as set forth in the Information Certificate.
(f) In the event that any Borrower shall be entitled to or shall at any time after the date
hereof hold or acquire any certificated securities, such Borrower shall promptly endorse, assign
and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify. If any securities, now or hereafter
acquired by any Borrower are uncertificated and are issued to such Borrower its nominee directly by
the issuer thereof, such Borrower shall immediately notify Agent thereof and shall as Agent may
specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such
securities, without further consent of Borrower or such nominee, or (B) arrange for Agent to become
the registered owner of the securities.
(g) No Borrower shall, directly or indirectly, after the date hereof open, establish or
maintain any investment account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity intermediary unless
each of the following conditions is satisfied: (A) Agent shall have received not less than five (5)
Business Days prior written notice of the intention of such Borrower to open or establish such
account which notice shall specify in reasonable detail and specificity reasonably acceptable to
Agent
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the name of the account, the owner of the account, the name and address of the securities
intermediary or commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower is dealing and the purpose of the account,
(B) the securities intermediary or commodity intermediary (as the case may be) where such account
is opened or maintained shall be acceptable to Agent, and (C) on or before the opening of such
investment account, securities account or other similar account with a securities intermediary or
commodity intermediary, such Borrower shall, as Agent may specify, either (1) execute and deliver,
and cause to be executed and delivered to Agent, an Investment Property Control Agreement with
respect thereto duly authorized, executed and delivered by such Borrower and such securities
intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder
with respect to such investment property on terms and conditions acceptable to Agent.
(h) No Borrower is the beneficiary or otherwise entitled to any right to payment under any
letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set
forth in the Information Certificate. In the event that any Borrower shall be entitled to
or shall receive any right to payment under any letter of credit, banker’s acceptance or any
similar instrument, whether as beneficiary thereof or otherwise after the date hereof, such
Borrower shall promptly notify Agent thereof in writing. Each Borrower shall immediately, as Agent
may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter
of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any
other nominated Person obligated to make any payment in respect thereof (including any confirming
or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of
the proceeds of the letter of credit to Agent by such Borrower and agreeing to make all payments
thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at
Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or
similar instrument (as the case may be).
(i) No Borrower has any commercial tort claims as of the date hereof, except as set forth in
the Information Certificate. In the event that any Borrower shall at any time after the
date hereof have any commercial tort claims, such Borrower shall promptly notify Agent thereof in
writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by such Borrower to Agent of a security
interest in such commercial tort claim (and the proceeds thereof). In the event that such notice
does not include such grant of a security interest, the sending thereof by such Borrower to Agent
shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial
tort claim described therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise
arising by the execution by such Borrower of this Agreement or any of the other Financing
Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and such Borrower as debtor, or
any amendments to any financing statements, covering any such commercial tort claim as Collateral.
In addition, each Borrower shall promptly upon Agent’s request, execute and deliver, or cause to be
executed and delivered, to Agent such other agreements, documents and instruments as Agent may
require in connection with such commercial tort claim.
(j) No Borrower has any goods, documents of title or other Collateral in the custody, control
or possession of a third party as of the date hereof, except as set forth in the Information
Certificate and except for goods located in the United States in transit to a location of such
Borrower permitted herein in the ordinary course of business of such Borrower in the possession of
the carrier transporting such goods. In the event that any goods, documents of title or
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other Collateral are at any time after the date hereof in the custody, control or possession of any
other Person not referred to in the Information Certificate or such carriers, Borrowers
shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, each Borrower shall
deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such
Person and the Borrower that is the owner of such Collateral.
(k) Each Borrower shall take any other actions reasonably requested by Agent from time to time
to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the
security interest of Agent in any and all of the Collateral, including, (i) executing, delivering
and, where appropriate, filing financing statements and amendments relating thereto under the UCC
or other applicable law, to the extent, if any, that such Borrower’s signature thereon is required
therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or priority of, or ability of
Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or priority of, or ability
of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents
and approvals of any Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other Person obligated on Collateral, and taking all actions
required by any earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers’ Loan Account. Agent shall maintain one or more loan account(s) on its books in
which shall be recorded (a) all Loans, Letters of Credit and other Obligations and the Collateral,
(b) all payments made by or on behalf of Borrower and (c) all other appropriate debits and credits
as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries
in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect
from time to time.
6.2 Statements. Agent shall render to Administrative Borrower each month a statement
setting forth the balance in Borrowers’ loan account(s) maintained by Agent for Borrowers pursuant
to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each
such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors
or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon
Borrowers as an account stated except to the extent that Agent receives a written notice from
Administrative Borrower of any specific exceptions of Administrative Borrower thereto within thirty
(30) days after the date such statement has been mailed by Agent. Until such time as Agent shall
have rendered to Administrative Borrower a written statement as provided above, the balance in
Borrowers’ loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and
Lenders by Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense, blocked accounts or
lockboxes and related blocked accounts (in either case, “Blocked Accounts”), as Agent may specify,
with such banks as are acceptable to Agent into which Borrowers shall promptly deposit and direct
their 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,
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whether by cash, check or other manner. Borrowers shall deliver, or cause to be delivered to Agent
a Deposit Account Control Agreement in form and substance satisfactory to Agent, duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as provided in Section
5.2 hereof or at any time and from time to time Agent may become the bank’s customer with respect
to any of the Blocked Accounts and promptly upon Agent’s request, Borrowers shall execute and
deliver such agreements and documents as Agent may require in connection therewith. Prior to the
occurrence of a Cash Dominion Trigger Date, Borrowers shall be permitted to transfer cash from the
Blocked Accounts and to use the funds therein for working capital and general corporate purposes to
the extent permitted herein. Upon the occurrence of a Cash Dominion Trigger Date, (i) each
Borrower and Guarantor agrees that all payments made to such Blocked Accounts or other funds
received and collected by Agent or any Lender, whether in respect of the Receivables, as proceeds
of Inventory or other Collateral, or otherwise, shall be treated as payments to Agent and Lenders
in respect of the Obligations and shall constitute the property of Agent and Lenders to the extent
of the then outstanding Obligations, and (ii) the Agent may disregard Borrowers’ instructions with
respect to the Blocked Accounts, exercise exclusive dominion and control over the Blocked Accounts,
and apply funds deposited therein as directed by the Required Lenders or as otherwise provided
herein. Agent’s rights to exercise exclusive dominion and control over the Blocked Accounts shall
continue in effect only until such time (if any) as Agent has confirmed that (i) no Event of
Default then exists and (ii) Borrowers have maintained Excess Availability of at least $5,000,000
for 60 consecutive days.
(b) Each Borrower and all of such Borrower’s shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as the property of
Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts or other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to Agent. In no event shall
the same be commingled with any Borrower’s own funds. Borrowers agree to reimburse Agent on demand
for any amounts owed or paid to any bank at which a Blocked Account is established or any other
bank or Person involved in the transfer of funds to or from the Blocked Accounts arising out of
Agent’s payments to or indemnification of such bank or Person. The obligation of Borrowers to
reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the termination of this
Agreement.
6.4 Payments. All Obligations shall be payable to the Agent Payment Account as provided in
Section 6.3 or such other place as Agent may designate from time to time. Agent shall apply
payments received or collected from any Borrower or for the account of any Borrowers (including the
monetary proceeds of collections or of realization upon any Collateral) as follows: first, to pay
any fees, indemnities or expense reimbursements then due to Agent from Borrowers; second, to pay
any fees, indemnities or expense reimbursements then due to Lenders from Borrower; third, to pay
interest due in respect of any Loans (and including any Special Agent Advances); fourth, to pay or
prepay principal in respect of Special Agent Advances; fifth, to pay principal due in respect of
the Loans and to pay Hedging Obligations up to the amount of Current Hedging Exposure, and Letters
of Credit; sixth, to pay or prepay any other Obligations (including any Hedging Obligations in
excess of the Current Hedging Exposure) whether or not then due, in such order and manner as Agent
determines. Notwithstanding anything to the contrary contained in this Agreement, unless so
directed by Administrative Borrower, or unless an Event of Default shall exist or have occurred and
be continuing. Agent shall not apply any payments which it receives to any Eurodollar Rate Loans,
except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Rate
Loans, or (b) in the event that there are no outstanding Prime Rate Loans. At Agent’s option, all
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principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of Borrowers. Borrowers
shall make all payments to Agent and Lenders on the Obligations free and clear of, and without
deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes,
levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any
Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds
shall be reinstated and continue and this Agreement shall continue in full force and effect as if
such payment or proceeds had not been received by Agent or such Lender. Borrowers shall be liable
to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such
payment or proceeds. This Section 6.4 shall survive the payment of the Obligations and the
termination of this Agreement.
6.5 Authorization to Make Loans. Agent is authorized to make the Loans and provide Letters
of Credit based upon telephonic or other instructions received from anyone purporting to be an
officer of any Borrower or other authorized Person or, at the discretion of Agent, if such Loans
are necessary to satisfy any Obligations. All requests for Loans or Letters of Credit hereunder
shall specify the date on which the requested advance is to be made or Letters of Credit
established (which day shall be a Business Day) and the amount of the requested Loan. Requests
received after 11:00 a.m. (Atlanta, Georgia) time on any day shall be deemed to have been made as
of the opening of business on the immediately following Business Day. All Loans and Letters of
Credit under this Agreement shall be conclusively presumed to have been made to, and at the request
of and for the benefit of, Borrowers when deposited to the credit of Borrowers or otherwise
disbursed or established in accordance with the instructions of Borrowers or in accordance with the
terms and conditions of this Agreement.
6.6 Use of Proceeds. All Loans made or Letters of Credit provided by Agent or Lenders to
Borrowers pursuant to the provisions hereof shall be used by Borrowers only for: (a) payments to
each of the Persons listed in the disbursement direction letter furnished by Borrowers to Agent on
the Closing Date; (b) costs, expenses and fees in connection with the preparation, negotiation,
execution and delivery of this Agreement and the other Financing Agreements; and (c) general
operating, working capital and other proper corporate purposes of Borrowers not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring
any indebtedness which was originally incurred to purchase or carry any margin security or for any
other purpose which might cause any of the Loans to be considered a “purpose credit” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.
6.7 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement: (a) the
making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata
Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of
one or more of Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.
6.8 Sharing of Payments, Etc.
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(a) Borrowers agree that, in addition to (and without limitation of) any right of
setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be
entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section
12.3(b) hereof), to offset balances held by it for the account of any Borrower at any of its
offices, in dollars or in any other currency, against any principal of or interest on any Loans
owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to such Borrower), in which case it shall
promptly notify Borrowers and Agent thereof; provided, that, such Lender’s failure
to give such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower payment of any principal of
or interest on any Loan owing to it or payment of any other amount under this Agreement or any of
the other Financing Agreements through the exercise of any right of setoff, banker’s lien or
counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a
result of such payment, such Lender shall have received more than its Pro Rata Share of the
principal of the Loans or more than its share of such other amounts then due hereunder or
thereunder by Borrowers to such Lender than the percentage thereof received by any other Lender, it
shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and
simultaneously purchase from such other Lenders a participation in the Loans or such other amounts,
respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be equitable, to the end
that all Lenders shall share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in accordance with their
respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make
appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) Borrowers agree that any Lender purchasing a participation (or direct interest) as
provided in this Section may exercise, in a manner consistent with this Section, all rights of
setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such
Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any right of setoff,
banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other Indebtedness or
obligation of any Borrower. If, under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender
shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in
any event, exercise its rights in respect of such secured claim in a manner consistent with the
rights of Lenders entitled under this Section to share in the benefits of any recovery on such
secured claim.
6.9 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient manner and to minimize
the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of
this Section, make available, on behalf of Lenders, the full amount of the Loans requested or
charged to Borrowers’ loan account(s) or otherwise to be advanced by Lenders pursuant to the terms
hereof, without requirement of prior notice to Lenders of the proposed Loans.
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(b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section,
the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00
p.m. (Atlanta, Georgia time) on the Business Day immediately preceding the date of each settlement
computation; provided, that, Agent retains the absolute right at any time or from
time to time to make the above described adjustments at intervals more frequent than weekly, but in
no event more than twice in any week. Agent shall deliver to each of the Lenders after the end of
each week, or at such lesser period or periods as Agent shall determine, a summary statement of the
amount of outstanding Loans for such period (such week or lesser period or periods being
hereinafter referred to as a “Settlement Period”). If the summary statement is sent by Agent and
received by a Lender prior to 12:00 p.m. (Atlanta, Georgia time), then such Lender shall make the
settlement transfer described in this Section by no later than 3:00 p.m. (Atlanta, Georgia time) on
the same Business Day and if received by a Lender after such time, then such Lender shall make the
settlement transfer by not later than 3:00 p.m. (Atlanta, Georgia time) on the next Business Day
following the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender’s
Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the
outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith
(but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire
transfer in immediately available funds the amount of the increase. Alternatively, if the amount of
a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount
of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent
shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount
of the decrease. The obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent.
Agent and each Lender agrees to xxxx its books and records at the end of each Settlement Period to
show at all times the dollar amount of its Pro Rata Share of the outstanding Loans and Letters of
Credit. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans
to the extent such Loans have been funded by such Lender. Because Agent on behalf of Lenders may be
advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with
the amount of Loans actually advanced by and repaid to each Lender and Agent and shall accrue from
and including the date such Loans are so advanced to but excluding the date such Loans are either
repaid by Borrowers or actually settled with the applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available and the settlement described
above shall not yet have occurred, upon repayment of any Loans by Borrower, Agent may apply such
amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of
weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to
provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior
to Agent’s disbursement of such Loan to Borrower. In such event, all Loans under this Agreement
shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender
shall be responsible for any default by any other Lender in the other Lender’s obligation to make a
Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a
result of the default by any other Lender in the other Lender’s obligation to make a Loan
hereunder.
(d) If Agent is funding a particular Loan to a Borrower (or Administrative Borrower for the
benefit of such Borrower) pursuant to this Section above on any day, Agent may
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assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan
requested or otherwise made on such day and Agent may, in its discretion, but shall not be
obligated to, cause a corresponding amount to be made available to or for the benefit of Borrower
on such day. If Agent makes such corresponding amount available to Borrower and such corresponding
amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover
such corresponding amount on demand from such Lender together with interest thereon for each day
from the date such payment was due until the date such amount is paid to Agent at the Federal Funds
Rate for each day during such period (as published by the Federal Reserve Bank of Atlanta or at
Agent’s option based on the arithmetic mean determined by Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (Atlanta, Georgia time) on that
day by each of the three leading brokers of Federal funds transactions in New York City selected by
Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the period
in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to
the contrary contained in this Agreement or any of the other Financing Agreements, the amount so
advanced by Agent to or for the benefit of any Borrower shall, for all purposes hereof, be a Loan
made by Agent for its own account. Upon any such failure by a Lender to pay Agent, Agent shall
promptly thereafter notify Administrative Borrower of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days of Administrative
Borrower’s receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans
made available by Agent on such Lender’s behalf, or any Lender who fails to pay any other amount
owing by it to Agent, is a “Defaulting Lender”. Agent shall not be obligated to transfer to a
Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal,
interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to a Borrower the amount of all such payments
received or retained by it for the account of such Defaulting Lender. For purposes of voting or
consenting to matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender and such
Lender’s Commitment shall be deemed to be zero (0). This Section shall remain effective with
respect to a Defaulting Lender until such default is cured. The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by any Borrower or any Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements
shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any rights that any
Borrower may have against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
6.10 Obligations Several; Independent Nature of Lenders’ Rights. The obligation of
each Lender hereunder is several, and no Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other
Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed
to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender
to be joined as an additional party in any proceeding for such purpose.
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6.11 Appointment of Administrative Borrower as Agent for Requesting Loans and
Receipts of Loans and Statements.
(a) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower
as its agent and attorney-in-fact to request and receive Loans and Letters of Credit pursuant to
this Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf
of such Borrower. Agent and Lenders may disburse the Loans to such bank account of Administrative
Borrower or a Borrower or otherwise make such Loans to a Borrower and provide such Letters of
Credit to a Borrower as Administrative Borrower may designate or direct, without notice to any
other Borrower or Guarantor. Notwithstanding anything to the contrary contained herein, Agent may
at any time and from time to time require that Loans to or for the account of any Borrower be
disbursed directly to an operating account of such Borrower.
(b) Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent
and attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative Borrower shall
ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the
account of Parent, or the issuance of any Letter of Credit for a Borrower hereunder, shall be paid
to or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to receive statements on account and all other notices from
Agent and Lenders with respect to the Obligations or otherwise under or in connection with this
Agreement and the other Financing Agreements.
(d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf
of any other Borrower or any Guarantor by Administrative Borrower shall be deemed for all purposes
to have been made by such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made directly by such
Borrower or Guarantor.
(e) No purported termination of the appointment of Administrative Borrower as agent as
aforesaid shall be effective, except after ten (10) days’ prior written notice to Agent.
6.12 Nature and Extent of Each Borrower’s Liability.
(a) Each Borrower shall be liable for, on a joint and several basis, and hereby
guarantees the timely payment by all other Borrowers of, all of the Loans and other Obligations,
regardless of which Borrower actually may have received the proceeds of any Loans or other
extensions of credit hereunder or the amount of such Loans received or the manner in which Agent or
any Lender accounts for such Loans or other extensions of credit on its books and records, it being
acknowledged and agreed that Loans to any Borrower inure to the mutual benefit of all Borrowers and
that Agent and Lenders are relying on the joint and several liability of Borrowers in extending the
Loans and other financial accommodations hereunder. Each Borrower hereby unconditionally and
irrevocably agrees that upon default in the payment when due (whether at stated maturity, by
acceleration or otherwise) of any principal of, or interest owed on, any of the Loans or other
Obligations, such Borrower shall forthwith pay the same, without notice or demand.
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(b) Each Borrower’s joint and several liability hereunder with respect to, and guaranty of,
the Loans and other Obligations shall, to the fullest extent permitted by applicable law, be
unconditional irrespective of (i) the validity, enforceability, avoidance or subordination of any
of the Obligations or of any promissory note or other document evidencing all or any part of the
Obligations, (ii) the absence of any attempt to collect any of the Obligations from any other
Borrower or any Guarantor or any Collateral or other security therefor, or the absence of any other
action to enforce the same, (iii) the waiver, consent, extension, forbearance or granting of any
indulgence by Agent or any Lender with respect to any provision of any instrument evidencing or
securing the payment of any of the Obligations, or any other agreement now or hereafter executed by
any other Borrower and delivered to Agent or any Lender, (iv) the failure by Agent to take any
steps to perfect or maintain the perfected status of its security interest in or lien upon, or to
preserve its rights to, any of the Collateral or other security for the payment or performance of
any of the Obligations or Agent’s release of any Collateral or of its security interests or liens
upon any Collateral, (v) Agent’s or Lenders’ election, in any proceeding instituted under the
Bankruptcy Code, for the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any
borrowing or grant of a security interest by any other Borrower, as debtor-in-possession under
Section 364 of the Bankruptcy Code, (vii) the release or compromise, in whole or in part, of the
liability of any Borrower or Guarantor for the payment of any of the Obligations, (viii) any
amendment or modification of any of the Financing Agreements or any waiver of a Default or Event of
Default, (ix) any increase in the amount of the Obligations beyond any limits imposed herein or in
the amount of any interest, fees or other charges payable in connection therewith, or any decrease
in the same, (x) the disallowance of all or any portion of Agent’s or any Lender’s claims against
any other Borrower or Guarantor for the repayment of any of the Obligations under Section 502 of
the Bankruptcy Code, or (xi) any other circumstance that might constitute a legal or equitable
discharge or defense of any Borrower. After the occurrence and during the continuance of any Event
of Default, Agent may proceed directly and at once, without notice to any Borrower or Guarantor,
against any or all of Borrowers to collect and recover all or any part of the Obligations, without
first proceeding against any other Borrower or Guarantor or against any Collateral or other
security for the payment or performance of any of the Obligations, and each Borrower waives any
provision under applicable law that might otherwise require Agent to pursue or exhaust its remedies
against any Collateral or Borrower or Guarantor before pursuing another Borrower or Guarantor.
Each Borrower consents and agrees that Agent shall be under no obligation to marshal any assets in
favor of any Borrower or Guarantor or against or in payment of any or all of the Obligations.
(c) No payment or payments made by a Borrower or Guarantor or received or collected by Agent
from a Borrower or any other Person by virtue of any action or proceeding or any setoff or
appropriation or application at any time or from time to time in reduction of or in payment of the
Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any
Borrower under this Agreement, each of whom shall remain jointly and severally liable for the
payment and performance of all Loans and other Obligations until full payment of the Obligations.
(d) Each Borrower is unconditionally obligated to repay the Obligations as a joint and several
obligor under this Agreement. If, as of any date, the aggregate amount of payments made by a
Borrower on account of the Obligations and proceeds of such Borrower’s Collateral that are applied
to the Obligations exceeds the aggregate amount of Loan proceeds actually used by such Borrower in
its business (such excess amount being referred to as an “Accommodation Payment”), then each of the
other Borrowers (each such Borrower being referred to as a “Contributing Borrower”) shall be
obligated to make contribution to such Borrower (the “Paying Borrower”) in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of
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each Borrower by the Allocable Percentage of the Borrower from whom contribution is sought
less (B) the amount, if any, of the then outstanding Accommodation Payment of such
Contributing Borrower (such last mentioned amount which is to be subtracted from the aforesaid
product to be increased by any amounts theretofore paid by such Contributing Borrower by way of
contribution hereunder, and to be decreased by any amounts theretofore received by such
Contributing Borrower by way of contribution hereunder); provided, however, that a
Paying Borrower’s recovery of contribution hereunder from the other Borrowers shall be limited to
that amount paid by the Paying Borrower in excess of its Allocable Percentage of all Accommodation
Payments then outstanding of all Borrowers. As used herein, the term “Allocable Percentage” shall
mean, on any date of determination thereof, a fraction the denominator of which shall be equal to
the number of Borrowers who are parties to this Agreement on such date and the numerator of which
shall be 1; provided, however, that such percentages shall be modified in the event
that contribution from a Borrower is not possible by reason of insolvency, bankruptcy or otherwise
by reducing such Borrower’s Allocable Percentage equitably and by adjusting the Allocable
Percentage of the other Borrowers proportionately so that the Allocable Percentages of all
Borrowers at all times equals 100%.
(e) Each Borrower hereby subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have from or against any other Borrower or any Guarantor,
and any successor or assign of any other Borrower or any Guarantor, including any trustee, receiver
or debtor-in-possession, howsoever arising, due or owing or whether heretofore, now or hereafter
existing, to the full payment of all of the Obligations.
6.13 Taxes.
(a) Any and all payments by or on account of any of the Obligations shall be made free
and clear of and without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, charges, withholdings, liabilities,
restrictions or conditions of any kind, excluding (i) in the case of each Lender, Issuing Bank and
Agent (A) taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction
(or any political subdivision thereof) under the laws of which such Lender, Issuing Bank or Agent
(as the case may be) is organized and (B) any United States withholding taxes payable with respect
to payments under the Financing Agreements under laws (including any statute, treaty or regulation)
in effect on the date hereof (or, in the case of an Eligible Transferee, the date of the Assignment
and Acceptance) applicable to such Lender, Issuing Bank or Agent, as the case may be, but not
excluding any United States withholding taxes payable as a result of any change in such laws
occurring after the date hereof (or the date of such Assignment and Acceptance) and (ii) in the
case of each Lender, taxes measured by its net income, and franchise taxes imposed on it as a
result of a present or former connection between such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, fees, deductions, charges, withholdings and liabilities being
hereinafter referred to as “Taxes”).
(b) If any Taxes shall be required by law to be deducted from or in respect of any sum payable
in respect of the Obligations to any Lender, Issuing Bank or Agent (i) the sum payable shall be
increased as may be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6.13), such Lender, Issuing Bank or Agent
(as the case may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the relevant Borrower shall make such deductions, (iii) the relevant
Borrower shall pay the full amount deducted to the relevant taxing authority or other
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authority in accordance with applicable law and (iv) the relevant Borrower shall deliver to
Agent evidence of such payment.
(c) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies of the United States or any
political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with
respect thereto, in each case arising from any payment made hereunder or under any of the other
Financing Agreements or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any of the other Financing Agreements (collectively, “Other Taxes”).
(d) Each Borrower shall indemnify each Lender, Issuing Bank and Agent for the full amount of
Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 6.13) paid by such Lender, Issuing Bank or Agent (as the case may be)
and any liability (including for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted;
provided, that, if such Lender, Issuing Bank or Agent is successful in obtaining a
refund of any Taxes or Other Taxes that were incorrectly or illegally asserted, such Lender,
Issuing Bank or Agent, as applicable, shall promptly remit the portion of such refunded amount, if
any, paid by Borrowers under this Section 6.13(d) in respect of such incorrect or illegal Taxes or
Other Taxes. This indemnification shall be made within thirty (30) days from the date such Lender,
Issuing Bank or Agent (as the case may be) makes written demand therefor. A certificate as to the
amount of such payment or liability delivered to Administrative Borrower by a Lender, Issuing Bank
(with a copy to Agent) or by Agent on its own behalf or on behalf of a Lender or Issuing Bank,
shall be conclusive absent manifest error.
(e) As soon as practicable after any payment of Taxes or Other Taxes by any Borrower, such
Borrower shall furnish to Agent, at its address referred to herein, the original or a certified
copy of a receipt evidencing payment thereof.
(f) Without prejudice to the survival of any other agreements of any Borrower hereunder or
under any of the other Financing Agreements, the agreements and obligations of such Borrower
contained in this Section 6.13 shall survive the termination of this Agreement and the payment in
full of the Obligations.
(g) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the applicable Borrower is resident for tax purposes, or
any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any
of the other Financing Agreements shall deliver to Administrative Borrower (with a copy to Agent),
at the time or times prescribed by applicable law or reasonably requested by Administrative
Borrower or Agent (in such number of copies as is reasonably requested by the recipient), whichever
of the following is applicable (but only if such Foreign Lender is legally entitled to do so): (i)
duly completed copies of Internal Revenue Service Form W-8BEN claiming exemption from, or a
reduction to, withholding tax under an income tax treaty, or any successor form, (ii) duly
completed copies of Internal Revenue Service Form 8-8ECI claiming exemption from withholding
because the income is effectively connection with a U.S. trade or business or any successor form,
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect
that such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10
percent shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the Code or a
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“controlled foreign corporation” described and Section 881(c)(3)(C) of the Code and (B) duly
completed copies of Internal Revenue Service Form W-8BEN claiming exemption from withholding under
the portfolio interest exemption or any successor form or (iv) any other applicable form,
certificate or document prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable law to permit a Borrower to determine the
withholding or deduction required to be made. Unless Administrative Borrower and Agent have
received forms or other documents satisfactory to them indicating that payments hereunder or under
any of the other Financing Agreements to or for a Foreign Lender are not subject to United States
withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, Borrowers
or Agent shall withhold amounts required to be withheld by applicable requirements of law from such
payments at the applicable statutory rate.
(h) Any Lender claiming any additional amounts payable pursuant to this Section 6.13 shall use
its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions)
to change the jurisdiction of its applicable lending office if the making of such a change would
avoid the need for, or reduce the amount of, any such additional amounts that would be payable or
may thereafter accrue and would not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
Each Borrower hereby covenants and agrees, on behalf of itself and its Subsidiaries, as
applicable below, as follows:
7.1 Collateral Reporting.
(a) Borrowers shall provide Agent with the following documents in a form satisfactory
to Agent:
(i) on a weekly basis or more frequently as required by Lender, (A) a schedule of sales made,
credits issued and cash received, and (B) each Due From Factor Report, together with copies of all
data and other information requested by Agent from which each such Due From Factor Report is
derived.
(ii) on a monthly basis or more frequently as Lender may request, (A) a report detailing the
calculation of the Borrowing Base certified by the chief financial officer of Delta or an
authorized designee thereof, in form and substance satisfactory to Agent, (B) perpetual inventory
reports, (C) inventory reports by location and category, (D) agings of accounts payable, and (E)
agings of accounts receivable (together with a reconciliation to the previous month’s aging and
general ledger)
(iii) upon Agent’s request, (A) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by Borrowers;
(iv) reports detailing any sales or transfers of Equipment or Real Property during the prior
month; and
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(v) such other reports as to the Collateral as Agent shall request from
time to time.
(b) If any of Borrowers’ records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrowers hereby irrevocably authorizes
such service, contractor, shipper or agent to deliver such records, reports, and related documents
to Agent and to follow Agent’s instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrowers shall notify Agent promptly of: (i) any material delay in any Borrower’s
performance of any of its obligations to any account debtor involving an Account exceeding $500,000
or the assertion of any claims, offsets, defenses or counterclaims by any account debtor involving
an amount exceeding $500,000, or any disputes with account debtors, or any settlement, adjustment
or compromise thereof involving an amount exceeding $500,000, (ii) all material adverse information
relating to the financial condition of any account debtor and (iii) any event or circumstance
which, to any Borrower’s knowledge would cause Agent to consider any then existing Accounts as no
longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor without Agent’s consent, except in the
ordinary course of a Borrower’s business in accordance with such Borrower’s historical practices
and policies. So long as no Event of Default exists or has occurred and is continuing, Borrowers
shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is continuing, Agent shall,
at its option, have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrowers to deliver any other information to Agent,
Borrowers shall promptly report to Agent any return of Inventory by any one account debtor if (i)
the Inventory so returned in such case has a value in excess of $200,000, and (ii) the Account
arising out of the sale of the Inventory so returned was not already excluded from Eligible
Accounts in whole or in part as a result of the account debtor’s potential return rights with
respect to such Inventory. At any time that Inventory is returned, reclaimed or repossessed, the
Account (or portion thereof) which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any account debtor returns
Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Agent’s request, (i) hold the returned Inventory in trust for Agent, (ii) segregate all returned
Inventory from all of its other property, (iii) dispose of the returned Inventory solely according
to Agent’s instructions, and (iv) not issue any credits, discounts or allowances with respect
thereto without Agent’s prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or
schedule thereof delivered to Agent shall be true and complete, (ii) no payments shall be made
thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement,
(iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with this Agreement and
except for credits, discounts, allowances or extensions made or given in the ordinary course of
each Borrower’s business in accordance with practices and policies previously disclosed to
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Agent, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes
existing or asserted with respect thereto except as reported to Agent in accordance with the terms
of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable
State or Federal laws or regulations, all documentation relating thereto will be legally sufficient
under such laws and regulations and all such documentation will be legally enforceable in
accordance with its terms.
(d) Agent shall have the right at any time or times, in Agent’s name or in the name of a
nominee of Agent, to verify the validity, amount or any other matter relating to any Account or
other Collateral, by mail, telephone, facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to Agent, with appropriate endorsement
and assignment, with full recourse to Borrowers, all chattel paper and instruments which any
Borrower now owns or may at any time acquire immediately upon any Borrower’s receipt thereof,
except as Agent may otherwise agree.
7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower shall at all
times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate
records itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower’s
cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers shall conduct
cycle counts of the Inventory throughout each year, but shall conduct a physical count of Inventory
at any time or times as Agent may request on or after an Event of Default, and promptly following
such physical inventory shall supply Agent with a report in the form and with such specificity as
may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers shall not
remove any Inventory from the locations set forth or permitted herein, without the prior written
consent of Agent, except for sales of Inventory in the ordinary course of a Borrower’s business and
except to move Inventory directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to such Borrower which is
in transit to the locations set forth or permitted herein; each Borrower shall, at its expense, at
any time or times as Agent may request upon the occurrence or during the existence of an Event of
Default, deliver or cause to be delivered to Agent written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to
Agent, addressed to Agent and Lenders upon which Agent and Lenders are expressly permitted to rely;
(e) each Borrower shall produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (f) each Borrower assumes all
responsibility and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrowers shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate any Borrower to repurchase
such Inventory except for the right of return given to customers of such Borrower consistent with
its current policies as of the date hereof; (h) each Borrower shall keep the Inventory in good and
marketable condition; and (i) Borrowers shall not, without prior written notice to Agent, acquire
or accept any Inventory on consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real Property:
(a) each Borrower shall, at its expense, at any time or times as Agent may request upon the
occurrence or during the existence of an Event of Default, deliver or cause to be delivered to
Agent written reports or appraisals as to the Equipment and/or the Real Property in form, scope and
methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and
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Lenders and upon which Agent and Lenders are expressly permitted to rely; (b) Borrowers shall keep
the Equipment in good order, repair, running and marketable condition (ordinary wear and tear
excepted); (c) Borrowers shall use the Equipment and Real Property with all reasonable care and
caution and in accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in a Borrower’s business and not for
personal, family, household or farming use; (e) Borrowers shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of a Borrower or to move Equipment
directly from one location set forth or permitted herein to another such location except for the
movement of motor vehicles used by or for the benefit of such Borrower in the ordinary course of
business and Borrowers shall not remove any Equipment currently located in the United States to any
location outside of the United States except for (i) the textile equipment currently located at
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxx, and (ii) the cutting equipment currently located at 000
Xxxx Xxxx Xxxxxx, Xxxxxx, Xxxxx Xxxxxxxx; (f) the Equipment is now and shall remain personal
property and Borrowers shall not permit any of the Equipment to be or become a part of or affixed
to real property so as to become a fixture or an accession to real property unless it is attached
to the Real Property subject to the Mortgage; and (g) each Borrower assumes all responsibility and
liability arising from the use of the Equipment and Real Property.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and appoints Agent (and
all Persons designated by Agent) as such Borrower’s true and lawful attorney-in-fact, and
authorizes Agent, in such Borrower’s or Agent’s name, to: (a) at any time a Default or an Event of
Default exists or has occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise
all of such Borrower’s rights and remedies to collect any Receivable or other Collateral, (iv) sell
or assign any Receivable upon such terms, for such amount and at such time or times as Agent deems
advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release
any Receivable, (vii) prepare, file and sign such Borrower’s name on any proof of claim in
bankruptcy or other similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to change the address
for delivery of remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail
addressed to such Borrower and handle and store all mail relating to the Collateral; and (ix) do
all acts and things which are necessary, in Agent’s determination, to fulfill such Borrower’s
obligations under this Agreement and the other Financing Agreements and (b) at any time to (i)
after a Cash Dominion Trigger Date and until such time (if any) as Agent has confirmed that no
Event of Default then exists and Borrowers have maintained Excess Availability of at least
$5,000,000 for 60 consecutive days, take control in any manner of any item of payment in respect of
Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Agent or any Lender, including pursuant to Section 6.3(a), (ii)
after a Cash Dominion Trigger Date and until such time (if any) as Agent has confirmed that no
Event of Default then exists and Borrowers have maintained Excess Availability of at least
$5,000,000 for 60 consecutive days, have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Receivables or other proceeds of Collateral
are sent or received, (iii) endorse such Borrower’s name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit
the same in Agent’s account for application to the Obligations, (iv) endorse such Borrower’s name
upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to
any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or
other receipts, or bills of lading and other negotiable or non-
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negotiable documents, (v) clear Inventory the purchase of which was financed with a Letter of
Credit through U.S. Customs in such Borrower’s name, Agent’s name or the name of Agent’s designee,
and to sign and deliver to customs officials powers of attorney in such Borrower’s name for such
purpose, and to complete in such Borrower’s or Agent’s name, any order, sale or transaction, obtain
the necessary documents in connection therewith and collect the proceeds thereof, (vi) sign such
Borrower’s name on any verification of Receivables and notices thereof to account debtors or other
obligors in respect thereof and (vii) execute in such Borrower’s name and file any UCC financing
statements or amendments thereto. Each Borrower hereby releases Agent and Lenders and their
respective officers, employees and designees from any liabilities arising from any act or acts
under this power of attorney and in furtherance thereof, whether of omission or commission, except
as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, (a) upon notice to Administrative Borrower,
cure any default by any Borrower under any material agreement with a third party which affects the
Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the
Collateral or the rights and remedies of Agent therein or the ability of any Borrower to perform
its obligations hereunder or under the other Financing Agreements, (b) pay or bond on appeal any
judgment entered against any Borrower, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and
Lenders with respect thereto. Agent may add any amounts so expended to the Obligations and charge
Borrowers’ account therefor, such amounts to be repayable by Borrowers on demand. Agent and Lenders
shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be
deemed to have assumed any obligation or liability of any Borrower. Any payment made or other
action taken by Agent or any Lender under this Section shall be without prejudice to any right to
assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the cost and expense of
Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower’s premises
during normal business hours and after notice to Administrative Borrower, or at any time and
without notice to any Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of each Borrower’s books
and records, including the Records, and (b) each Borrower shall promptly furnish to Agent such
copies of such books and records or extracts therefrom as Agent may request, and (c) Agent or any
Lender or Agent’s designee may use during normal business hours such of any Borrower’s personnel,
equipment, supplies and premises as may be reasonably necessary for the foregoing (provided, that,
such Borrower shall make such personnel, equipment, supplies and premises available to Agent or its
designee in such manner so as to minimize any interference with the operations of such Borrower and
so as to enable Agent or its designee to comply with applicable health and safety procedures and
regulations) and if an Event of Default exists or has occurred and is continuing for the collection
of Accounts and realization of other Collateral.
SECTION
8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Agent, Lenders and Issuing Bank the
following (which shall survive the execution and delivery of this Agreement), the truth and
accuracy
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of which are a continuing condition of the making of Loans and providing Letters of Credit to
Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation and is duly
qualified as a foreign corporation and in good standing, in all states or other jurisdictions where
the nature and extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to so qualify would
not have a material adverse effect on the financial condition, results of operation or business of
such Borrower and its Subsidiaries, taken as whole, or the rights of Agent in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all within each
Borrower’s corporate powers, have been duly authorized, are not in contravention of law or the
terms of any Borrower’s certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its property are bound, and will not result in the creation or imposition of,
or require or give rise to any obligation to grant, any lien, security interest, charge or other
encumbrance upon any property of any Borrower except as otherwise expressly permitted pursuant to
Section 9.8 of this Agreement. This Agreement and the other Financing Agreements constitute legal,
valid and binding obligations of each Borrower enforceable in accordance with their respective
terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.
(a) The exact legal name of each Borrower is as set forth on the signature page of this
Agreement and in the Information Certificate. No Borrower has, during the five years prior
to the date of this Agreement, been known by or used any other corporate or fictitious name or been
a party to any merger or consolidation, or acquired all or substantially all of the assets of any
Person, or acquired any of its property or assets out of the ordinary course of business, except as
set forth in the Information Certificate.
(b) Each Borrower is an organization of the type and organized in the jurisdiction set forth
in the Information Certificate. The Information Certificate accurately sets forth
the organizational identification number of each Borrower or accurately states that such Borrower
has none and accurately sets forth the federal employer identification number of each Borrower.
(c) The chief executive office and mailing address of each Borrower and each Borrower’s
Records concerning Accounts are located only at the address identified as such in Schedule
8.2 and its only other places of business and the only other locations of Collateral, if any,
are the addresses set forth in Schedule 8.2, subject to the rights of any Borrower to
establish new locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by a Borrower and sets forth the
owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change.
(a) All financial statements relating to any Borrower which have been or may hereafter be
delivered by any Borrower to Agent and Lenders have been prepared in accordance with GAAP and
fairly present the financial condition and the results of operation of such Borrower as at the
dates and for the periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrowers to Agent prior to the date of this Agreement, there has been no
act, condition
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or event which has had or is reasonably likely to have a Material Adverse Effect since the
date of the most recent audited financial statements furnished by Borrowers to Agent prior to the
date of this Agreement.
(b) The pro forma balance sheets and future cash flow projections for Borrowers and their
Subsidiaries (together with the summaries of assumptions and projected assumptions, based on
historical performance with respect thereto) furnished by Borrowers to Agent prior to the date of
this Agreement represent the reasonable, good faith opinion of Borrowers and their management as to
the subject matter thereof.
8.4 Priority of Liens, Title to Properties. The security interests and liens granted to
Agent under this Agreement and the other Financing Agreements constitute valid and perfected first
priority liens and security interests in and upon the Collateral subject only to the liens
indicated on Schedule 8.4 hereto and the other liens permitted under Section 9.8 hereof
other than Collateral located in a Borrower’s locations outside of the United States as set forth
in item 9 of the Information Certificate. Each Borrower has good and marketable title to
all of its properties and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Agent and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a timely manner all
tax returns, reports and declarations which are required to be filed by it. All information in such
tax returns, reports and declarations is complete and accurate in all material respects. Each
Borrower has paid or caused to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower and with respect to which
adequate reserves have been set aside on its books. Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or
not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there is no
present investigation by any Governmental Authority pending, or to the best of each Borrower’s
knowledge threatened, against or affecting any Borrower, its assets or business and there is no
action, suit, proceeding or claim by any Person pending, or to the best of each Borrower’s
knowledge threatened, against any Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined against any Borrower
could reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
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(a) Borrowers are not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its assets are bound. Borrower is in
compliance in all material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority relating to its business, including those set
forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the
Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, as each has been amended, the Truth-in-Lending Act, the
Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and
regulations, rules and orders promulgated thereunder), all Federal, State and local states,
regulations, rules and orders pertaining to sales of consumer goods (including, without limitation,
the Consumer Products Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914,
as amended, and all regulations, piles and orders promulgated thereunder).
(b) Each Borrower has obtained all material permits, licenses, approvals, consents,
certificates, orders or authorizations of any governmental agency required for the lawful conduct
of its business. Schedule 8.7 hereto sets forth all material permits, licenses, approvals,
consents, certificates, orders or authorizations (the “Permits”) issued to or held by each Borrower
as of the date hereof by any Federal, State or local governmental agency and any applications
pending by each Borrower with such federal, state or local governmental agency. The Permits
constitute all permits, licenses, approvals, consents, certificates, orders or authorizations
necessary for each Borrower to own and operate its business as presently conducted or proposed to
be conducted where the failure to have such Permits would have a material adverse effect on the
business, performance, operations or properties of such Borrower or the legality, validity or
enforceability of this Agreement or the other Financing Agreements or the ability of Borrowers and
their respective Subsidiaries, taken as a whole, to perform its obligations under the Agreement or
any of the other Financing Agreements or the rights and remedies of Agent under this Agreement or
any of the other Financing Agreements. All of the 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 Anti-Terrorism Laws.
(a) General. None of the Obligors or their Affiliates is in violation of any
Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any Anti-Terrorism Law.
(b) Executive Order No. 13224. None of the Credit Party or their Affiliates is any of
the following (each a “Blocked Person”):
(i) a Person owned or controlled by, or acting for or on behalf of, any Person that is
listed in the annex to, or is otherwise subject to the provisions of, Executive Order No.
13224;
(ii) a Person or entity with which any bank or other financial institution is
prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
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(iii) a Person or entity that commits, threatens or conspires to commit or supports
“terrorism” as defined in Executive Order No. 13224;
(iv) a Person or entity that is named as a “specially designated national” on the most
current list published by the U.S. Treasury Department Office of Foreign Asset Control at
its official website or any replacement website or other replacement official publication of
such list; or
(v) a Person or entity who is affiliated with a Person or entity listed above.
(c) None of the Obligors or their Affiliates (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person
or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224.
8.9 Environmental Compliance.
(a) Except as set forth on Schedule 8.9 hereto, Borrowers and their
Subsidiaries have not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by
it) in any manner which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the operations of Borrowers
and their Subsidiaries comply in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.9 hereto, there has been no investigation,
proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or
any other Person nor is any pending or to the best of each Borrower’s knowledge threatened, with
respect to any non-compliance with or violation of the requirements of any Environmental Law by any
Borrower or any Subsidiary of any Borrower or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects any Borrower or its business, operations or
assets or any properties at which any Borrower has transported, stored or disposed of any Hazardous
Materials.
(c) Borrowers and their Subsidiaries have no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or
the generation, use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrowers and their Subsidiaries have all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with the operations of
Borrowers under any Environmental Law and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
8.10 Employee Benefits.
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(a) Each Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under
Section 401 (a) of the Code has received a favorable determination letter from the Internal Revenue
Service and to the best knowledge of each Borrower, nothing has occurred which would cause the loss
of such qualification. Each Borrower and its ERISA Affiliates have made all required contributions
to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has been made with respect
to any Plan.
(b) There are no pending or to the best knowledge of each Borrower, threatened claims, actions
or lawsuits, or action by any Governmental Authority, with respect to any Plan. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan
that has not been fully cured by reversal of the transaction or otherwise, including payment in
full of any applicable fees or penalties.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value
of each Plan’s assets (determined in accordance with the assumptions used for funding such Plan
pursuant to Section 412 of the Code) do not exceed such Plan’s liabilities under Section
4001(a)(16) of ERISA; (iii) Borrowers and their ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) Borrowers and their ERISA
Affiliates have not incurred and do not reasonably expect to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would result in such
liability), under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
Borrowers and their ERISA Affiliates have not engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
8.11 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in
the name of or used by any Borrower maintained at any bank or other financial institution are set
forth on Schedule 8.11 hereto, subject to the right of each Borrower to establish new
accounts in accordance with Section 9.13 below.
8.12 Intellectual Property. Each Borrower owns or licenses or otherwise has the right to
use all Intellectual Property necessary for the operation of its business as presently conducted or
proposed to be conducted. As of the date hereof, Borrowers do not have any Intellectual Property
registered, or subject to pending applications, in the United States Patent and Trademark Office or
any similar office or agency in the United States, any State thereof, any political subdivision
thereof or in any other country, other than those described in Schedule 8.12 hereto and has
not granted any licenses with respect thereto other than as set forth in Schedule 8.12
hereto. No event has occurred which permits or would permit after notice or passage of time or
both, the revocation, suspension or termination of such rights. To the best of the knowledge of
each Borrower, no slogan or other advertising device, product, process, method, substance or other
Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to
be sold by or employed by any Borrower infringes any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person presently and no claim
or litigation is pending or threatened against or affecting any Borrower contesting its right to
sell or use any such Intellectual Property. Schedule 8.12 sets forth all of the agreements
or other arrangements of each Borrower pursuant to which such Borrower has a license or other right
to use any trademarks, logos, designs, representations or other Intellectual Property owned by
another Person with respect to Eligible
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Inventory of such Borrower as in effect on the date hereof and the dates of the expiration of such
agreements or other arrangements of such Borrower as in effect on the date hereof. No trademark,
servicemark or other Intellectual Property at any time used by any Borrower which is owned by
another Person, or owned by such Borrower subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any Person other than Agent, is affixed to any
Eligible Inventory, except to the extent permitted under the term of the license agreements listed
on Schedule 8.12 hereto.
8.13 Subsidiaries; Affiliates; Capitalization.
(a) No Borrower has any direct or indirect Subsidiaries or Affiliates nor is any
Borrower engaged in any joint venture or partnership except as set forth in the Information
Certificate.
(b) The issued and outstanding shares of Capital Stock of each Borrower are directly and
beneficially owned and held by the Persons indicated in the Information Certificate, and in
each case all of such shares have been duly authorized and are fully paid and non-assessable, free
and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in
writing to Agent prior to the date hereof.
8.14
Solvency. Each Borrower is Solvent and will continue to be Solvent after the creation
of the Obligations, the security interests of Agent and the other transactions contemplated
hereunder.
8.15 Labor Disputes.
(a) Set forth on Schedule 8.15 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or applicable to any
Borrower and any union, labor organization or other bargaining agent in respect of the employees of
any Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice complaint pending against any Borrower
or, to the best of the knowledge of each Borrower, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant arbitration proceeding arising out of
or under any collective bargaining agreement is pending on the date hereof against any Borrower or,
to best of the knowledge of each Borrower, threatened against it, and (ii) no significant strike,
labor dispute, slowdown or stoppage is pending against any Borrower or, to the best of the
knowledge of each Borrower, threatened against any Borrower.
8.16 Restrictions on Subsidiaries. Except for restrictions contained in this Agreement or
any other agreement with respect to Indebtedness of Borrowers permitted hereunder as in effect on
the date hereof, there are no contractual or consensual restrictions on any Borrower or any
Subsidiaries of any Borrower which prohibit or otherwise restrict (a) the transfer of cash or other
assets (i) between any Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of any
Borrower or (b) the ability of any Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Agent or any Lender in the Collateral.
8.17
Material Contracts. Schedule 8.17 hereto sets forth all Material Contracts to
which each Borrower is a party or is bound as of the date hereof. Borrowers have delivered true,
correct and complete copies of such Material Contracts to Agent on or before the date hereof. No
Borrower is in
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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 Payable Practices. Each Borrower and Guarantor have not made any material change in
the historical accounts payable practices from those in effect immediately prior to the date
hereof.
8.19
Accuracy and Completeness of Information. All information furnished by or on behalf of
any Borrower in writing to Agent or any Lender in connection with this Agreement or any of the
other Financing Agreements or any transaction contemplated hereby or thereby, including all
information on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a Material Adverse Effect, which has not been
fully and accurately disclosed to Agent in writing.
8.20 Survival of Warranties, Cumulative. All representations and warranties contained in
this Agreement or any of the other Financing Agreements shall survive the execution and delivery of
this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each
additional Loan, advance or Letter of Credit hereunder and shall be conclusively presumed to have
been relied on by Agent and Lenders regardless of any investigation made or information possessed
by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and
in addition to any other representations or warranties which any Borrower shall now or hereafter
give, or cause to be given, to Agent or any Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower hereby covenants and agrees, on behalf of itself and its Subsidiaries, as
applicable below, as follows:
9.1 Maintenance of Existence. Each Borrower shall at all times preserve, renew and keep in
full, force and effect its corporate existence and rights and franchises with respect thereto and
maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business as presently or proposed to
be conducted. Borrowers shall give Agent thirty (30) days prior written notice of any proposed
change in any Borrower’s corporate name, which notice shall set forth the new name and Borrowers
shall deliver to Agent a copy of the amendment to the Certificate of Incorporation of such Borrower
providing for the name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.
9.2 New Collateral Locations. Each Borrower may open any new location within the
continental United States provided such Borrower (a) gives Agent fifteen (15) days prior
written notice of the intended opening of any such new location and (b) executes and delivers, or
causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent
may deem reasonably necessary or desirable to protect its interests in the Collateral at such
location, including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
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(a) Each Borrower shall, and shall cause any Subsidiary of such Borrower to, at all
times, comply in all material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all requirements of any Federal, State or
local Governmental Authority, including ERISA, the Code, the Occupational Safety and Health Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental pollution and employee
health and safety, including all of the Environmental Laws.
(b) At the reasonable request of Agent and in any event, to the extent required by applicable
law, each Borrower shall establish and maintain, at its expense, a system to assure and monitor its
continued compliance with all Environmental Laws in all of its operations, which system shall
include annual reviews of such compliance by employees or agents of such Borrower who are familiar
with the requirements of the Environmental Laws. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by each Borrower to Agent. Each Borrower shall take prompt
and appropriate action to respond to any non-compliance with any of the Environmental Laws and
shall regularly report to Agent on such response.
(c) Each Borrower shall give both oral and written notice to Agent immediately upon such
Borrower’s receipt of any notice of, or such Borrower’s otherwise obtaining knowledge of, (i) the
occurrence of any event involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of any Environmental
Law by such Borrower or (B) the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other environmental, health or safety
matter, which affects such Borrower or its business, operations or assets or any properties at
which such Borrower transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever Agent reasonably determines
that there is non-compliance, or any condition which requires any action by or on behalf of any
Borrower in order to avoid any material non-compliance, with any Environmental Law, Borrowers
shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental engineer
acceptable to Agent to conduct such tests of the site where such Borrower’s non-compliance or
alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and
prepare and deliver to Agent a report as to such non-compliance setting forth the results of such
tests, a proposed plan for responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer
whenever the scope of such non-compliance, or such Borrower’s response thereto or the estimated
costs thereof, shall change in any material respect.
(e) Each Borrower shall indemnify and hold harmless Agent and Lenders and their respective
directors, officers, employees, agents, invitees, representatives, successors and assigns, from and
against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys’ fees actually incurred and legal expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any
required or necessary repair, cleanup or other remedial work with respect to any property of such
Borrower and the preparation and implementation of any closure, remedial or other required
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plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall
survive the payment of the Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause any Subsidiary to,
duly pay and discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which are being contested
in good faith by appropriate proceedings diligently pursued and available to such Borrower or such
Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on
its books.
9.5 Insurance. Each Borrower shall, and shall cause any Subsidiary to, at all times,
maintain with financially sound and reputable insurers insurance with respect to the Collateral
against loss or damage and all other insurance of the kinds and in the amounts customarily insured
against or carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be satisfactory to Agent as to
form, amount and insurer. Each Borrower shall furnish certificates, policies or endorsements to
Agent as Agent shall require as proof of such insurance, and, if such Borrower fails to do so,
Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers. All
policies shall provide for at least thirty (30) days’ prior written notice to Agent of any
cancellation or reduction of coverage and that Agent may act as attorney for each Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting,
settling, amending and canceling such insurance. Each Borrower shall cause Agent to be named as a
loss payee and an additional insured (but without any liability for any premiums) under such
insurance policies and each Borrower shall obtain non-contributory lender’s loss payable
endorsements to all insurance policies in form and substance satisfactory to Agent. Such lender’s
loss payable endorsements shall specify that the proceeds of such insurance shall be payable to
Agent as its interests may appear and further specify that Agent and Lenders shall be paid
regardless of any act or omission by any Borrower or any of its Affiliates. Without limiting any
other rights of Agent or Lenders, at its option, Agent may apply any insurance proceeds received by
Agent at any time to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Agent may determine or
hold such proceeds as cash collateral for the Obligations.
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9.6 Financial Statements and Other Information.
(a) Each Borrower shall, and shall cause any Subsidiary to, keep proper books and
records in which true and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of such Borrower and its Subsidiaries in accordance
with GAAP. Borrowers shall promptly furnish to Agent and Lenders all such financial and other
information as Agent shall reasonably request relating to the Collateral and the assets, business
and operations of Borrowers, and to notify the auditors and accountants of Borrowers that Agent is
authorized to obtain such information directly from them. Without limiting the foregoing, Borrowers
shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after
the end of each fiscal month (other than at the end of a fiscal quarter), monthly unaudited
consolidated financial statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail,
fairly presenting the financial position and the results of the operations of Borrowers and their
Subsidiaries as of the end of and through such fiscal month, certified to be correct by the chief
financial officer of Borrowers subject to normal year-end adjustments, (ii) within forty-five (45)
days after the end of each fiscal quarter (other than at the end of the fiscal year), unaudited
consolidated financial statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders’ equity) and (iii) within ninety (90)
days after the end of each fiscal year, audited consolidated financial statements (including in
each case balance sheets, statements of income and loss, statements of cash flow and statements of
shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrowers and their
Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an independent accounting firm
selected by Borrowers and reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations and financial
condition of Borrowers and their Subsidiaries as of the end of and for the fiscal year then ended ;
and (iv) at such time as available, but in no event later than thirty (30) days prior to the end of
each fiscal year (commencing with the fiscal year of Borrowers ending June 30, 2009), projected
consolidated financial statements (including in each case, forecasted balance sheets and statements
of income and loss, statements of cash flow, and statements of shareholders’ equity, and projected
Excess Availability) of Borrowers for the next fiscal year, all in reasonable detail, and in a
format consistent with the projections delivered by Borrowers to Agent prior to the date hereof,
together with such supporting information as Agent may reasonably request. Such projected
financial statements shall be prepared on a quarterly basis for the next succeeding year. Such
projections shall represent the reasonable best estimate by Borrowers and Guarantors of the future
financial performance of Borrowers for the periods set forth therein and shall have been prepared
on the basis of the assumptions set forth therein which Borrowers and Guarantors believe are fair
and reasonable as of the date of preparation in light of current and reasonably foreseeable
business conditions (it being understood that actual results may differ from those set forth in
such projected financial statements). If reasonably requested by Agent, each year Borrowers shall
provide to Agent a semi-annual update with respect to such projections or at any time a Default or
Event of Default exists or has occurred and is continuing, more frequently as Agent may require.
(b) Borrowers shall promptly notify Agent in writing of the details of (i) any loss, damage,
investigation, action, suit, proceeding or claim relating to the Collateral or any other property
which is security for the Obligations or which would result in any material adverse change in the
business, properties, assets, goodwill or condition, financial or otherwise, of Borrowers and their
Subsidiaries taken as a whole, (ii) any Material Contract of any Borrower being terminated or
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amended or any new Material Contract entered into (in which event Borrowers shall provide Agent
with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $500,000
shall have been entered against any Borrower or any of its properties or assets, (iv) any
notification of violation of laws or regulations received by any Borrower, (v) any ERISA Event, and
(vi) the occurrence of any Default or Event of Default.
(c) To the extent not already provided by Borrowers in a publicly available format, or in any
case, if requested by Agent, Borrowers shall promptly furnish or cause to be furnished to Agent
copies of all reports which any Borrower sends to its stockholders generally and copies of all
reports and registration statements which any Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of Securities Dealers,
Inc. and such other reports as Agent may hereafter specifically identify to Administrative Borrower
that Agent will require be provided to Agent, all press releases and all other statements
concerning material changes or developments in the business of a Borrower made available by any
Borrower to the public.
(d) Borrowers shall furnish or cause to be furnished to Agent such budgets, forecasts,
projections and other information respecting the Collateral and the business of Borrowers, as Agent
may, from time to time, reasonably request. Agent is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of Borrowers to any Court or
other Government Authority to the extent required by statute, rule, regulation, subpoena or court
order, or to any Affiliate of any Agent or Lender or to any participant or assignee or prospective
participant or assignee. Each Borrower hereby irrevocably authorizes and directs all accountants
or auditors to deliver to Agent, at Borrowers’ expense, copies of the financial statements of
Borrowers and any reports or management letters prepared by such accountants or auditors on behalf
of Borrowers and to disclose to Agent and Lenders such information as they may have regarding the
business of Borrowers. Any documents, schedules, invoices or other papers delivered to Agent or
any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the
same are delivered to Agent or such Lender, except as otherwise designated by Administrative
Borrower to Agent or such Lender in writing.
(e) At any time or times that, pursuant to the terms of Section 9.22 hereof, the Fixed Charge
Coverage Ratio is not in effect, Borrowers shall, for informational purposes only, no later than
forty-five (45) days following the last day of each fiscal quarter of Borrowers, report Borrowers’
calculation of the Fixed Charge Coverage Ratio for the four (4) fiscal quarter period most recently
ended
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower shall not, and
shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with any other Person or permit any other Person to
merge into or with or consolidate with it, except for mergers of a Borrower into, or consolidations
of a Borrower with, another Borrower in which a Borrower is the surviving entity; or
(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital
Stock or Indebtedness to any other Person or any of its assets to any other Person, except for
(i) sales of Inventory in the ordinary course of business,
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(ii) the disposition of worn-out or obsolete Equipment so long as (A) any proceeds are paid to
Agent and (B) such sales do not involve Equipment having an aggregate fair market value in excess
of $100,000 for all such Equipment disposed of in any fiscal year of Borrowers;
(iii) the issuance and sale by any Borrower of Capital Stock of such Borrower after the date
hereof; provided, that, (A) Agent shall have received not less than ten (10)
Business Days prior written notice of such issuance and sale by such Borrower, which notice shall
specify the parties to whom such shares are to be sold, the terms of such sale, the total amount
which it is anticipated will be realized from the issuance and sale of such stock and the net cash
proceeds which it is anticipated will be received by such Borrower from such sale, (B) such
Borrower shall not be required to pay any cash dividends or repurchase or redeem such Capital Stock
or make any other payments in respect thereof except as permitted in Section 9.11 hereof, (C) the
terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall
not include any terms that include any limitation on the right of any Borrower to request or
receive Loans or Letters of Credit or the right of any Borrower to amend or modify any of the terms
and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrowers with Agent or Lenders or are more restrictive or
burdensome to any Borrower than the terms of any Capital Stock in effect on the date hereof, and
(D) as of the date of such issuance and sale and after giving effect thereto, no Default or Event
of Default shall exist or have occurred;
(iv) the issuance of Capital Stock of any Borrower consisting, of common stock pursuant to a
stock option plan, 401(k) plan, or incentive stock award plan of such Borrower for the benefit of
its employees, directors and consultants, provided, that, in no event shall such
Borrower be required to issue, or shall such Borrower issue, Capital Stock pursuant to such stock
option plan, 401(k) plan, or incentive stock award plan which would result in an Event of Default;
(v) sales of Excluded Real Property (other than Excluded Real Property covered by a Mortgage
pursuant to Section 9.19 hereof) and related assets, provided, that, as to each and
all of such sales (A) Agent shall have received not less than ten (10) days’ prior written notice
of such sale, which notice shall set forth in reasonable detail satisfactory to Agent, the parties
to such sale, the Excluded Real Property to be sold, the purchase price and the manner of payment
thereof and such other information with respect thereto as Agent may request, (B) such sale shall
be on commercially reasonable terms in a bona fide arm’s-length transaction with a
non-affiliated Person, (C) all of the Net Proceeds of any such sale shall be paid either (i)
directly to Agent or (ii) to a Borrower, provided, that, the entire amount of the
Net Proceeds are used to repay the outstanding amount of Loans which amounts may be reborrowed, (D)
Borrowers shall not incur any liabilities in connection with such sales except as permitted herein,
and (E) as of the date of such sale and after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing;
(vi) dispositions of investments permitted under Section 9.10(b) to the extent the proceeds
thereof are used to acquire additional investments permitted under Section 9.10(b);
(vii) sales of Factored Accounts by JCC to Factor pursuant to the Factoring Agreement or sales
of such Factored Accounts to any other Qualified Factor; and
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(viii) the charitable donation of Borrowers’ Fayette County, Alabama Real Property and related
assets, provided, that, (A) Borrowers shall not incur any liabilities in connection
with such donation, and (B) as of the date of such donation and after giving effect thereto, no
Default or 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, except for liquidations or dissolutions of an Immaterial
Subsidiary; or
(e) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower shall not, and shall permit any Subsidiary to, create,
incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral,
except the following (“Permitted Liens”):
(a) the security interests and liens of Agent for itself and the benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other government charges or levies,
either not yet overdue or the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or such Subsidiary, as the case may
be and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in
the ordinary course of such Borrower’s or such Subsidiary’s business to the extent: (i) such liens
secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims
or liabilities which are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower or such Subsidiary, in each case prior to the commencement
of foreclosure or other similar proceedings and with respect to which adequate reserves have been
set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the
use of Real Property which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of such Borrower or such Subsidiary as presently
conducted thereon or materially impair the value of the Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including Capital Leases) to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) liens specified in any title insurance policy delivered to and accepted by Agent in
connection with any Mortgage;
(g) security interests in the Inventory of the Honduras Subsidiaries to secure Permitted
Honduras Working Capital Debt to the extent permitted under Section 9.9(h) hereof;
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(h) security interests in the trademarks of Borrowers to secure Permitted Trademark Financing
Debt to the extent permitted under Section 9.9(i) hereof;
(g) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Each Borrower shall not, and shall not permit any Subsidiary to, incur,
create, assume, become or be liable in any manner with respect to, or permit to exist, any
Indebtedness, except the following (“Permitted Indebtedness”):
(a) (i) the Obligations; (ii) guarantees permitted by Section 9.10(d) hereof; and (iii)
Indebtedness permitted by Section 9.10(h) hereof;
(b) purchase money Indebtedness (including Capital Leases) to the extent secured by purchase
money security interests in Equipment (including Capital Leases) not to exceed $1,000,000 in the
aggregate at any time outstanding so long as such security interests do not apply to any property
of such Borrower other than the Equipment so acquired, and the Indebtedness secured thereby does
not exceed the cost of the Equipment so acquired;
(c) Indebtedness of such Borrower under Hedging Agreements entered into for the purpose of
protecting a Person against fluctuations in interest rates; provided, that, such
arrangements are with banks or other financial institutions that have combined capital and surplus
and undivided profits of not less than $100,000,000 and are not for speculative purposes and such
indebtedness shall be unsecured;
(d) Banking Relationship Debt of Borrowers entered into by Borrowers in the ordinary course of
the businesses of Borrowers consistent with the current practices of Borrowers as of the date
hereof;
(e) Indebtedness of such Borrower under License Agreements with respect to non-refundable,
advance or minimum guarantee royalty payments, entered into by such Borrower in the ordinary course
of the businesses of such Borrower consistent with the current practices of such Borrower as of the
date hereof;
(f) the Indebtedness set forth on Schedule 9.9 hereto; provided, that,
(i) such Borrower may only make regularly scheduled payments of principal and interest in respect
of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or
giving rise to such Indebtedness as in effect on the date hereof, (ii) such Borrower shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date hereof except,
that, such Borrower may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit
or invest any sums for such purpose, and (iii) Borrower shall furnish to Agent all notices or
demands in connection with such Indebtedness either received by such Borrower or on its behalf,
promptly after the receipt thereof, or sent by such Borrower or on its behalf, concurrently with
the sending thereof, as the case may be;
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(g) Indebtedness incurred by the Honduras Subsidiaries during the period from October 2, 2006
through October 2, 2008 with respect to the purchase of certain Equipment for use in the operations
of the Honduras Subsidiaries, in an aggregate principal amount not to exceed $15,000,000;
(h) Permitted Central American Working Capital Debt; and
(i) Permitted Trademark Financing Debt.
9.10 Loans, Investments, Guarantees, Etc. Each Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, make any loans or advance money or property to any Person,
or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital
Stock or Indebtedness or all or a substantial part of the assets or property of any Person, or
guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the
Indebtedness, performance, obligations or dividends of any Person, or form or acquire any
Subsidiaries, or agree to do any of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the ordinary course of
business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no Loans are
then outstanding and (ii) as to any of the foregoing, unless waived in writing by Agent, Borrower
shall take such actions as are deemed necessary by Agent to perfect the security interest of Agent
in such investments;
(c) the existing equity investments of such Borrower as of the date hereof in its
Subsidiaries, provided, that, such Borrower shall have no obligation to make any
other investment in, or loans to, or other payments in respect of, any such Subsidiaries;
(d) guarantees by any Subsidiaries of any Borrower of the Obligations in favor of Agent and
Lenders;
(e) stock or obligations issued to such Borrower by any Person (or the representative of such
Person) in respect of Indebtedness of such Person owing to such Borrower in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; provided, that, the original of any such
stock or instrument evidencing such obligations shall be promptly delivered to Agent, upon Agent’s
request, together with such stock power, assignment or endorsement by such Borrower as Agent may
request;
(f) obligations of account debtors to such Borrower arising from Accounts which are past due
evidenced by a promissory note made by such account debtor payable to such Borrower;
provided, that, promptly upon the receipt of the original of any such promissory
note by such Borrower, such promissory note shall be endorsed to the order of Agent by such
Borrower and promptly delivered to Agent as so endorsed;
(g) the loans, advances and guarantees set forth on Schedule 9.10 hereto;
provided, that, (i) such Borrower may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument
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evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) such Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto as in effect on the date
hereof except, that, such Borrower may, after prior written notice to Agent, amend, modify, alter
or change the terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith,
or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) such Borrower shall furnish to
Agent all notices or demands in connection with such Indebtedness either received by such Borrower
or on its behalf, promptly after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;
(h) loans by such Borrower to any other Borrower after the date hereof;
(i) the transactions contemplated by the Junkfood Purchase Documents;
(j) Permitted Acquisitions;
(k) upfront advances by such Borrower for anticipated royalties under License Agreements
entered into by such Borrower in the ordinary course of business of such Borrower consistent with
the current practices of such Borrower as of the date hereof; and
(l) investments in the Honduras JV not to exceed an aggregate amount of $3,000,000 during the
term of this Agreement.
9.11 Dividends and Redemptions. Each Borrower shall, not, directly or indirectly, declare
or pay any dividends on account of any shares of class of Capital Stock of such Borrower now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or
redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or
set aside or otherwise deposit or invest any sums for such purpose) for any consideration other
than common stock or apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the foregoing
except, that:
(a) any Subsidiary of such Borrower may pay dividends to such Borrower;
(b) such Borrower may pay cash dividends or distributions from funds legally available
therefor to its shareholders from time to time in amounts such that the aggregate amount
paid to its shareholders since May 16, 2000 does not exceed twenty-five percent (25%) of
such Borrower’s cumulative Net Income for the period from May 16, 2000 through the date of
determination, provided, that, (i) Agent shall have received at least ten
(10) days prior to any payment thereof, a certificate signed by such Borrower’s chief
financial officer (A) setting forth such Borrower’s Net Income for the applicable period and
(B) certifying that such dividend or distribution is not in violation of applicable law or
any other agreement to which such Borrower is a party or by which it is bound and (ii) as of
the date of any such payment and after giving effect thereto, no Default or Event of Default
shall exist.
9.12 Transactions with Affiliates. Each Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly,
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(a) except as set forth in Schedule 9.12 hereto, purchase, acquire or lease any
property (or processing services) from, or sell, transfer or lease any property to, any officer,
director, agent or other Person affiliated with such Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower’s business and upon fair and reasonable
terms no less favorable to such Borrower than Borrower would obtain in a comparable arm’s length
transaction with an unaffiliated Person; or
(b) make any payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder, director or other
Affiliate of such Borrower, except,
(i) reasonable compensation to officers, employees and directors for services rendered to such
Borrower in the ordinary course of business;
(ii) dividends permitted under Section 9.11(b) above;
(iii) payments by such Borrower to the Honduras Subsidiaries for (A) actual and necessary
reasonable out-of-pocket administrative, operating and capital expenditures of the Honduras
Subsidiaries for the business of such Borrower as presently conducted in the ordinary course of
business (including lease payments, payroll, insurance, franchise taxes and similar items),
provided, that, the amount of all such payments permitted under this Section
9.12(b)(iii)(A) in respect of capital expenditures shall not exceed $1,000,000 in the aggregate in
any fiscal year of such Borrower, and (B) actual and necessary reasonable out-of-pocket legal,
accounting, insurance (including premiums for such insurance), marketing, payroll and similar types
of services paid for by such Honduras Subsidiary in the ordinary course of its business as
conducted as of the date hereof or as the same may be directly attributable to such Borrower;
provided, that, (1) such expenses are in the ordinary course of and pursuant to the
reasonable requirements of such Borrower’s business as conducted on the date hereof, and (2) to the
extent such expenses are payable to a Honduras Subsidiary, such expenses shall be payable upon
terms no less favorable to such Borrower, than such Borrower, could obtain in a comparable arm’s
length transaction with a Person who is not an Affiliate; and
(iv) payments by such Borrower to Mexican Subsidiary for (A) actual and necessary reasonable
out-of-pocket administrative, operating and capital expenses of Mexican Subsidiary for the business
of such Borrower as presently conducted in the ordinary course of business (including lease
payments, payroll, insurance, franchise taxes and similar items), provided, that,
the amount of all such payments permitted under Section 9.12(b)(iv)(A) in respect of capital
expenditures shall not exceed $1,000,000 in the aggregate in any fiscal year of such Borrower and
(B) actual and necessary reasonable out-of-pocket legal, accounting, insurance (including premiums
for such insurance), marketing, payroll and similar types of services paid for by Mexican
Subsidiary in the ordinary course of its business as conducted as of the date hereof or as the same
may be directly attributable to such Borrower; provided, that, (1) such expenses are in the
ordinary course of and pursuant to the reasonable requirements of such Borrower’s business as
conducted on the date hereof, and (2) to the extent such expenses are payable to Mexican
Subsidiary, such expenses shall be payable upon terms no less favorable to such Borrower, than such
Borrower, could obtain in a comparable arm’s length transaction with a Person who is not an
Affiliate;
(v) Indebtedness permitted under Section 9.10(h) above; and
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(vi) investments in the Honduras JV permitted under Section 9.10(k) above.
9.13 Additional Bank Accounts. Each Borrower shall not, directly or indirectly, open,
establish or maintain any deposit account, investment account or any other account with any bank or
other financial institution, other than the Blocked Accounts and the accounts set forth in
Schedule 8.11 hereto, except: (a) as to any new or additional Blocked Accounts and other
such new or additional accounts which contain any Collateral or proceeds thereof, with the prior
written consent of Agent and subject to such conditions thereto as Agent may establish and (b) as
to any accounts used by such Borrower to make payments of payroll, taxes or other obligations to
third parties, after prior written notice to Agent.
9.14 Compliance with ERISA. Each Borrower shall and shall cause each of its ERISA
Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is
qualified under Section 401 (a) of the Code to maintain such qualification; (c) not terminate any
of such Plans so as to incur any liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any of such Plans or any trust
created thereunder which would subject such Borrower or such ERISA Affiliate to a tax or penalty or
other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e)
make all required contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any such Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such
Plan that is a single employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation.
9.15 End of Fiscal Years: Fiscal Quarters. Each Borrower shall, for financial reporting
purposes, cause its, and each of its Subsidiaries’ (a) fiscal years to end the Saturday closest to
June 30 of each year and (b) fiscal quarters to end on the last day of the thirteenth (13th) week
following the end of the immediately preceding fiscal quarter, provided, that, the
end of the fourth fiscal quarter shall be on the last day of the fourteenth (14th) week following
the end of the third fiscal quarter whenever necessary to have the fourth fiscal quarter end on the
Saturday closest to June 30.
9.16 Change in Business. Each Borrower shall not engage in any business other than the
business of such Borrower on the date hereof and any business reasonably related, ancillary or
complimentary to the business in which such Borrower is engaged on the date hereof.
9.17 Limitation of Restrictions Affecting Subsidiaries. Each Borrower shall not, directly,
or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which
prohibits or limits the ability of any Subsidiary of such Borrower to (a) pay dividends or make
other distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of such
Borrower; (b) make loans or advances to such Borrower or any Subsidiary of such Borrower, (c)
transfer any of its properties or assets to Borrower or any Subsidiary of Borrower; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable
law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any
lease governing a leasehold interest of such Borrower or any of its Subsidiaries, (iv) customary
restrictions on
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dispositions of real property interests found in reciprocal easement agreements of such Borrower or
its Subsidiary, (v) any agreement relating to Permitted Indebtedness or Permitted Liens incurred by
a Subsidiary of such Borrower prior to the date on which such Subsidiary was acquired by such
Borrower and outstanding on such acquisition date, and (vi) the extension or continuation of
contractual obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no less favorable to
Agent and Lenders than those encumbrances and restrictions under or pursuant to the contractual
obligations so extended or continued.
9.18 Foreign Assets Control Regulations, Etc. None of the requesting or borrowing of the
Loans or the requesting or issuance, extension or renewal of any Letter of Credit or the use of the
proceeds of any thereof will violate the Trading With the Enemy Act (50 USC §1 et seq., as amended)
(the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive order relating thereto (including,
but not limited to (a) Executive Order 13224, and (b) the USA PATRIOT Act. None of the Obligors
shall, nor shall any of them permit any of their respective Subsidiaries to, (i) conduct any
business or engage in any transaction or dealing with any Blocked Person, including the making or
receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person;
(ii) deal in, or otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224; or (iii) engage in on conspire to engage in
any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in Executive Order No. 13224 or the USA PATRIOT Act.
Each of the Obligors shall deliver to the Agent and Lenders any certification or other evidence
requested from time to time by the Agent or any Lender, in the Agent’s sole discretion, confirming
such Person’s compliance with this Section.
9.19 Excluded Real Property; After Acquired Real Property.
(a) In the event that Agent determines that (i) the average daily Excess Availability
of Borrowers shall have been less than $3,000,000 during any consecutive thirty (30) day period, or
(ii) a Default or Event of Default exists, without limiting any other rights of Agent, or duties or
obligations of Borrowers, upon Agent’s request, Borrowers shall promptly, execute and deliver to
Agent (A) a mortgage, deed of trust or deed to secure debt, as Agent may determine, in form and
substance substantially similar to the Mortgages in respect of any or all of the Excluded Real
Property (as Agent shall determine in its sole discretion, exercised in good faith), and as to any
provisions relating to specific state laws satisfactory to Agent and in form appropriate for
recording in the real estate records of the jurisdiction in which such Excluded Real Property is
located granting to Agent a first and only lien and mortgage on and security interest in such
Excluded Real Property, fixtures or other property located thereon, and (B) such other agreements,
surveys, title insurance policies, documents and instruments as Agent may require in connection
therewith.
(b) If any Borrower hereafter acquires any Real Property, fixtures or any other property that
is of the kind or nature described in the Mortgages and such Real Property, fixtures or other
property at any one location has a fair market value in an amount equal to or greater than $500,000
(or if a Default or Event of Default exists, then regardless of the fair market value of such
assets), without limiting any other rights of Agent or any Lender, or duties or obligations of such
Borrower, upon Agent’s request, such Borrower shall execute and deliver to Agent a mortgage, deed
of trust or deed to secure debt, as Agent may determine, in form and substance substantially
similar
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to the Mortgages and as to any provisions relating to specific state laws satisfactory to Agent and
in form appropriate for recording in the real estate records of the jurisdiction in which such Real
Property or other property is located granting to Agent a first and only lien and mortgage on and
security interest in such Real Property, fixtures or other property (except as such Borrower would
otherwise be permitted to incur hereunder or under the Mortgages or as otherwise consented to in
writing by Agent) and such other agreements, documents and instruments as Agent may require in
connection therewith.
9.20 Costs and Expenses. Borrowers shall pay to Agent and Lenders on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements
and all other documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance
premiums, environmental audits, surveys, assessments, engineering reports and inspections,
appraisal fees and search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked Accounts, together with
Agent’s customary charges and fees with respect thereto; (c) charges, fees or expenses charged by
any Issuing Bank in connection with any Letter of Credit; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of Agent, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement
and the other Financing Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore
and from time to time hereafter incurred by Agent during the course of periodic field examinations
of the Collateral and Borrower’s operations, plus Agent’s then standard per diem charge ($850 as of
Closing Date) per person per day for Agent’s examiners in the field and office; and (g) the
reasonable fees actually incurred and disbursements of counsel (including legal assistants) to
Agent in connection with any of the foregoing.
9.21 Further Assurances. At the request of Agent at any time and from time to time, each
Borrower shall, at Borrowers’ expense, duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Agent may at any time and from
time to time request a certificate from an officer of any Borrower representing that all conditions
precedent to the making of Loans and providing Letters of Credit contained herein are satisfied. In
the event of such request by Agent, Agent and Lenders may, at Agent’s option, cease to make any
further Loans or provide any further Letters of Credit until Agent has received such certificate
and, in addition, Agent has determined that such conditions are satisfied. Where permitted by law,
each Borrower hereby authorizes Agent to execute and file one or more UCC financing statements
signed only by Agent.
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9.22 Fixed Charge Coverage Ratio. If at any time during any month, Alternate Excess
Availability as determined by Agent is less than $10,000,000, Borrowers shall not, as of the end of
such month, permit the Fixed Charge Coverage Ratio for the twelve (12) month period most recently
ended to be less than 1.10 to 1.0.
9.23 Amount Due From Factor. Borrowers shall promptly provide Agent with copies of all
reports, statements of account and other communications received by JCC from Factor with reference
to the Factoring Agreement, including all Factor Status Statements, all notices of default or
termination and all amendments to the Factoring Agreement (which must comply with the provisions of
Section 9.24 hereof).
9.24 Amendments to Factoring Agreement, Etc. Borrowers shall not enter into or permit any
amendment or modification to the Factoring Agreement except to the extent expressly permitted under
the Factor Intercreditor Agreement. Borrowers shall promptly notify Agent in writing if Factor
exercises its right under the Factoring Agreement to withdraw credit approval or a credit line with
respect to any account debtor of JCC.
SECTION
10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of the following events
are referred to herein individually as an “Event of Default and collectively as “Events of
Default”:
(a) (i) Borrowers fail to pay any of the Obligations when due or (ii) Borrowers or any Obligor
fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.6, 9.13, 9.14, 9.16, or
9.22 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 by any
Borrower or Obligor of any such covenant or (iii) any Borrower fails to perform any of the terms,
covenants, conditions or provisions contained in this Agreement or any of the other Financing
Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by any Borrower to Agent in this
Agreement, the other Financing Agreements or any other agreement, schedule, confirmatory assignment
or otherwise shall when made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the terms, covenants,
conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of
Agent;
(d) any judgment for the payment of money is rendered against any Borrower or Obligor in
excess of $500,000 in any one case or in excess of $2,000,000 in the aggregate and shall remain
undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time
not be effectively stayed, or any judgment other than for the payment of money, or injunction,
attachment, garnishment or execution is rendered against any Borrower or Obligor or any of their
assets having a value in excess of $500,000 in the aggregate;
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(e) any Obligor (being a natural person or a general partner of an Obligor which is a
partnership) dies or any Borrower or any Obligor, which is a partnership, limited liability
company, limited liability partnership or a corporation, dissolves or suspends or discontinues
doing business;
(f) any Borrower or Obligor becomes insolvent (however defined or evidenced), makes an
assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at law or in equity) is filed against any Borrower or Obligor or all or any part of its properties
and such petition or application is not dismissed within forty-five (45) days after the date of its
filing or such Borrower or Obligor shall file any answer admitting or
not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such
action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at a law or equity) is filed by any Borrower or Obligor or for all or any part of its property; or
(i) any default by any Borrower or Obligor under any agreement, document or instrument
relating to any Indebtedness for borrowed money owing to any Person other than a Lender, or any
capitalized lease obligations, contingent Indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any Person other than Agent, in any
case in an amount in excess of $500,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any material default under any Material Contract to any
Person other than Agent, which default continues for more than the applicable cure period, if any,
with respect thereto;
(j) any material provision hereof or of any of the other Financing Agreements shall for any
reason cease to be valid, binding and enforceable with respect to any party hereto or thereto
(other than Agent) in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take
any action based on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with
its terms, or any security interest provided for herein or in any of the other Financing Agreements
shall cease to be a valid and perfected first priority security interest in any of the Collateral
purported to be subject thereto (except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could reasonably be expected to result in
liability of any Borrower in an aggregate amount in excess of $500,000;
(l) any Change of Control shall occur;
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(m) the indictment by any Governmental Authority, or as Agent may reasonably and in good faith
determine, the threatened indictment by any Governmental Authority of any Borrower of which any
Borrower or Agent receives notice, in either case, as to which there is a reasonable possibility of
an adverse determination, in the good faith determination of Agent, under any criminal statute, or
commencement or threatened commencement of criminal or civil proceedings against such Borrower,
pursuant to which statute or proceedings the penalties or remedies sought or available include
forfeiture of (i) any of the Collateral with an aggregate value in excess of $500,000 or more, or
(ii) any other property of any Borrower which is necessary or material to the conduct of its
business;
(n) there shall be a material adverse change in the business, assets or prospects of Borrowers
and their Subsidiaries, taken as a whole, after the date hereof;
(o) there shall be an event of default under any of the other Financing Agreements; or
(p) there shall be (i) a default or event of default under any of the Junkfood Seller Note,
the Junkfood Seller Guaranty, the Junkfood Asset Purchase Agreement or any other guaranty, security
agreement, mortgage or similar agreement executed by any Borrower or Guarantor in connection
therewith, or (ii) any default by Junkfood Sellers under the Junkfood Subordination Agreement.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is continuing, Agent and
Lenders shall have all rights and remedies provided in this Agreement, the other Financing
Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights, remedies and powers
granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or
other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and shall include,
without limitation, the right to apply to a court of equity for an injunction to restrain a breach
or threatened breach by any Borrower of this Agreement or any of the other Financing Agreements.
Subject to Section 12 hereof, Agent may, at any time or times, proceed directly against any
Borrower or Obligor to collect the principal balance of the Obligations and all interest accrued
thereon without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists or has occurred and
is continuing, Agent may, in its discretion and without limitation, (i) accelerate the payment of
the principal balance of the Obligations and all interest accrued thereon and demand immediate
payment thereof to Agent for itself and the ratable benefit of Lenders (provided,
that, upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), the principal balance of the Obligations and all interest accrued thereon shall
automatically become immediately due and payable) and (ii) terminate the Commitments and this
Agreement (provided, that, upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h), the Commitments and any other obligation of Agent or a Lender
hereunder shall automatically terminate).
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(c) Without limiting the foregoing, at any time an Event of Default exists or has occurred and
is continuing, Agent may, in its discretion, and upon the direction of the Required Lenders, shall
(i) with or without judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any
Borrower, at Borrowers’ expense, to assemble and make available to Agent any part or all of the
Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the
Collateral from any premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into
contracts with respect thereto, public or private sales at any exchange, broker’s board, at any
office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon
credit or for future delivery, with Agent having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any right or equity of
redemption of any Borrower, which right or equity of redemption is hereby expressly waived and
released by such Borrower and/or (vi) terminate this Agreement. If any of the Collateral is sold or
leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a
result thereof until payment therefor is finally collected by Agent. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Agent to Administrative Borrower
designating the time and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof
and each Borrower waives any other notice. In the event Agent institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower waives
the posting of any bond which might otherwise be required. At any time an Event of Default exists
or has occurred and is continuing, upon Agent’s request, Borrowers will either, as Agent shall
specify, furnish cash collateral to Issuing Bank to be used to secure and fund the reimbursement
obligations to Issuing Bank in connection with any Letter of Credit Obligations or furnish cash
collateral to Agent for the Letter of Credit Obligations. Such cash collateral shall be in the
amount equal to one hundred ten (110%) percent of the amount of the Letter of Credit Obligations
plus the amount of any fees and expenses payable in connection therewith through the end of the
latest expiration date of the Letters of Credit giving rise to such Letter of Credit Obligations.
(d) At any time or times that an Event of Default exists or has occurred and is continuing,
Agent may, in its discretion, enforce the rights of any Borrower against any account debtor,
secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without
limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i)
notify any or all account debtors, secondary obligors or other obligors in respect thereof that the
Receivables have been assigned to Agent and that Agent has a security interest therein and Agent
may direct any or all account debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby discharge or release the
account debtor or any secondary obligors or other obligors in respect thereof without affecting any
of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any
failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys
with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for
the protection of its interests and the interests of Lenders. At any time that an Event of Default
exists or
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has occurred and is continuing, at Agent’s request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have been assigned to Agent
and are payable directly and only to Agent and Borrowers shall deliver to Agent such originals of
documents evidencing the sale and delivery of goods or the performance of services giving rise to
any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event
of Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s request, hold
the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other
property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue
any credits, discounts or allowances with respect thereto without Agent’s prior written consent.
(e) To the extent that applicable law imposes duties on Agent or any Lender to exercise
remedies in a commercially reasonable manner (which duties cannot be waived under such law), each
Borrower acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender
(i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in process into finished
goods or other finished products for disposition, (ii) to fail to obtain third party consents for
access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to
obtain consents of any Governmental Authority or other third party for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other Persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same
business as any Borrower, for expressions of interest in acquiring all or any portion of the
Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent
or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or
Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the
extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions by Agent or any Lender would not be
commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral
and that other actions or omissions by Agent or any Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower
or to impose any duties on Agent or Lenders that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.
(f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, each
Borrower hereby grants to Agent, to the extent assignable, an, irrevocable, non exclusive license
(exercisable without payment of royalty or other compensation to such Borrower) to use, assign,
license or sublicense any of the trademarks, service-marks, trade names, business names, trade
styles, designs, logos and other source of business identifiers and other Intellectual
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Property and general intangibles now owned or hereafter acquired by such Borrower, wherever the
same maybe located, including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for the compilation or
printout thereof.
(g) Agent may apply the cash proceeds of Collateral actually received by Agent from any sale,
lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole
or in part and in such order as Agent may elect, whether or not then due. Borrowers shall remain
liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement, including reasonable
attorneys’ fees actually incurred and legal expenses.
(h) Without limiting the foregoing, upon the occurrence of an Event of Default or an event
which with notice or passage of time or both would constitute an Event of Default, Agent and
Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of
the Required Lenders, Agent and Lenders shall, without notice, (i) cease making Loans or arranging
for Letters of Credit or reduce the lending formulas or amounts of Loans and Letters of Credit
available to Borrowers and/or (ii) terminate any provision of this Agreement providing for any
future Loans to be made by Agent and Lenders or Letters of Credit to be issued by Issuing Bank and
(ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or
restriction, notwithstanding anything to the contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and the other
Financing Agreements and any dispute arising out of the relationship between the parties hereto,
whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State
of Georgia (without giving effect to principles of conflicts of law).
(b) Each Borrower, Agent, Issuing Bank and Lenders irrevocably consent and submit to the
nonexclusive jurisdiction of the Superior Court of Xxxxxx County, Georgia and the United States
District Court for the Northern District of Georgia and waive any objection based on venue or
forum, non conveniens with respect to any action instituted therein arising
under this Agreement or any of the other Financing Agreements or in any way connected with or
related or incidental to the dealings of the parties hereto in respect of this Agreement or any of
the other Financing Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree
that any dispute with respect to any such matters shall be heard only in the courts described above
(except that Agent and Lenders shall have the right to bring any action or proceeding against any
Borrower or its property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its rights against any
Borrower or its property).
(c) Each Borrower hereby waives personal service of any and all process upon it and consents
that all such service of process may be made by certified mail (return receipt requested) directed
to its address set forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at
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Agent’s option, by service upon such Borrower (or Administrative Borrowe on behalf of such
Borrower) in any other manner provided under the rules of any such courts. Within thirty (30) days
after such service, each Borrower shall appear in answer to such process, failing which such
Borrower shall be deemed in default and judgment may be entered by Agent against such Borrower for
the amount of the claim and other relief requested.
(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER, AGENT. ISSUING BANK AND LENDERS
EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
BORROWER, AGENT, ISSUING BANK AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SUCH
BORROWER, AGENT, ISSUING BANK OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Agent, Lenders and Issuing Bank shall not have any liability to any Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by such Borrower in connection with,
arising out of, or in any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith, unless it is determined
by a final and non-appealable judgment or court order binding on Agent, such Lender or Issuing
Bank, as applicable, that the losses were the result of its acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Agent, each Lender and Issuing Bank 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. Each Borrower:
(i) certifies that neither Agent, any Lender, Issuing Bank nor any representative, agent or
attorney acting for or on behalf of Agent, any Lender or Issuing Bank has represented, expressly or
otherwise, that Agent, Lenders and Issuing Bank would not, in the event of litigation, seek to
enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements
and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements,
Agent, Lenders and Issuing Bank are relying upon, among other things, the waivers and
certifications set forth in this Section 11.1 and elsewhere herein and therein.
11.2
Waiver of Notices. Each Borrower hereby expressly waives demand, presentment, protest
and notice of protest and notice of dishonor with respect to any and all instruments and chattel
paper, included in or evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for herein. No notice to or
demand on any Borrower which Agent or any Lender may elect to give shall entitle such Borrower to
any other or further notice or demand in the same, similar or other circumstances. Without limiting
the generality of the foregoing, each Borrower waives (i) notice prior to Agent’s taking possession
or control of any of the Collateral or any bond or security which might be required by any court
prior to allowing
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Agent to exercise any of Agent’s remedies, including the issuance of an immediate writ of
possession and (ii) the benefit of all valuation, appraisement and exemption laws.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or
thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge
or termination is in writing signed by Agent and the Required Lenders or, at Agent’s option, by
Agent with the authorization of the Required Lenders, and in addition, with respect to any
amendments (other than with respect to any provision of Section 12 hereof), by any Borrower and
such amendment, waiver, discharge or termination shall be effective and binding as to all Lenders
and Issuing Bank only in the specific instance and for the specific purpose for which given;
except, that, no such amendment, waiver, discharge or termination shall:
(i) reduce the interest rate or any fees or extend the time of payment of principal, interest
or any fees or reduce the principal amount of any Loan or Letter of Credit, in each case without
the consent of each Lender directly affected thereby,
(ii) increase the Commitment of any Lender over the amount thereof then in effect or provided
hereunder, including pursuant to Section 2.5, in each case without the consent of the Lender
directly affected thereby,
(iii) release any Collateral (except as expressly provided hereunder or under any of the other
Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof),
without the consent of Agent and all of Lenders,
(iv) reduce any percentage specified in the definition of Required Lenders, without the
consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or Guarantor of any of their rights
and obligations under this Agreement, without the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3 or Section 12.8 hereof, without the
consent of Agent and all of Lenders, or
(vii) increase the advance rates constituting part of the Borrowing Base, without the consent
of Agent and all of Lenders.
(b) Agent, Lenders and Issuing Bank shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies
unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by Agent, any Lender or
Issuing Bank of any right, power and/or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right, power and/or remedy which Agent, any Lender or Issuing Bank would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in the event
that any Borrower or Guarantor requests that this Agreement or any other Financing
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Agreements be amended or otherwise modified in a manner which would require the unanimous consent
of all of the Lenders and such amendment or other modification is agreed to by the Required
Lenders, then, with the consent of Borrowers, Agent and the Required Lenders, Borrowers, Agent and
the Required Lenders may amend this Agreement without the consent of the Lenders that did not agree
to such amendment or other modification (collectively, the “Minority Lenders”) to provide for (i)
the termination of the Commitment of each of the Minority Lenders, (ii) the addition to this
Agreement of one or more other Lenders, or an increase in the Commitment of one or more of the
Required Lenders, so that the Commitments, after giving effect to such amendment, shall be in the
same aggregate amount as the Commitments immediately before giving effect to such amendment, (iii)
if any Loans are outstanding at the time of such amendment, the making of such additional Loans by
such new Lenders or Required Lenders, as the case may be, as may be necessary to repay in full the
outstanding Loans of the Minority Lenders immediately before giving effect to such amendment and
(iv) the payment of all interest, fees and other Obligations payable or accrued in favor of the
Minority Lenders and such other modifications to this Agreement as Borrowers and the Required
Lenders may determine to be appropriate.
(d) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection
with any amendment, waiver, discharge or termination, in the event that any Lender whose consent
thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such
amendment, waiver, discharge or termination that is required are obtained, if any, then Wachovia
shall have the right, but not the obligation, at any time thereafter, and upon the exercise by
Wachovia of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and
transfer to Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of such
Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto.
Wachovia shall provide the Non-Consenting Lender with prior written notice of its intent to
exercise its right under this Section, which notice shall specify on date on which such purchase
and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such
purchase and sale, Wachovia, or such Eligible Transferee specified by Wachovia, shall pay to the
Non-Consenting Lender (except as Wachovia and such Non-Consenting Lender may otherwise agree) the
amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately preceding the effective
date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and
fees payable to the Non-Consenting Lender to the effective date of the purchase, minus (iii) the
amount of the closing fee received by the Non-Consenting Lender pursuant to the terms hereof or of
any of the other Financing Agreements multiplied by the fraction, the numerator of which is the
number of months remaining in the then current term of the Credit Facility and the denominator of
which is the number of months in the then current term thereof. Such purchase and sale shall be
effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment
of the Non-Consenting Lender shall terminate on such date.
(e) The consent of Agent shall be required for any amendment, waiver or consent affecting the
rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to
the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of
its rights hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory shall not
be deemed an amendment to the advance rates provided for in this Section 11.3. The consent of
Issuing Bank shall be required for any amendment, waiver or consent affecting the rights or duties
of Issuing Bank hereunder or under any of the other Financing Agreements, in addition to
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the consent of the Lenders otherwise required by this Section, provided, that, the
consent of Issuing Bank shall not be required for any other amendments, waivers or consents.
Notwithstanding anything to the contrary contained in Section 11.3(a) above, (i) in the event that
Agent shall agree that any items otherwise required to be delivered to Agent as a condition of the
initial Loans and Letters of Credit hereunder may be delivered after the date hereof, Agent may, in
its discretion, agree to extend the date for delivery of such items or take such other action as
Agent may deem appropriate as a result of the failure to receive such items as Agent may determine
or may waive any Event of Default as a result of the failure to receive such items, in each case
without the consent of any Lender and (ii) Agent may consent to any change in the type of
organization, jurisdiction of organization or other legal structure of any Borrower, Guarantor or
any of their Subsidiaries and amend the terms hereof or of any of the other Financing Agreements as
may be necessary or desirable to reflect any such change, in each case without the approval of any
Lender.
11.4
Waiver of Counterclaims. Each Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims), in any
action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating hereto or thereto.
11.5
Indemnification. Each Borrower shall jointly and severally indemnify and hold Agent, each Lender and Issuing Bank, and its officers, directors, agents, employees, advisors and counsel
and their respective Affiliates (each such Person being an “Indemnitee”), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including reasonable
attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction related or attendant
thereto, including amounts paid in settlement, court costs, and the reasonable fees and expenses of
counsel, except, as to any indemnified party, for such losses, claims, damages, liabilities, costs
or expenses resulting from gross negligence or willful misconduct of such party, its directors,
agents, employees or counsel as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction (but without limiting the obligations of Borrowers or Guarantors as to any
other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set
forth in this Section may be unenforceable because it violates any law or public policy, Borrowers
and Guarantors shall pay the maximum portion which it is permitted to pay under applicable law to
Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent
permitted by applicable law, no Borrower or shall assert, and each Borrower hereby waives, any
claim against any Indemnitee, on any theory of liability for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as
a result of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. No Indemnitee referred to above shall be liable for any damages
arising from the use by unintended recipients of any information or other materials distributed by
it through telecommunications, electronic or other information transmission systems in connection
with this Agreement or any of the other Financing Agreements or the transaction contemplated hereby
or thereby. All amounts due under this Section shall be payable upon demand. The foregoing
indemnity shall survive the payment of the Obligations and the termination of this Agreement.
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SECTION
12. THE AGENT
12.1
Appointment, Powers and Immunities. Each Lender and Issuing Bank irrevocably designates,
appoints and authorizes Wachovia to act as Agent hereunder and under the other Financing Agreements
with such powers as are specifically delegated to Agent by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are incidental thereto. Without
limiting the generality of the foregoing, Agent shall have the sole and exclusive right and
authority to: (x) act as the disbursing and collecting Agent for Lenders with respect to all
payments and collections arising in connection with this Agreement and the other Financing
Agreements; (y) execute and deliver as Agent each Financing Agreement (including the Factor
Intercreditor Agreement, the Junkfood Subordination Agreement and each Collateral Access Agreement)
and accept delivery of each such agreement by any Borrower, Guarantor or other Person; and (z) bind
each Lender to the terms of the Factor Intercreditor Agreement and the Junkfood Subordination
Agreement as if such Lender were a direct signatory thereto (including the terms of the Factor
Intercreditor Agreement relating to the priority, enforcment and release of Agent’s security
interest and liens). Agent (a) shall have no duties or responsibilities except those expressly set
forth in this Agreement and in the other Financing Agreements, and shall not by reason of this
Agreement or any other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall not
be responsible to Lenders for any recitals, statements, representations or warranties contained in
this Agreement or in any of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Financing Agreement or any other document referred to or
provided for herein or therein or for any failure by any Borrower or Obligor or any other Person to
perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders
for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement
or under any other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may
employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until the assignment
thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance
satisfactory to Agent shall have been delivered to and acknowledged by Agent.
12.2
Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or
other communication (including any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel, independent accountants
and other experts selected by Agent. As to any matters not expressly provided for by this Agreement
or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions given by the
Required Lenders or all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be binding on all
Lenders.
12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the occurrence of a
Default or an Event of Default or other failure of a condition precedent to the Loans and Letters
of
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Credit hereunder, unless and until Agent has received written notice from a Lender, or Borrower
specifying such Event of Default or any unfulfilled condition precedent, and stating that such
notice is a “Notice of Default or Failure of Condition”. In the event that Agent receives such a
Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders.
Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or
failure of condition precedent as shall be directed by the Required Lenders; provided, that, unless
and until Agent shall have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to or by reason of such Event of
Default or failure of condition precedent, as it shall deem advisable in the best interest of
Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and
continuance of an Event of Default or any other failure to satisfy any of the conditions precedent
set forth in Section 4 of this Agreement to the contrary, Agent may, but shall have no obligation
to, continue to make Loans and Issuing Bank may, but shall have no obligation to, issue or cause to
be issued any Letters of Credit for the ratable account and risk of Lenders from time to time if
Agent believes making such Loans or issuing or causing to be issued such Letters of Credit is in
the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender or Issuing Bank may assert or
exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Obligations or
other Obligations, as against any Borrower or Obligor or any of the Collateral or other property of
any Borrower or Obligor.
12.4
Wachovia in its Individual Capacity. With respect to its Commitment and the Loans made
and Letters of Credit issued by it (and any successor acting as Agent), so long as Wachovia shall
be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders”
shall, unless the context otherwise indicates, include Wachovia in its individual capacity as
Lender hereunder. Wachovia (and any successor acting as Agent) and its Affiliates may (without
having to account therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with any Borrower (and any Subsidiaries or Affiliates of such Borrower) as
if it were not acting as Agent, and Wachovia and its Affiliates may accept fees and other
consideration from any Borrower or any Obligor and any Subsidiaries and Affiliates of such Borrower
or Obligor for services in connection with this Agreement or otherwise without having to account
for the same to Lenders.
12.5
Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in
accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever
that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out
of or by reason of any investigation in or in any way relating to or arising out of this Agreement
or any other Financing Agreement or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including the costs and expenses that
Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided, that, no Lender shall be liable for any of the
foregoing to the extent it arises from the gross negligence or willful misconduct of the party to
be indemnified as determined by a final non-appealable judgment of a court of competent
jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the
termination of this Agreement.
12.6
Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently
and without reliance on Agent or other Lender, and based on such documents and
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information as it has deemed appropriate, made its own credit analysis of Borrowers and Obligors
and has made its own decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and decisions in taking or
not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be
required to keep itself informed as to the performance or observance by any Borrower or Obligor of
any term or provision of this Agreement or any of the other Financing Agreements or any other
document referred to or provided for herein or therein or to inspect the properties or books of any
Borrower or Obligor. Agent will use reasonable efforts to provide Lenders with any information
received by Agent from any Borrower or Obligor which is required to be provided to Lenders or
deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of
Condition received by Agent from any Borrower or Lender; provided, that, Agent shall not be liable
to any Lender for any failure to do so, except to the extent that such failure is attributable to
Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment
of a court of competent jurisdiction. Except for notices, reports and other documents expressly
required to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or
responsibility to provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Borrower or Obligor that may come into the
possession of Agent.
12.7
Failure to Act. Except for action expressly required of Agent hereunder and under the
other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to
act hereunder and thereunder unless it shall receive further assurances to its satisfaction from
Lenders of their indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or continuing to take any such
action.
12.8
Additional Loans. Agent shall not make any Loans or provide any Letters of Credit to
Borrowers on behalf of Lenders intentionally and with actual knowledge that such Loans or Letters
of Credit would cause the aggregate amount of the total outstanding Loans and Letter of Credit
Obligations to Borrowers to exceed the Borrowing Base, without the prior consent of all Lenders,
except, that, Agent may make such additional Loans or provide such additional Letters of Credit on
behalf of Lenders, intentionally and with actual knowledge that such Loans or Letters of Credit
will cause the total outstanding Loans and Letters of Credit to Borrowers to exceed the Borrowing
Base, as Agent may deem necessary or advisable in its discretion, provided, that:
(a) the total principal amount of the additional Loans or additional Letters of Credit to Borrower
which Agent may make or provide after obtaining such actual knowledge that the aggregate principal
amount of the Loans equal or exceed the Borrowing Base shall not exceed the aggregate amount equal
to $5,000,000 outstanding at any time and shall not cause the total principal amount of the Loans
and Letter of Credit Obligations to exceed the Maximum Credit and (b) no such additional Loan or
Letters of Credit shall be outstanding more than ninety (90) days after the date such additional
Loan or Letter of Credit is made or issued (as the case may be), except as the Required Lenders may
otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of
any such additional Loans or Letters of Credit provided that Agent is acting in accordance
with the terms of this Section 12.8.
12.9
Concerning the Collateral and the Related Financing Agreements. Each Lender authorizes
and directs Agent to enter into this Agreement and the other Financing Agreements. Each Lender
agrees that any action taken by Agent or Required Lenders in accordance with the terms of this
Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of
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their respective powers set forth therein or herein, together with such other powers that are
incidental thereto, shall be binding upon all of the Lenders.
12.10
Field Audit, Examination Reports and other Information; Disclaimer by Lenders. By
signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes
available, a copy of each field audit or examination report and a monthly report with respect to
the Borrowing Base prepared by Agent (each field audit or examination report and monthly report
with respect to the Borrowing Base being referred to herein as a “Report” and collectively,
“Reports”), appraisal and financial statements;
(b) expressly agrees and acknowledges that Agent (A) does not make any representation or
warranty as to the accuracy of any Report, appraisal or financial statement or (B) shall not be
liable for any information contained in any Report, appraisal or financial statement;
(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or any other party performing any audit or examination will inspect only
specific information regarding Borrowers and Obligors and will rely significantly upon Borrowers’
and any Obligor’s books and records, as well as on representations of Borrowers’ and any Obligor’s
personnel; and
(d) agrees to keep all Reports confidential and strictly for its internal use in accordance
with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner.
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or after an Event of
Default and for so long as the same is continuing or upon any other failure of a condition
precedent to the making of Loans and issuance of Letters of Credit hereunder, make such
disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, deems
necessary or desirable either (i) to preserve or protect the Collateral or any portion thereof or
(ii) to enhance the likelihood or maximize the amount of repayment by Borrowers of the Loans and
other Obligations, provided, that, the aggregate principal amount of the Special
Agent Advances pursuant to this clause (ii), plus the then outstanding principal amount of the
additional Loans and Letters of Credit which Agent may make or provide as set forth in Section 12.8
hereof, shall not exceed the aggregate amount of ten (10%) percent of the Maximum Credit or (iii)
to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement or any of
the other Financing Agreements consisting of costs, fees and expenses and payments to Issuing Bank
on account of Letter of Credit Obligations. Special Agent Advances shall be repayable on demand and
be secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise
constitute Obligations hereunder. Interest on Special Advances shall be payable at the Interest
Rate then applicable to Prime Rate Loans. Agent shall notify each Lender and Borrowers in writing
of each such Special Agent Advance, which notice shall include a description of the purpose of such
Special Agent Advance. Without limitation of its obligations pursuant to Section 6.9, each Lender
agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds,
the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds
are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and
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Agent shall be entitled to recover such funds, on demand from such Lender together with interest
thereon for each day from the date such payment was due until the date such amount is paid to Agent
at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank
of Atlanta or at Agent’s option based on the arithmetic mean determined by Agent of the rates for
the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (Atlanta, Georgia time)
on that day by each of the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the
highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release
any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the
Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral
to the extent required under Section 13.1 below, or (ii) constituting property being sold or
disposed of if Administrative Borrower or any Borrower certifies to Agent that the sale or
disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any
such certificate, without further inquiry), or (iii) constituting property in which any Borrower or
Obligor did not own an interest at the time the security interest, mortgage or lien was granted or
at any time thereafter, or (iv) having a value in the aggregate in any fiscal quarter period of
less than $500,000, and to the extent Agent may release its security interest in and lien upon any
such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition
shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of
the other Financing Agreements, including any intercreditor agreement, or (vi) constituting
trademarks securing Permitted Trademark Financing Debt if concurrently with such release (A)
Administrative Borrower or any Borrower certifies to Agent that the Indebtedness constituting the
Permitted Trademark Financing Debt is incurred, and Liens securing the same are granted, in
compliance with Sections 9.8 and 9.9 hereof (and Agent may rely conclusively on any such
certificate, without further inquiry), and (B) Borrowers deliver to Agent a report detailing the
calculation of the Borrowing Base which excludes therefrom any trademarks securing the Permitted
Trademark Financing Debt, or (vii) approved, authorized or ratified in writing by all of Lenders.
Except as provided above, Agent will not release any security interest in, mortgage or lien upon,
any of the Collateral without the prior written authorization of all of Lenders. Upon request by
Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular
types or items of Collateral pursuant to this Section. In no event shall the consent or approval
of Issuing Bank be required to any release of Collateral.
(c) Without any manner limiting Agent’s authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon
request by Agent, the authority to release Collateral conferred upon Agent under this Section.
Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon
any Collateral to the extent set forth above; provided, that, (i) Agent shall not
be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to
liability or create any obligations or entail any consequence other than the release of such
security interest, mortgage or liens without recourse or warranty and (ii) such release shall not
in any manner discharge, affect or impair the Obligations or any security interest, mortgage or
lien upon (or obligations of any Borrower or any Obligor in respect of) the Collateral retained by
any Borrower or any Obligor.
(d) Agent shall have no obligation whatsoever to any Lender, Issuing Bank or any other Person
to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or Obligor
or is cared for, protected or insured or has been encumbered, or that any
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particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or
Letters of Credit hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing Agreements or
otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any particular manner or
under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any of the other
Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no
duty or liability whatsoever to any other Lender or Issuing Bank.
12.12
Agency for Perfection. Each Lender and Issuing Bank hereby appoints Agent and each
other Lender and Issuing Bank as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9
of the UCC can be perfected only by possession (or where the security interest of a secured party
with possession has priority over the security interest of another secured party) and Agent and
each Lender and Issuing Bank hereby acknowledges that it holds possession of any such Collateral
for the benefit of Agent as secured party. Should any Lender or Issuing Bank obtain possession of
any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.
12.13
Successor Agent. Agent may resign as Agent upon thirty (30) days’ notice to Lenders and
Administrative Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint
from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to
the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders
and Administrative Borrower, a successor agent from among Lenders. Upon the acceptance by the
Lender so selected of its appointment as successor agent hereunder, such successor agent shall
succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used
herein and in the other Financing Agreements shall mean such successor agent and the retiring
Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to
any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is thirty (30) days after the date of a
retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless
thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and effect for a term
ending on September 21, 2012, unless sooner terminated pursuant to the terms hereof. Upon the
effective date of termination of the Financing Agreements, Borrowers shall pay to Agent, in full,
all outstanding and unpaid Obligations and shall furnish cash collateral to Agent in such amounts
as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or
expense, including reasonable attorneys’ fees actually incurred and legal expenses, in connection
with
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any contingent Obligations, including issued and outstanding Letters of Credit and checks or other
payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not
yet received final and indefeasible payment and any continuing obligations of Agent or any Lender
pursuant to any Deposit Account Control Agreement. The amount of such cash collateral (or letter
of credit, as Agent may determine) as to any Letter of Credit Obligations shall be in the amount
equal to one hundred ten (110%) percent of the amount of the Letter of Credit Obligations plus the
amount of any fees and expenses payable in connection therewith through the end of the latest
expiration date of the Letters of Credit giving rise to such Letter of Credit Obligations. Such
payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in
Federal funds to such bank account of Agent, as Agent may, in its discretion, designate in writing
to Administrative Borrower for such purpose. Interest shall be due until and including the next
Business Day, if the amounts so paid by Borrowers to the bank account designated by Agent are
received in such bank account later than 12:00 noon, Atlanta, Georgia time.
(b) No termination of the Commitments, this Agreement or any of the other Financing Agreements
shall relieve or discharge any Borrower of its respective duties, obligations and covenants under
this Agreement or any of the other Financing Agreements until all Obligations have been fully and
finally discharged and paid, and Agent’s continuing security interest in the Collateral and the
rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been fully and finally
discharged and paid. Accordingly, each Borrower and Guarantor waives any rights it may have under
the UCC to demand the filing of termination statements with respect to the Collateral and Agent
shall not be required to send such termination statements to Borrowers or Guarantors, or to file
them with any filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid and satisfied in full in immediately available
funds.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the
UCC shall have the meanings given therein unless otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the singular and to the singular shall
also. mean the plural unless the context otherwise requires.
(c) All references to any Borrower, any Obligor, Agent, Lenders and Issuing Bank pursuant to
the definitions set forth in the recitals hereto, or to any other Person herein, shall include
their respective successors and assigns.
(d) The words “hereof’, “herein”, “hereunder”, “this Agreement” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(e) The word “including” when used in this Agreement shall mean “including, without
limitation”.
(f) An Event of Default shall exist or continue or be continuing until such Event of Default
is waived in accordance with Section 11.3 or is cured in a manner satisfactory, to Agent, if such
Event of Default is capable of being cured as determined by Agent.
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(g) All references to the term “good faith” used herein when applicable to Agent or any Lender
shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in
fact in the conduct or transaction concerned. Borrowers shall have the burden of proving any lack
of good faith on the part of Agent or any Lender alleged by any Borrower at any time.
(h) Any accounting term used in this Agreement shall have, unless otherwise specifically
provided herein, the meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for inventory valuation as
used in the preparation of the financial statements of Borrowers most recently received by Agent
prior to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any
interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise,
the term “unqualified opinion” as used herein to refer to opinions or reports provided by
accountants shall mean an opinion or report that is unqualified and also does not include any
explanation, supplemental comment or other comment concerning the ability of the applicable Person
to continue as a going concern or the scope of the audit.
(h) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including”, the words “to and “until” each mean “to but excluding” and
the word “through” means “to and including”.
(i) Unless otherwise expressly provided herein, (i) references herein to any agreement,
document or instrument shall be deemed to include all subsequent amendments, modifications,
supplements, extensions, renewals, restatements or replacements with respect thereto, but only to
the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and
(iii) references to any statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, recodifying, supplementing or
interpreting the statute or regulation.
(j) The captions and headings of this Agreement are for convenience of reference only and
shall not affect the interpretation of this Agreement.
(k) This Agreement and other Financing Agreements may use several different limitations, tests
or measurements to regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their terms.
(1) This Agreement and the other Financing Agreements are the result of negotiations among and
have been reviewed by counsel to Agent and the other parties, and are the products of all parties.
Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent
or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.
13.3 Notices.
(a) All notices, requests and demands hereunder shall be in writing and deemed to have been
given or made: if delivered in Person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested, five (5) days after
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mailing. Notices delivered through electronic communications shall be effective to the extent
set forth in Section 13.3(b) below. All notices, requests and demands upon the parties are to be
given to the following addresses (or to such other address as any party may designate by notice in
accordance with this Section):
| If to Borrowers: | Delta Apparel, Inc. | |||
| 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000 | ||||
| Xxxxxx, Xxxxxxx 00000 | ||||
| Attention: Xxxxxxx Xxxxxxx | ||||
| Telephone No.: (000) 000-0000 (ext. 6620) | ||||
| Telecopy No.: (000) 000-0000 | ||||
| If to Agent: | Wachovia Bank, National Association | |||
| 000 00xx Xxxxxx GA4524 | ||||
| 0xx Xxxxx | ||||
| Xxxxxxx, Xxxxxxx 00000 | ||||
| Attention: Xxxxxx Xxxxxx, Portfolio Manager | ||||
| Telephone No.: (000) 000-0000 | ||||
| Telecopy No.: (000) 000-0000 |
(b) Notices and other communications to Lenders and Issuing Bank hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant
to procedures approved by Agent or as otherwise determined by Agent, provided,
that, the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to
Section 2 hereof if such Lender or Issuing Bank, as applicable, has notified Agent that it is
incapable of receiving notices under such Section by electronic communication. Unless Agent
otherwise requires, (i) notices and other communications sent to an e-mail address shall be deemed
received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other written
acknowledgement), provided, that, if such notice or other communication is not
given during the normal business hours of the recipient, such notice shall be deemed to have been
sent at the opening of business on the next Business Day for the recipient, and (ii) notices or
communications posted to an Internet or intranet website shall be deemed received upon the deemed
receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of
notification that such notice or communications is available and identifying the website address
therefor.
13.4
Partial Invalidity. If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the particular provision held to
be invalid or unenforceable and the rights and obligations of the parties shall be construed and
enforced only to such extent as shall be permitted by applicable law.
13.5 Confidentiality.
(a) Agent, each Lender and Issuing Bank shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling confidential
information and safe and sound lending practices, any non-public information supplied to it
by any Borrower pursuant to this Agreement which is clearly and conspicuously marked as
confidential at the time such information is furnished by such Borrower to Agent, such
Lender or Issuing Bank, provided, that, nothing contained herein shall limit
the disclosure of
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any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or
accountants, in connection with any litigation to which Agent, such Lender or Issuing Bank
is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or
Issuing Bank or to any Affiliate of any Lender so long as such Lender, Participant (or
prospective Lender or Participant), Issuing Bank or Affiliate shall have been instructed to
treat such information as confidential in accordance with this Section 13.5, or (iv) to
counsel for Agent, any Lender, Participant (or prospective Lender or Participant) or Issuing
Bank.
(b) In the event that Agent, any Lender or Issuing Bank receives a request or demand to
disclose any confidential information pursuant to any subpoena or court order, Agent or such
Lender or Issuing Bank, as the case may be, agrees (i) to the extent permitted by applicable
law or if permitted by applicable law, to the extent Agent or such Lender or Issuing Bank
determines in good faith that it will not create any risk of liability to Agent or such
Lender or Issuing Bank, Agent or such Lender or Issuing Bank will promptly notify
Administrative Borrower of such request so that Administrative Borrower may seek a
protective order or other appropriate relief or remedy and (ii) if disclosure of such
information is required, disclose such information and, subject to reimbursement by
Borrowers of Agent’s or such Lender’s or Issuing Bank’s expenses, cooperate with
Administrative Borrower in the reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of the disclosed
information which Administrative Borrower so designates, to the extent permitted by
applicable law or if permitted by applicable law, to the extent Agent or such Lender or
Issuing Bank determines in good faith that it will not create any risk of liability to Agent
or such Lender or Issuing Bank.
(c) In no event shall this Section 13.5 or any other provision of this Agreement, any
of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by any Borrower, Guarantor or any
third party or otherwise becomes generally available to the public other than as a result of
a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information
that was or becomes available to Agent, any Lender (or any Affiliate of any Lender) or
Issuing Bank on a non-confidential basis from a Person other than a Borrower or Guarantor,
(iii) to require Agent, any Lender or Issuing Bank to return any materials furnished by a
Borrower or Guarantor to Agent, a Lender or Issuing Bank or prevent Agent, a Lender or
Issuing Bank from responding to routine informational requests in accordance with the Code
of Ethics for the Exchange of Credit Information promulgated by The Xxxxxx Xxxxxx Associates
or other applicable industry standards relating to the exchange of credit information. The
obligations of Agent, Lenders and Issuing Bank under this Section 13.5 shall supersede and
replace the obligations of Agent, Lenders and Issuing Bank under any confidentiality letter
signed prior to the date hereof or any other arrangements concerning the confidentiality of
information provided by any Borrower or Guarantor to Agent or any Lender. In addition,
Agent and Lenders may disclose information relating to the Credit Facility to Gold Sheets
and other publications, with such information to consist of deal terms and other information
customarily found in such publications, and that, subject to Borrowers’ consent, which
consent shall not be unreasonably withheld or delayed, Wachovia may otherwise use the
corporate name and logo of Borrowers and Guarantors or deal terms in “tombstones” or other
advertisements, public statements or marketing materials.
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13.6
Successors. This Agreement, the other Financing Agreements and any other document
referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable
by Agent, Lenders, Issuing Bank, Borrowers and their respective successors and assigns, except that
no Borrower may assign its rights under this Agreement, the other Financing Agreements and any
other document referred to herein or therein without the prior written consent of Agent. Any such
purported assignment without such express prior written consent shall be void. No Lender may
assign its rights and obligations under this Agreement without the prior written consent of Agent,
except as provided in Section 13.7 below. The terms and provisions of this Agreement and the other
Financing Agreements are for the purpose of defining the relative rights and obligations of
Borrowers, Agent, Lenders and Issuing Bank with respect to the transactions contemplated hereby and
there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or
any of the other Financing Agreements.
13.7
Assignments; Participations.
(a) Each Lender may assign all or, if less than all, a portion equal to at least
$5,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this
Agreement to one or more Eligible Transferees (but not including for this purpose any assignments
in the form of a participation), each of which assignees shall become a party to this Agreement as
a Lender by execution of an Assignment and Acceptance; provided, that, (i) if such
Eligible Transferee is not a bank, Agent shall receive a representation in writing by such Eligible
Transferee that no part of its acquisition of its Loans is made out of assets of any employee
benefit plan, (ii) such transfer or assignment will not be effective until recorded by Agent on the
Register and (iii) Agent shall have received for its sole account payment of a processing fee from
the assigning Lender or the assignee in the amount of $5,000. As used in this Section, the term
“employee benefit plan” shall have the meaning assigned to it in Title I of ERISA and shall also
include a “plan” as defined in Section 4975(e)(1) of the Code.
(b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments
and the principal amount of their Loans (the “Register”). Agent shall also maintain a copy of each
Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give
effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and Borrowers, Obligors, Agent and Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by Administrative Borrower and any
Lender at any reasonable time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto
and to the other Financing Agreements and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letter of Credit Obligations) of a
Lender hereunder and thereunder and (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee
thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, the assigning Lender makes no
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representation or warranty and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement or any of the other Financing
Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this
Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower, any Obligor or any of their Subsidiaries or the performance or
observance by any Borrower or any Obligor of any of the Obligations; (iii) such assignee confirms
that it has received a copy of this Agreement and the other Financing Agreements, together with
such other documents and information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints
and authorizes Agent to take such action as agent on its behalf and to exercise such powers under
this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and
thereof, together with such powers as are incidental thereto, and (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations which by the terms of this
Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent
and Lenders may furnish any information concerning any Borrower or Obligor in the possession of
Agent or any Lender from time to time to assignees and Participants.
(e) Each Lender may sell participations to one or more banks or other entities in or to all or
a portion of its rights and obligations under this Agreement and the other Financing Agreements
(including, without limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Obligations, without the consent of Agent or the other
Lenders); provided, that, (i) such Lender’s obligations under this Agreement
(including, without limitation, its Commitment hereunder) and the other Financing Agreements shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and Borrowers, Obligors and Agent shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and obligations under
this Agreement and the other Financing Agreements, (iii) the Participant shall not have any rights
under this Agreement or any of the other Financing Agreements (the Participant’s rights against
such Lender in respect of such participation to be those set forth in the agreement executed by
such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower
or Obligor hereunder shall be determined as if such Lender had not sold such participation, and
(iv) if such Participant is not a bank, represent that no part of its acquisition of its
participation is made out of assets of any employee benefit plan. As used in this Section, the term
“employee benefit plan” shall have the meaning assigned to it in Title I of ERISA and shall also
include a “plan” as defined in Section 4975(e)(l) of the Code.
(f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal
Reserve Bank; provided, that, no such pledge shall release such Lender from any of its obligations
hereunder or substitute any such pledgee for such Lender as a party hereto.
(g) Borrowers shall assist Agent or any Lender permitted to sell assignments or participations
under this Section 13.7 in whatever manner necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and delivery of any and
all agreements, notes and other documents and instruments as shall be requested and the delivery of
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informational materials, appraisals or other documents for, and the participation of relevant
management in meetings and conference calls with, potential Lenders or Participants. Borrowers
shall certify the correctness and accuracy of all descriptions of Borrowers and their affairs
provided, prepared or reviewed by any Borrower that are contained in any selling materials prepared
for potential Lenders in connection with the initial syndication of the Loans and all other
information provided by it and included in such materials.
13.8
Entire Agreement. This Agreement, the other Financing Agreements, any supplements
hereto or thereto, and any instruments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and understanding concerning the subject
matter hereof and thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties, commitments, proposals,
offers and contracts concerning the subject matter hereof, whether oral or written. In the event of
any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms
of this Agreement shall govern.
13.9
USA PATRIOT Act. Each Lender subject to the USA PATRIOT Act hereby notifies Borrowers
and Guarantors that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain,
verify and record information that identifies each Person or corporation who opens an account
and/or enters into a business relationship with it, which information includes the name and address
of Borrowers and Guarantors and other information that will allow such Lender to identify such
Person in accordance with the USA PATRIOT Act and any other applicable law. Borrowers and
Guarantors are hereby advised that any Loans or Letters of Credit hereunder are subject to
satisfactory results of such verification.
13.10 No Novation; Reaffirmation of Grant of Security Interest.
(a) Each Borrower agrees that the security interests and liens granted to Wachovia, as
Agent, pursuant to the Existing Loan Agreement and the Existing Financing Agreements (as defined
in the Existing Loan Agreement), shall remain outstanding and in full force and effect in
accordance with the Existing Financing Agreements, in each case, as amended as of the date hereof
and shall continue to secure the Obligations.
(b) Each Borrower, Agent, Issuing Bank and each Lender acknowledges and agrees that (i) the
Obligations represent, among other things, the amendment, restatement, renewal, extension, and
modification of the Obligations (as defined in the Existing Loan Agreement) arising in connection
with the Existing Loan Agreement and the other Existing Financing Agreements executed in connection
therewith; (ii) each Borrower, Agent, Issuing Bank and each Lender intends that the Collateral
pledged under the Existing Loan Agreement and the other Existing Financing Agreements executed in
connection therewith shall secure, without interruption or impairment of any kind, all existing
Obligations (as defined in the Existing Loan Agreement) under the Existing Loan Agreement and the
other Existing Financing Agreements executed in connection therewith as amended, restated, renewed,
extended, and modified hereunder, together with all other Obligations hereunder; and (iii) all
security interests and liens granted under or evidenced by the Existing Loan Agreement and the
other Existing Financing Agreements executed in connection therewith are hereby ratified, confirmed
and continued.
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(c) Each Borrower, Agent, Issuing Bank and each Lender intends that by entering into and
performing their respective obligations hereunder, this transaction shall not constitute a novation
or an accord and satisfaction.
13.11
Counterparts, Etc. This Agreement or any of the other Financing Agreements may be
executed in any number of counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed counterpart of this
Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and
effect as the delivery of an original executed counterpart of this Agreement or any of such other
Financing Agreements. Any party delivering an executed counterpart of any such agreement by
telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall
not affect the validity, enforceability or binding effect of such agreement.
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IN WITNESS WHEREOF, Agent, Lenders and Borrowers have caused these presents to be duty
executed as of the day and year first above written.
| BORROWERS: | ||||||
| DELTA APPAREL, INC., a Georgia corporation | ||||||
| By: | ||||||
| Title: | ||||||
| Chief Executive Office: | ||||||
| 0000 Xxxxxxxx Xxxxxxx | ||||||
| Xxxxx 000 | ||||||
| Xxxxxx, Xxxxxxx 00000 | ||||||
| X.X. XXXXX CO., a North Carolina corporation | ||||||
| By: | ||||||
| Title: | ||||||
| Chief Executive Office: | ||||||
| 0000 Xxxxxxxx Xxxxxxx | ||||||
| Xxxxx 000 | ||||||
| Xxxxxx, Xxxxxxx 00000 | ||||||
| JUNKFOOD CLOTHING COMPANY, a Georgia corporation | ||||||
| By: | ||||||
| Title: | ||||||
| Chief Executive Office: | ||||||
| 0000 Xxxxxxxx Xxxxxxx | ||||||
| Xxxxx 000 | ||||||
| Xxxxxx, Xxxxxxx 00000 | ||||||
[Signatures continued on following page]
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| AGENT AND LENDER: | ||||||
| WACHOVIA NATIONAL BANK, NATIONAL ASSOCIATION | ||||||
| By: | ||||||
| Title: | ||||||
| Address: | ||||||
| 000 Xxxxxxxx Xxxxxxx | ||||||
| Xxxxx 0000 | ||||||
| Xxxxxxx, Xxxxxxx 00000 | ||||||
| LENDERS: | ||||||
| By: | ||||||
| Title: | ||||||
| Address: | ||||||
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