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EXHIBIT 10(c)
August 4, 1999
Dyersburg Corporation and its Subsidiaries
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: President
You have requested that CONGRESS FINANCIAL CORPORATION (SOUTHERN), a
Georgia corporation ("Congress"), and BANKBOSTON, N.A., a national banking
association ("BankBoston"; Congress and BankBoston are sometimes collectively
referred to hereinafter as "Lenders" and individually as a "Lender"), provide a
revolving credit, term loan and letter of credit facility in an aggregate
principal amount of up to $110,000,000 (the "Facilities"), to Dyersburg
Corporation, a Tennessee corporation, and certain of its subsidiaries
(collectively, "Borrowers" and individually, a "Borrower"). The purpose of the
Facilities will be to refinance Borrowers' existing senior revolving and term
loan facility with SunTrust Bank, N.A., as agent and various other financial
institutions (the "Existing Facility"), to support ongoing working capital and
general corporate needs of Borrowers, including permitted capital expenditures,
and to pay transaction expenses associated with the closing of the Facilities.
Subject to the terms and conditions set forth herein, Lenders are
pleased to advise you of their respective commitments to make available to
Borrowers the Facilities as hereinafter described:
1. REVOLVING CREDIT FACILITY.
(a) Subject to and upon the terms and conditions set forth herein and
in the Loan Documents (as hereinafter defined), each Lender will, severally to
the extent of its Revolving Commitment (as hereinafter defined) and not jointly
with the other Lender, make revolving loans ("Revolving Loans") to Borrowers
from time to time in amounts requested by Borrowers, up to the amount equal to
the sum of:
(i) eighty-five percent (85%) of the net amount of
eligible accounts plus ninety percent (90%) of the
net amount of eligible factored accounts, plus
(ii) the lesser of:
(A) the sum of:
(I) seventy percent (70%) of the value
of eligible cotton inventory, plus
(II) sixty percent (60%) of the value of
eligible raw materials during the
period from the closing date to the
sooner to occur of: (x) February
15, 2000 or (y) Borrowers' receipt
of their federal tax refund claim
for prior fiscal years of Borrowers
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and fifty percent (50%) of the value
of eligible raw materials at all
times thereafter, plus
(III) sixty percent (60%) of the value of
eligible finished goods during the
period from the closing date to the
sooner to occur of: (x) February 15,
2000 or (y) Borrowers' receipt of
their federal tax refund claim for
prior fiscal years of Borrowers and
fifty percent (50%) of the value of
eligible finished goods at all times
thereafter, plus
(IV) the lesser of: (x) fifty percent
(50%) of the value of eligible
work-in-process consisting of
manufactured yarn, greige cloth
inventory and dyed greige cloth at
Borrowers' Dyersburg, Tennessee
location and greige cloth inventory
at Alamac's location plus
twenty-five percent (25%) of the
value of eligible Alamac
stock-in-process and finishing
department inventory or (y)
$8,000,000, or
(B) $25,000,000, less
(iii) any availability reserves that are established by
Agents.
(b) For purposes hereof, "Revolving Commitment" shall mean, at any date
for any Lender, the obligation of such Lender to make Revolving Loans and to
purchase participations in letter of credit accommodations under the Loan
Documents with Borrowers, which shall not exceed (a) $42,000,000 for Congress,
and (b) $42,000,000 for BankBoston, and "Revolving Commitments" means the
aggregate principal amount of the Revolving Commitments of all Lenders, the
maximum amount of which shall not exceed $84,000,000.
(c) Eligible accounts and eligible inventory and the net amounts
thereof shall be determined by Congress, in its capacity as administrative agent
("Administrative Agent") and BankBoston, in its capacity as collateral agent
("Collateral Agent"; Administrative Agent and Collateral Agent are sometimes
collectively referred to hereinafter as "Agents") pursuant to general criteria
which will be set forth in the Loan Documents and which will be substantially in
the form of Exhibit A, attached hereto. Agents may, in their 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 and eligible
factored accounts to the extent that Agents determine in good faith that: (A)
the dilution with respect to the accounts for any period (based on the ratio of
(x) the aggregate amount of reductions in accounts other than as a result of
payments in cash to (y) 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 declined or (ii) reduce the lending formula(s) with respect
to eligible inventory to the extent that Agents determine that: (x) the number
of days of the turnover of the inventory for any period has changed in any
material respect from historical levels or (y) the liquidation value of the
eligible inventory, or any category thereof, has decreased, or (z) the nature
and quality of the inventory has deteriorated. In determining whether to reduce
the lending formula(s), Agents may
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consider events, conditions, contingencies or risks which are also considered in
determining eligible accounts, eligible inventory or in establishing
availability reserves.
(d) Lenders will allow Borrowers to elect once during the term of the
Loan Agreement to reduce permanently the Revolving Commitments by up to
$10,000,000, and such commitment reduction of up to $10,000,000 shall not be
subject to a prepayment penalty, premium or fee.
2. TERM LOAN FACILITY.
(a) Subject to and upon the terms and conditions herein set forth and
in the Loan Documents, each Lender severally agrees to make to Borrowers a term
loan advance in an amount not to exceed such Xxxxxx's Term Loan Commitment (as
defined below) (collectively, the "Term Loan"). The Term Loan shall be comprised
of term loan advances in the aggregate principal amount of $26,000,000 and shall
be funded by Lenders on the closing date, concurrently with Lenders' funding of
their initial Revolving Loans. Each term loan advance shall be evidenced by a
term note in the principal amount of the Term Loan Commitment of the holder
thereof, repaid, together with interest and other amounts due in respect
thereof, in accordance with the Loan Documents and shall be secured by all of
the Collateral (as defined below). The Term Loan shall be repaid in monthly
installments of $425,000 each, commencing on February 1, 2000, and continuing on
the first day of each month thereafter, with a final payment upon the commitment
termination date; provided, however, that the unpaid balance shall be due,
without notice or demand, upon any termination of the revolving credit facility.
The Term Loan Commitment of each Lender shall expire on the funding by such
Lender of its term loan advance. Borrowers shall not be entitled to reborrow any
amounts repaid with respect to the Term Loan.
(b) For purposes hereof, "Term Loan Commitment" shall mean at any date
for any Lender, the obligation of such Lender to make term loan advances
pursuant to the terms and conditions of the Loan Documents, which shall not
exceed (i) $13,000,000 for Congress, and (ii) $13,000,000 for BankBoston; and
the term "Term Loan Commitments" shall mean the aggregate principal amount of
the Term Loan Commitments of all Lenders, the maximum amount of which shall not
exceed $26,000,000.
(c) Voluntary prepayments of the Term Loan shall be permitted in part
subject to premiums of three percent (3.0%) of the total prepayment in Year 1,
one and one-half percent (1.50%) in Year 2, and three-fourths of one percent
(0.75%) in Year 3 and at all times thereafter, together with any standard LIBOR
breakage costs as applicable.
3. LETTER OF CREDIT FACILITY. Congress shall procure from an issuing
bank all letters of credit. The letter of credit facility shall be a sublimit of
the revolving credit facility and shall not exceed $16,000,000 in the aggregate
at any time. Letter of credit fees in respect of standby and direct pay letters
of credit shall be payable pro rata to the Lenders at the annual rate equal to
the Applicable Margin (as defined below) for Revolving Loans consisting of LIBOR
Rate loans and based on the maximum amount available to be drawn under each
standby letter of credit. Letter of credit fees in respect of documentary
letters of credit shall be payable pro rata to the Lenders at the annual rate of
1.50% of the face amount of each issued documentary letter of credit. In
addition, Borrowers shall pay to the issuing bank a fronting fee equal to 0.125%
per annum of the face amount
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of each standby and documentary letter of credit. Any other issuance fees in
respect of documentary letters of credit will be in amounts to be agreed upon
among Borrowers, Agents and Lenders.
4. TERM. The Facilities will have an initial term of three (3) years
from the closing date and may be extended for an additional one (1) year period
with the mutual written consent of Borrowers, Agents and Lenders.
5. INTEREST.
(a) Interest Rate. Outstanding amounts under the Facilities shall
accrue interest at the Borrowers' option at either the Alternate Base Rate plus
the Applicable Margin or the LIBOR Rate plus the Applicable Margin. "Alternate
Base Rate" shall mean a floating rate equal to BankBoston's base rate. "LIBOR
Rate" shall mean with respect to the interest period for a LIBOR 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 BankBoston is offered deposits of United States
dollars in the London interbank market (or other LIBOR Rate market selected by
Borrowers and approved by Agents and Lenders) 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 LIBOR Rate loans
requested by and available to Borrowers in accordance with the Loan Agreement,
with a maturity of comparable duration to the interest period selected by
Borrowers.
For purposes hereof, "Applicable Margin" shall mean a percentage equal to 2.75%
with respect to Revolving Loans consisting of LIBOR Rate loans; 0.75% with
respect to Revolving Loans consisting of Base Rate loans; 3.25% with respect to
any portion of the Term Loan consisting of LIBOR Rate loans; and 1.25% with
respect to any portion of the Term Loan consisting of Base Rate loans; provided,
that, commencing October 1, 2000, if there exists no Default or Event of Default
under (and as defined in) the Loan Agreement, then the Applicable Margin shall
be increased or decreased, based upon the ratio of Consolidated Funded Debt to
Consolidated EBITDA, as follows:
Consolidated Funded Revolving Loans Term Loan
Debt/Consolidated
EBITDA
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LIBOR Rate Base Rate LIBOR Rate Base Rate
Loans Loans Loans Loans
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Greater than or
equal to 6.50 to 1.0 3.00% 1.00% 3.50% 1.50%
--------------------------------------------------------------------------------
Less than 6.50 to
1.0 but greater than
or equal to 5.50 to 1.0 2.75% 0.75% 3.25% 1.25%
--------------------------------------------------------------------------------
Less than 5.50 to 1.0
but greater than or
equal to 4.50 to 1.0 2.50% 0.50% 3.00% 1.00%
--------------------------------------------------------------------------------
Less than 4.5 to 1.0
but greater than or
equal to 3.50 to 1.0 2.25% 0.25% 2.75% 0.75%
--------------------------------------------------------------------------------
Less than 3.50 to 1.0 2.00% 0% 2.50% 0.50%
--------------------------------------------------------------------------------
For purposes of this definition and the unused line fee, Consolidated EBITDA
shall mean earnings before interest, taxes, depreciation and amortization for
the last four (4) quarters plus up to $2,000,000 of cash restructuring charges
associated with the closing of up to one (1) additional business facility plus
all non-cash charges related to a restructuring in financial statements prepared
in accordance with GAAP. The effective date of any change in the Applicable
Margin due
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to a change in the Borrowers' relevant ratio will be the third business day
following the receipt by Agents of the Borrowers' quarterly financial
statements.
(b) Default Rate. If an Event of Default occurs, the default rate of
interest will be two percent (2.00%) over the rates otherwise applicable to the
loans.
(c) Interest Periods. LIBOR rates may be selected for interest periods
of 1, 2, or 3 months, as available.
(d) Payment Dates. Interest on Base Rate loans will be due and payable
monthly, in arrears. Interest on LIBOR Rate loans will be due and payable at the
earlier of the end of each applicable interest period.
(e) Minimum Amounts. LIBOR Rate Loans shall be in a minimum amount of
$5,000,000 and integral multiples of $1,000,000 in excess of that amount.
(f) Calculation of Fees and Interest. Interest and all fees described
herein and payable to Lenders under the Loan Documents shall be calculated on
the basis of the actual days elapsed in a year of 360 days.
6. FEES. All fees listed below are in addition to interest and other
fees and charges provided for herein and may, at Agents' and Lenders' option, be
charged directly to any loan account.
(a) Closing Fee. Borrowers shall jointly and severally pay to
Collateral Agent (for the pro rata benefit of Lenders) a closing fee in the
amount of $825,000: (i) $250,000 of which has been paid by Borrowers to Lenders
on July 14, 1999, in connection with the acceptance of the Outline of Terms and
Conditions, (ii) $500,000 of which shall be payable by Borrowers to Lenders on
or before August 5, 1999, in immediately available funds, and (iii) the
remaining $75,000 of which shall be payable by Borrowers to Lenders on the
closing date subject, in each case, to the limitations and conditions set forth
in the Letter from Congress and BankBoston to Dyersburg dated July 14, 1999.
Such closing fee shall compensate Lenders for the costs associated with the
origination, structuring, processing, approving and closing of the transactions
contemplated in this commitment, exclusive of any other expenses for which
Xxxxxxxxx have agreed to reimburse Agents and Lenders.
(b) Syndication Fee. Borrowers shall jointly and severally pay to
BankBoston and Congress on the closing date a syndication fee in the amount of
$550,000 in immediately available funds.
(c) Collateral Agent Fee. Borrowers shall jointly and severally pay to
Collateral Agent for its benefit a monthly fee in an amount equal to $4,000 per
month, which fee shall be fully earned as of, and payable in advance on, the
first day of each month.
(d) Administrative Agent Fee. Borrowers shall jointly and severally pay
Administrative Agent for its benefit a monthly fee in an amount equal to $1,500
per month in respect of Administrative Agent's services, which fee shall be
fully earned as of, and payable in advance on the closing date and on the first
day of each month thereafter.
(e) Unused Line Fee. Borrowers shall jointly and severally pay to
Collateral Agent (for the pro rata benefit of Lenders) monthly an unused line
fee equal to (i) the percentage set forth below based upon the ratio of
Consolidated Funded Debt to Consolidated EBITDA (calculated as provided in
paragraph 5(a) above), multiplied by (ii) the amount by which the Revolving
Commitments exceed the average daily principal balance of the outstanding
Revolving Loans and letter of credit accommodations during the immediately
preceding month (or part thereof), which fee shall be payable on the first day
of each month in arrears:
(A) If the ratio of Consolidated Funded Debt to
Consolidated EBITDA is greater than or equal to 6.5 to 1.0,
then the applicable percentage shall be 0.50%.
(B) If the ratio of Consolidated Funded Debt to
Consolidated EBITDA is less than 6.5 to 1.0, then the
applicable percentage shall be 0.375%.
(f) Early Termination Fee. If the Facilities are terminated for any
reason prior to the end of the then current term, Borrowers shall pay to
Collateral Agent, for the pro rata benefit of Lenders, an Early Termination Fee
as
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follows: (i) three percent (3.0%) of the Facilities if terminated on or prior to
the first anniversary of the closing date; (ii) one and one-half of one percent
(1.5%) of the Facilities if terminated after the first anniversary and on or
prior to the second anniversary of the closing date; and (iii) three-quarters of
one percent (0.75%) of the Facilities if terminated after the second anniversary
and prior to the third anniversary of the closing date or at any other time
prior to the end of the then current term.
7. MANDATORY PREPAYMENTS. The loans shall be prepaid through
application to the loans of the following amounts: (a) 100% of the net proceeds
received from the sale or disposition of all or any part of the assets of any
Borrower or any of its subsidiaries (other than (i) sales in the ordinary course
of a Borrowers' business, (ii) permitted sales to be agreed upon, subject to the
reinvestment of the net proceeds thereof within six (6) months, and (iii) other
sales not in the ordinary course of business not to exceed in any fiscal year of
such Borrower an amount to be agreed upon by Borrowers, Agents and Lenders); and
(b) 100% of the net proceeds received from the issuance of subordinated debt or
equity by any Borrower. Mandatory prepayments described in the foregoing
sentence shall be applied to repay, without penalty or premium (except for LIBOR
breakage costs, if any) first, to outstandings on the Term Loan in inverse order
of maturity, then to the Revolving Loans; provided, however, that any proceeds
arising from (i) the issuance of subordinated debt or equity as described above
or (ii) the sale of machinery and equipment not included in Accuval's appraisal
dated June 18, 1999 and real estate in Trenton, Tennessee and Xxxxxxxx, North
Carolina, shall be applied first to Revolving Loans and then to outstandings on
the Term Loan in inverse order of maturity.
8. COLLATERAL. To secure payment and performance of all obligations of
Borrowers to Agents and Lenders, each Borrower and each guarantor shall grant to
Collateral Agent, for the benefit of itself as Collateral Agent and for the pro
rata benefit of Lenders, a continuing security interest in and lien upon all
domestic real and personal property of each Borrower and each guarantor,
including, all accounts, contract rights, general intangibles, chattel paper,
documents, instruments, deposit accounts, investment property, inventory,
equipment, fixtures and real property and all products and proceeds thereof of
each Borrower and each guarantor (collectively, the "Collateral"). A pledge of
100% of the stock of all domestic subsidiaries and affiliates of Borrowers and a
pledge of 65% of the stock of all foreign subsidiaries and affiliates of
Borrowers shall be required. Agents and Lenders will agree to release specific
identified equipment that is not listed in the Accuval appraisal dated June 18,
1999, with aggregate net book value not to exceed $5,000,000, that is targeted
to be transferred to Borrowers' foreign-owned subsidiaries, so long as no
Default or Event of Default exists at such time or would result therefrom.
9. GUARANTIES. DFIC, Inc., a Delaware corporation, IQUE, Inc., a
Tennessee corporation, IQUEIC, Inc., a Delaware corporation , United Knitting
Inc., a Tennessee corporation, UKIC, Inc., a Delaware corporation, AIH Inc., a
Delaware corporation, and Alamac Enterprises Inc., a Delaware corporation, and
any and all other direct and indirect existing and future subsidiaries and/or
affiliates of each Borrower, shall execute and deliver to Lenders unlimited
guaranties in favor of Lenders, pursuant to which each of the guarantors shall
guarantee any and all obligations of each Borrower to Agents and Lenders,
whether now existing or hereafter arising.
10. COLLECTIONS. Borrowers shall maintain either a lockbox or an agency
account(s) in which daily collected funds will be applied against the
outstanding loan balance of Borrowers. Agents and Xxxxxxx intend to work within
the framework of Borrowers' existing cash management system to insure timely
application of collected funds against any outstanding debt. The lockbox or
agency account(s) will be located at First Union National Bank or at a financial
institution acceptable to Agents and Lenders. All collections will be credited
one (1) business day after the receipt of wire transfers.
11. CLOSING DATE; EXPIRATION DATE. The closing with respect to the
transactions contemplated hereby will be held in Atlanta, Georgia, on or before
September 15, 1999 (the "Expiration Date"), unless Agents and Lenders agree with
Borrowers in writing to a later date; provided, however, that Lenders shall have
no obligation to close the transactions contemplated hereby unless and until
Borrowers have satisfied, or cause to be satisfied to Lenders' satisfaction, all
of the conditions to funding set forth herein on or before the Expiration Date.
Lenders will have no further obligation hereunder on the Expiration Date or the
date on which closing shall occur, whichever occurs first.
12. BASIC LOAN DOCUMENTATION. Borrowers shall be required to execute
and deliver, or cause to be executed and delivered, to Agents and Lenders such
instruments, agreements, documents, assignments, pledges, waivers, certificates,
opinions, affidavits and assurances as Agents and Lenders may request in
connection with the funding of any loans on the basis outlined in this
commitment, including execution of a Loan and Security Agreement (the "Loan
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Agreement") pursuant to which Borrowers shall, among other things, grant to
Collateral Agent a lien upon the Collateral; the revolving credit notes; the
term notes; mortgages; environmental indemnities; and UCC-1 financing statements
naming Borrowers as debtor and Collateral Agent as secured party and to be filed
in each jurisdiction in which a Borrower has an office or place of business or
in which any of the Collateral is located or stored (collectively, the "Loan
Documents"), all of which shall be in form and content satisfactory to Agents
and Lenders and their counsel. The Loan Documents will contain the
representations, warranties, covenants and conditions that are normally
contained in loan documents used by Agents and Lenders that relate to loans
similar to the loans described herein, including the following:
(a) Borrowers shall provide the following reports: (i) annual financial
statements prepared on a consolidated and consolidating basis in accordance with
GAAP, all certified by a nationally recognized firm of certified public
accountants and accompanied by an unqualified opinion of such firm on the annual
financial statements, accompanied by covenant compliance calculations and a
representation by the Chief Financial Officer of Borrowers that to the knowledge
of such officer, no Event of Default has occurred or is continuing, all
submitted to Agents and Lenders within ninety (90) days after the end of each
fiscal year; and (ii) monthly financial statements prepared on a consolidated
and consolidating basis in accordance with GAAP, with comparable information for
the year to date and corresponding month of the immediately preceding fiscal
year, accompanied by covenant compliance calculations and a representation by
the Chief Financial Officer of Borrowers that no Event of Default has occurred
or is continuing, all submitted to Agents and Lenders within thirty (30) days
after the end of each month.
(b) Borrowers shall be required to provide daily sales, collections and
other reporting as requested by Agents and Lenders and shall submit a borrowing
base report weekly, with accounts receivable agings and inventory designations
required monthly.
(c) Borrowers shall not be permitted to obtain any other loans or other
financings secured by a lien upon any of the Collateral.
(d) Agents and Lenders may require certain covenants from Borrowers
relating to capital expenditure limitations; restrictions on incurrence of debts
and granting of liens; prohibitions on dividend declarations and payments and
the prepayment of any subordinated debt; restrictions on investments, mergers
and business acquisitions; and prohibitions against selling, leasing or
otherwise disposing of any of the Collateral, except for sales of inventory in
the ordinary course of business, disposition of equipment that is no longer
economically operational in the business, and other dispositions expressly
authorized herein.
(e) An Event of Default will be deemed to have occurred under the Loan
Documents by reason of, among other things, the nonpayment of any of the
Facility obligations when due; the breach by any Borrower of any covenant
contained in the Loan Documents; any Borrower's default under any instrument or
agreement evidencing or securing the payment of any material indebtedness for
borrowed money, including any indebtedness owed to the holders of any
subordinated debt; the making by any Borrower of any material misrepresentation
in the Loan Documents; the bankruptcy or insolvency of any Borrower; and the
institution of any suit or proceeding by any Borrower or by any of the
shareholders of any Borrower against either Agents or any Lender that arises out
of or is related to the obligations, the Loan Documents or the ownership,
management or operation of any of the Collateral. There will be no grace periods
regarding principal and interest payments. Other notice or grace periods and/or
thresholds shall be agreed upon by Borrowers, Agents and Lenders.
(f) Borrowers shall be required to indemnify Agents and Lenders from
and against any and all liabilities, claims or expenses Agents and Lenders may
incur under or in connection with the Loan Documents, including any
environmental claims associated with or arising from Collateral Agent's Lien
upon, use or inspection of, or foreclosure upon any of the Collateral or
otherwise, and all taxes (excluding taxes imposed on any Lender's income)
associated in any way with the transactions contemplated hereby, except to the
extent that claims are the result of Agents' or Lenders' gross negligence or
willful misconduct.
(g) Borrowers shall agree to consent to jurisdiction and venue in the
State of Georgia as to any and all litigation arising out of or related to the
Loan Documents, the loans or the Collateral and to waive (along with Agents and
Lenders) all rights to trial by jury in any such litigation.
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(h) Borrowers shall maintain Excess Availability at all times of at
least $5,000,000 after the closing date. For purposes hereof, "Excess
Availability" shall mean the amount, as determined by Agents, calculated at any
time, equal to: (a) the lesser of: (i) the amount of the Revolving Loans
available to Borrowers as of such time based on the applicable lending formulas
multiplied by the net amount of eligible accounts and the net amount of eligible
factored accounts and the value of eligible inventory, as determined by Agents,
and subject to the sublimits and availability reserves from time to time
established by Agents, and (ii) the Revolving Commitments minus the sum of: (i)
the amount of all then outstanding, and unpaid Facility obligations (but not
including for this purpose the then outstanding principal amount of the Term
Loan), plus (ii) the aggregate amount of all then outstanding, unpaid and
undisputed trade payables of Borrowers which are more than sixty (60) days past
due as of such time, plus (iii) the amount of checks issued by Borrowers to pay
trade payables, but not yet sent and the book overdraft of Borrowers.
13. FINANCIAL COVENANTS; PERMITTED INVESTMENTS.
(a) Financial covenants will be set by Borrowers, Agents and Lenders at
mutually agreeable levels based on Borrowers' projections dated July 16, 1999
(the "Plan") and shall include, but not be limited to, the following:
(i) Minimum Consolidated Adjusted Tangible Net Worth: of
at least $115,000,000 (the "Target Covenant"), to be
tested on a monthly basis beginning August 31, 1999.
For purposes hereof, Adjusted Tangible Net Worth
shall mean stockholder's equity plus the face value
of the Subordinated Notes (as defined below) less
intangible assets, including, without limitation,
goodwill and deferred financing and closing costs. If
Borrowers, with the prior written consent of Agents
and Lenders, reduce the outstanding principal amount
of the Subordinated Notes below $125,000,000, then
the Target Covenant shall be reduced in an amount
equal to such reduction.
(ii) Minimum Consolidated EBITDA: During Borrowers' fiscal
year 2000; to be tested on a cumulative quarterly
basis for the quarters ending on or about December
31, 1999 and March 31, 2000 based on approximately
75% of the Plan and on a cumulative monthly basis
beginning April 30, 2000 through on or about August
31, 2000 based on 75% of the Plan;
(iii) Minimum Consolidated Fixed Charge Coverage Ratio:
minimum (EBITDA - Capex - Cash Taxes) / (Interest
Expense + current maturities of long-term debt) on a
rolling four quarter basis beginning September 30,
2000 at a level of approximately 1.1x based on the
Plan.
Consolidated EBITDA shall be defined as earnings
before interest, taxes, depreciation and amortization
plus non-cash charges related to a restructuring in
financial statements prepared in accordance with
GAAP.
(b) In addition to limitations on total capital expenditures (annual
limitation amount(s) to be determined), Borrowers will be permitted to make
investments and/or capital expenditures in non-domestic affiliates and joint
ventures up to $1,000,000 from the closing date through December 31, 1999,
$2,000,000 during calendar year 2000, and $2,000,000 during calendar year 2001.
Such investments are conditional upon Borrowers having a minimum Excess
Availability of at least $5,000,000 after consummation of such investment and no
Event of Default shall exist at such time or result therefrom. Borrowers also
may make additional investments and/or capital expenditures in non-domestic
affiliates and joint ventures at any time after January 1, 2000, provided, that
(i) the ratio of (EBITDA - Capital Expenditures - Cash Taxes) / (Interest
Expense + Principal Amortization) for the prior twelve-month period equals a
minimum of 1.25 times; and (ii) Excess Availability equals at least $10,000,000
after such investment or capital expenditure; and (iii) no Event of Default
exists. In addition, after payment of future subordinated debt interest payments
by Borrowers, Borrowers must have a minimum availability of at least $5,000,000.
14. FEES AND EXPENSES. Borrowers shall jointly and severally reimburse
Agents and Xxxxxxx for expenses reasonably incurred in connection with periodic
field examinations, wire transfer charges and other expenses set forth in the
Loan Documents. Field examinations shall be performed at Borrowers' expense at a
cost of $650 per person day plus expenses. All fees and out-of-pocket expenses
heretofore and hereafter reasonably incurred by Borrowers in connection with the
negotiation, documentation and closing of the Facilities, and the transactions
contemplated thereby, including closing costs, recording costs, filing fees,
documentary and intangibles taxes, appraisal costs, lien search
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charges, travel expenses and the reasonable fees and disbursements of Agents'
counsel, will be payable by Borrowers whether or not the Facilities are
established or any loan is made pursuant thereto. This obligation will survive
the expiration or termination of this commitment.
15. CONDITIONS TO FUNDING. The establishment of the Facilities is
expressly conditioned upon Borrowers' strict adherence to and timely compliance
with the requirements of this commitment, the satisfaction of Agents' legal
counsel concerning all legal matters, the accuracy and completeness of any and
all representations and warranties at any time made to Agents and Lenders by
Borrowers and the following matters:
(a) The Loan Documents shall have been duly executed by Borrowers,
Agents and Xxxxxxx, in form and substance satisfactory to Agents and Xxxxxxx and
counsels for Agents;
(b) Each of the representations and warranties contained in the Loan
Documents shall be true, accurate and complete on and as of the closing date,
and all information heretofore or hereafter provided to Agents and Lenders
concerning Borrowers and the Collateral shall be true, accurate and complete;
(c) No event shall have occurred and no condition shall exist which
constitutes a Default or an Event of Default (other than any default that exists
under the Existing Facility) under (and as defined in) the Loan Documents;
(d) Agents and Xxxxxxx shall have received from Borrowers' legal
counsel in the State of Tennessee and the State of North Carolina, written
opinions satisfactory to Agents in which such counsel opine that, among other
things: (i) each Borrower is duly incorporated or organized, validly existing
and in good standing under the laws of the State of its organization and is duly
qualified to transact business in certain other states; (ii) each Borrower has
taken all necessary corporate or partnership actions to authorize the execution,
delivery and performance of the Loan Documents and any other documents required
to be executed on the closing date pursuant thereto; (iii) the execution and
delivery of each Loan Document does not, and the consummation of the financing
transactions evidenced thereby will not, violate, result in the breach of, be in
conflict with or constitute a default under any provision of any law, rule,
order, judgment or decree applicable to Borrowers or any agreement (including
any agreement evidencing any of the subordinated debt of any Borrower) known to
counsel to be applicable to Borrowers or binding on Borrowers' properties; (iv)
the Loan Documents are legal, valid and binding obligations of each Borrower
enforceable against each Borrower party thereto in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy and
other similar laws of general application relating to or affecting the
enforcement of creditor's rights generally and by general principles of equity
and other customary limitations on enforceability typically included in such
opinions; (v) such attorney knows of no litigation, proceeding or investigation,
pending or threatened against any Borrower other than that disclosed in the Loan
Agreement; (vi) no registration or declaration with any governmental authority
is required by or on behalf of Borrowers in connection with the execution and
delivery of the Loan Documents or any other documents contemplated thereby
delivered on the closing date; (vii) the Loan Documents do not violate any
applicable law relating to interest or usury and a Tennessee and a North
Carolina court would give effect to the choice of Georgia law (including laws
regulating interest) under the Loan Documents (except as to matters of procedure
and enforcement of remedies in the States of North Carolina and Tennessee);
(viii) the liens granted and conveyed to Collateral Agent with respect to all of
the Collateral are legal and valid under Tennessee and North Carolina law and
are duly perfected pursuant to applicable provisions of Tennessee and North
Carolina law; (x) all documentary stamps, intangibles taxes and fees required to
be paid by Lenders in connection with any of the Loan Documents have been duly
paid and no additional stamps, taxes or fees are required to be paid other than
recording fees in a nominal amount and franchise and excise taxes, if
applicable; and (xi) such other matters as may be reasonably requested by legal
counsel to Agents;
(e) Agents and Lenders shall have received certificates from the
appropriate state officials to the effect that each Borrower is in good standing
and fully qualified to own its properties and to carry on its business in each
state in which such qualification is necessary;
(f) Agents and Xxxxxxx shall have received evidence satisfactory to
Agents that the liens granted to Collateral Agent under the Loan Documents will
constitute on the closing date duly perfected first priority liens in the
Collateral (wherever such Collateral may be located) and that there are no other
liens affecting the Collateral other than liens for specific leased equipment
that are in existence on the date hereof;
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(g) Each landlord or owner of premises used by a Borrower shall have
executed in favor of Agents and Lenders a landlord waiver agreement in form and
substance satisfactory to Agents and their counsels pursuant to which such
landlord shall waive or subordinate any lien it may hold with respect to any
Collateral to liens in favor of Agents and Lenders, and Agents shall have
received copies of all leases;
(h) Each processor of any domestic inventory of a Borrower shall have
executed in favor of Agents and Lenders a processor waiver agreement in form and
substance satisfactory to Agents and their counsel and by which each such
processor shall, among other things, agree to waive any lien that it may have
upon any inventory from time to time placed with it by Borrowers;
(i) Each mortgagee of any premises at which any of the Collateral
consisting of equipment (including fixtures) shall be located shall execute in
favor of Agents and Lenders a mortgagee waiver agreement, in form and substance
satisfactory to Agents, pursuant to which such mortgagee shall waive or
subordinate any lien it may hold with respect to any of such Collateral;
(j) From July 3, 1999, to the closing date, Borrowers' financial
condition and results of continuing operations shall not have deviated to a
degree deemed materially adverse by Agents from that set forth in the Plan
delivered by Borrowers to Agents and Lenders prior to the date hereof;
(k) Agents shall be satisfied that Borrowers will have Excess
Availability of at least $10,000,000 on the closing date, after giving effect to
the initial Revolving Loans and letter of credit accommodations to be made by
Lenders on the closing date and the payment of all transaction expenses;
(l) Agents shall have completed (and found the results thereof to be
acceptable) their customary field examinations of Borrowers, their financial
records and the Collateral, during which Agents will examine and inspect, and
conduct detailed tests of, Borrowers MIS, inventory accounting, accounts
receivable and records thereof, accounts payable and records thereof, tax
payment procedures and compliance and other matters usually covered by such
field examination;
(m) Agents shall have found satisfactory the results of their inventory
test counts and costing tests;
(n) All of the subordinated debt of Borrowers shall be expressly
subordinate in right of payment to the prior payment and satisfaction in full of
all of the obligations to Agents and Lenders, all in a manner and pursuant to
such written agreements binding on the holders of such subordinated debt as
shall be satisfactory to Agents and their counsel (with the Agents'
acknowledging that the subordination terms contained in the Indenture with
respect to the Subordinated Notes are acceptable to Agents and their counsel;
(o) Agents and Lenders shall have received and reviewed environmental
reports, in form and substance satisfactory to Agents, and Agents shall have
satisfied themselves that Borrowers are in compliance with all environmental
laws;
(p) Agents and Xxxxxxx shall have received and found satisfactory in
all respects Borrowers' financial statements for the quarter and year-to-date
period ending July 3, 1999;
(q) Borrowers shall have delivered to Agents and Lenders acceptable
title insurance, commitments and surveys with respect to all real estate of
Borrowers, which shall be in form and substance satisfactory to Agents in all
respects;
(r) Borrowers shall have certified to Agents that the Indenture dated
as of August 27, 1997, including all amendments thereto (the "Indenture"), for
the Borrowers' $125,000,000 Series A and Series B 9-3/4% Senior Subordinated
Notes due 2007 (the "Subordinated Notes") has not been amended or otherwise
modified;
(s) There shall be no order or injunction or other pending litigation
in which there is a reasonable possibility of a decision which could materially
adversely affect the ability of the Borrowers to perform under the Loan
Documents or Agents' and Lenders' rights in respect thereof or their ability to
exercise such rights;
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(t) No event of default shall exist under the Subordinated Notes on or
prior to the closing date or shall result from the transactions contemplated by
the Loan Documents;
(u) Agents shall have reviewed and found acceptable in all respects the
industrial revenue bond documentation with respect to Borrowers' Trenton,
Tennessee location.
Agents, in their sole discretion, may in writing waive the satisfaction
of any one or more of the foregoing conditions precedent.
16. CONFIDENTIALITY. This commitment is delivered to Borrowers with the
understanding that neither it nor its contents shall be disclosed to any third
party without the prior written consent of Agents and Lenders, except for
Borrowers' legal counsel, accountants and other professional advisors and to
SunTrust Bank, N.A., in its capacity as agent under the Existing Facility and to
any regulatory authority or as otherwise required by any applicable law, rule or
regulation, none of whom, however, shall have any right to enforce any of the
terms hereof or recover damages on account of any asserted breach hereof by
Agents and Lenders but each of whom shall be subject to the confidentiality
terms contained herein.
17. ASSIGNMENT AND PARTICIPATIONS. Each Lender may assign all or a
portion of its loan and commitments under the Facilities, or sell participations
therein to another person(s), provided, that assignments shall be in a minimum
amount of $3,000,000. Prior to or after the execution of definitive
documentation for the Facilities, Lenders reserve the right to assign all or a
portion of their commitment to one or more financial institutions after
consultation with Borrowers. Upon the acceptance by Agents of the written
commitment of any new Lender to assume a portion of the Facilities, the Lender
making such assignment shall be released from a portion of its commitments in an
aggregate amount equal to the commitment of the new Lender.
Congress and BankBoston Xxxxxxxxx Xxxxxxxx Inc. ("BRSI") will act as
the exclusive syndication agents and arrangers for the Lenders (the
"Co-Arrangers") with respect to the financing. Congress and BankBoston will
provide the full amount of such financing, but intend to syndicate the financing
either before or after closing.
By their signatures below, each Xxxxxxxx agrees to assist and cooperate
with the Co-Arrangers in their syndication efforts, including, but not limited
to, promptly preparing and providing materials and information reasonably deemed
necessary by the Co-Arrangers to successfully complete and otherwise facilitate
the syndication of the facilities described herein. In the event that such
syndication cannot be achieved in a manner reasonably satisfactory to Congress,
BankBoston and BRSI under the structure described in this Commitment Letter,
Borrowers, Congress, BankBoston and BRSI each agrees to cooperate with each
other in developing a mutually acceptable alternative structure that will permit
satisfactory syndications of such credit facilities but that will not have a
material impact on the availability of Borrower under the Loan Agreement or the
ability of Borrowers to meet financial covenants contained in the Loan
Agreement. Without limiting the foregoing, each Borrower hereby agrees: (a) that
the Co-Arrangers shall have the exclusive right to syndicate the financing and
manage all aspects of the syndication (including, without limitation, in
consultation with and subject to the reasonable approval of Borrowers, decisions
as to the selection of institutions to be approached and when they will be
approached, when their commitments will be accepted, which institutions will
participate, the allocations of the commitments among the syndicate lenders and
any titles to be given to any lender participating in the financing) and that
Borrowers will assist the Co-Arrangers in contacting and soliciting potential
co-lenders and will provide to the Co-Arrangers, as they reasonably request,
financial and organizational information as well as financial projections needed
for syndication purposes; (b) that the Co-Arrangers shall be expressly permitted
to distribute any and all documents and information relating to the transactions
contemplated hereby and received from Borrowers or any other source to any
potential lender, participant or assignee, on a confidential basis and subject
to reasonable confidentiality agreements requested by Borrowers; (c) to make
available Borrowers' personnel responsible for the financing or operations of
Borrowers and their subsidiaries for meetings with potential syndicate members
upon reasonable notification and at reasonable times to be mutually agreed; (d)
to permit the Co-Arrangers to publish information in respect of the financing
(including the Agents' and the Co-Arrangers' roles in the structuring and
financing thereof), subject to Borrowers' prior reasonable approval of the form
and content thereof; and (e) that prior to or after the execution of the
definitive documentation for the facilities, Congress and BankBoston may
syndicate all or any portion of their commitment hereunder to one or more
financial institutions after consultation with and subject to the reasonable
approval of Borrowers and the Co-Arrangers, and further, that upon acceptance by
Congress or BankBoston of a written commitment of any lender to provide a
portion of the financing, Congress or BankBoston shall
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be released from a portion of its commitment hereunder in an aggregate amount
equal to the commitment of such lender. In particular, and without limitation of
the foregoing, Borrowers, BankBoston, and the Co-Arrangers agree to negotiate in
good faith regarding any changes in the definitive loan documents that may be
requested in good faith by prospective Lenders.
Borrowers agree that, prior to and during the syndication of the
Facilities, Borrowers will not permit any offering, placement or arrangement of
any competing issues of debt securities or commercial bank facilities of
Borrowers and any subsidiaries.
18. MISCELLANEOUS.
(a) The Loan Documents shall be governed by the laws of the State of
Georgia, except (i) as to attachment and perfection of liens, matters of
procedure and enforcement of remedies in other jurisdictions, and (ii)to the
extent that certain rights and privileges are granted to Agents and Lenders
under federal law, in which event federal law shall govern to such extent.
(b) This commitment is solely for the benefit of Borrowers and no other
person or entity shall be deemed a beneficiary hereof or entitled to enforce any
of the provisions hereof. No third party shall have the right to require
satisfaction of the conditions imposed herein nor be deemed a beneficiary of
such conditions. This commitment may be signed in separate counterparts, each of
which shall constitute an original but all of which taken together shall
constitute one and the same instrument. This commitment may not be assigned or
transferred without Agents' and Xxxxxxx' prior written consent.
(c) No act hereunder will constitute either or both Lenders as an agent
for any Borrower or any other entity, or constitute any Borrower as an agent for
either or both Lenders, for any purpose whatsoever.
(d) Each provision of this commitment shall be interpreted in such
manner as to be effective and valid, but in the event any such provision should
be held invalid or unenforceable, the remaining provisions hereof shall not be
affected thereby.
(e) Time is of the essence of this commitment.
(f) This commitment supersedes in all respects any prior statements of
intent, proposals, commitments or agreements of Lenders pertaining to any loan
or proposed extension of credit to Borrowers.
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(g) This commitment is made in reliance upon the accuracy and
completeness of the information received by Lenders from Borrowers and, in the
event of any misrepresentations, inaccuracies or failures to disclose material
information, Lenders shall be authorized to cancel this commitment.
This letter constitutes an offer that may be revoked by either or both
Lenders, verbally or in writing, at any time prior to the written acceptance of
same by Borrowers, which acceptance shall be effective if and only if Borrowers
execute this commitment in the space provided below and return the original
hereof to Lenders at Lenders' Atlanta, Georgia offices, together with the
$500,000 portion of the closing fee payable in accordance with paragraph 6(a)
above, in immediately available funds, not later than 2:00 p.m., Atlanta,
Georgia, time on August 5, 1999. Upon such execution and delivery by Xxxxxxxxx
and receipt by Xxxxxxx of said $500,000 portion of the closing fee, this letter
shall constitute a commitment of Lenders to provide the Facilities subject to
the terms and conditions hereof, and a commitment by Borrowers to accept such
Facilities and to endeavor in good faith to satisfy or cause to be satisfied all
conditions to funding set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ Xxxxxxxx Xxxxxxxxx
--------------------------------------------
Title: Vice President
--------------------------------------
BANKBOSTON, N.A.
By: /s/ Xxxxx Xxxx
--------------------------------------------
Title: Vice President
--------------------------------------
Accepted this 5th day of August, 1999:
ATTEST: DYERSBURG CORPORATION
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
DYERSBURG FABRICS LIMITED
PARTNERSHIP, I
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
--------------------------------------------
its sole General Partner
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ATTEST: DYERSBURG FABRICS INC.
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
UNITED KNITTING LIMITED
PARTNERSHIP, I
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
--------------------------------------------
its sole General Partner
IQUE LIMITED PARTNERSHIP, I
By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
--------------------------------------------
its sole General Partner
ATTEST: ALAMAC KNIT FABRICS, INC.
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx, Xx.
------------------------- --------------------------------------------
Assistant Secretary Title: Executive Vice President and
Chief Financial Officer
--------------------------------------
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EXHIBIT A
"Eligible Accounts" shall mean Accounts created by a Borrower which are
and continue to be acceptable to Agents 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 a Borrower or rendition of services by a Borrower in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty (60) days after the
original due date thereof or more than one hundred twenty (120) days after the
date of the original invoice;
(c) such Accounts comply with all applicable representations,
warranties and covenants contained in the Loan 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, at Agents' option,
if either: (i) the account debtor has delivered to a Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Agents 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 Agents and, if
required by Agents, the original of such letter of credit has been delivered to
Collateral Agent and the issuer thereof notified of the assignment of the
proceeds of such letter of credit to Collateral Agent, or (ii) such Account is
subject to credit insurance payable to Agents and Lenders issued by an insurer
and on terms and in an amount acceptable to Agents, or (iii) such Account is
otherwise acceptable in all respects to Agents (subject to such lending formula
with respect thereto as Agents may determine);
(f) such Accounts do not consist of progress xxxxxxxx, xxxx and hold
invoices or retainage invoices, except as to bill and hold invoices, if Agents
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Agents, 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 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 a 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 collectibility 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 Collateral 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 the Loan Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with any Borrower or any guarantor directly or indirectly by
virtue of family membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agents'
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agents;
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(l) there are no proceedings or actions that are threatened or pending
against the account debtors with respect to such Accounts that 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 twenty percent (20%) 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
that constitute more than fifty percent (50%) of the total Accounts of such
account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness
to a Borrower does not exceed the credit limit with respect to such account
debtors as determined by Agents from time to time (but the portion of the
Accounts not in excess of such credit limit may be deemed Eligible Accounts);
and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Agents, as determined by Agents.
General criteria for Eligible Accounts may be established and revised from time
to time by Agents in good faith. Any Accounts that are not Eligible Accounts
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 selected work-in-process that are
acceptable to Agents based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) work-in-process that is not in a ready salable
form; (b) components that are not part of finished goods; (c) spare parts for
equipment; (d) packaging and shipping materials; (e) supplies used or consumed
in a Borrower's business; (f) Inventory at premises other than those owned and
controlled by a Borrower, except if Agents shall have received an agreement in
writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Agents
acknowledging Collateral Agent's first priority security interest in the
Inventory, waiving security interests and claims by such person against the
Inventory and permitting Agents access to, and the right to remain on, the
premises so as to exercise Agent's rights and remedies and otherwise deal with
the Collateral; (g) Inventory subject to a Lien in favor of any person other
than Agents except those permitted in the Loan Agreement; (h) bill and hold
goods; (i) unserviceable, obsolete or slow-moving Inventory; (j) Inventory that
is not subject to the first priority, valid and perfected security interest of
Collateral Agent; (k) returned and not first quality goods, damaged and/or
defective Inventory; and (l) Inventory purchased or sold on consignment. General
criteria for Eligible Inventory may be established and revised from time to time
by Agents in good faith. Any Inventory that is not Eligible Inventory shall
nevertheless be part of the Collateral.
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