POST-PETITION LOAN AND SECURITY AGREEMENT
Dated as of December 29, 1999
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
AS THE LENDERS
and
BANK OF AMERICA, N.A.
AS THE AGENT
and
FRUIT OF THE LOOM, INC.
AS THE BORROWER
and
FRUIT OF THE LOOM, LTD.
and certain of the
DOMESTIC SUBSIDIARIES OF FRUIT OF THE LOOM, INC.
AS GUARANTORS
TABLE OF CONTENTS
Section
PAGE
- -------
----
ARTICLE 1 INTERPRETATION OF THIS
AGREEMENT................................................................2
1.1
Definitions.....................................................................
................2
1.2 Accounting
Terms...........................................................................
....28
1.3 Interpretive
Provisions......................................................................
..28
ARTICLE 2 LOANS AND LETTERS OF
CREDIT....................................................................29
2.1 Total
Facility........................................................................
.........29
2.2 Revolving
Loans...........................................................................
.....29
2.3 Term
Loan............................................................................
..........36
2.4 Letters of
Credit..........................................................................
....36
2.5 Bank
Products........................................................................
..........43
ARTICLE 3 INTEREST AND
FEES............................................................................
..43
3.1
Interest........................................................................
...............43
3.2 Continuation and Conversion
Elections..........................................................44
3.3 Maximum Interest
Rate..........................................................................45
3.4 Facility
Fee.............................................................................
......46
3.5 Unused Line
Fee.............................................................................
...46
3.6 Letter of Credit
Fee...........................................................................46
3.7 Syndication
Fee.............................................................................
...46
3.8 Administration
Fee.............................................................................
46
ARTICLE 4 PAYMENTS AND
PREPAYMENTS.....................................................................
..47
4.1 Revolving
Loans...........................................................................
.....47
4.2 Termination of
Facility........................................................................
47
4.3 Repayment of the Term
Loan.....................................................................47
4.4 Voluntary Prepayments of the Term
Loan.........................................................47
4.5 Mandatory Prepayments of the
Loans.............................................................47
4.6 Payments by the
Borrower.......................................................................4
8
4.7 Payments as Revolving
Loans....................................................................49
4.8 Apportionment, Application and Reversal of
Payments............................................49
4.9 Indemnity for Returned
Payments................................................................50
4.10 Agent's and Lenders'Books and Records; Monthly
Statements......................................50
ARTICLE 5 TAXES, YIELD PROTECTION AND
ILLEGALITY.........................................................51
5.1
Taxes...........................................................................
...............51
5.2
Illegality......................................................................
...............52
5.3 Increased Costs and Reduction of
Return........................................................52
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Section
PAGE
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5.4 Funding
Losses..........................................................................
.......53
5.5 Inability to Determine
Rates...................................................................53
5.6 Certificates of
Lenders........................................................................5
3
5.7
Survival........................................................................
...............54
5.8 Change of
Office..........................................................................
.....54
ARTICLE 6
COLLATERAL......................................................................
...............54
6.1 Grant of Security
Interest.....................................................................54
6.2 Perfection and Protection of Security
Interest.................................................55
6.3 Location of
Collateral......................................................................
...56
6.4 Title to, Liens on, and Sale and Use of
Collateral.............................................57
6.5
Appraisals......................................................................
...............57
6.6 Access and Examination; Confidentiality; Consent to
Advertising................................57
6.7 Collateral
Reporting.......................................................................
....58
6.8
Accounts........................................................................
...............59
6.9 Collection of Accounts;
Payments...............................................................60
6.10 Inventory;
Records.........................................................................
....61
6.11
Equipment.......................................................................
...............61
6.12 Assigned
Contracts.......................................................................
......62
6.13 Documents, Instruments, and Chattel
Paper......................................................63
6.14 Right to
Cure............................................................................
......63
6.15 Power of
Attorney........................................................................
......63
6.16 The Agent's and Lenders'Rights, Duties and
Liabilities.........................................64
6.17 Site Visits, Observations and
Testing..........................................................64
6.18 Security Interest in
Collateral................................................................65
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL INFORMATION;
NOTICES..............................................65
7.1 Books and
Records.........................................................................
.....65
7.2 Financial
Information.....................................................................
.....66
7.3 Notices to the
Lenders.........................................................................
68
ARTICLE 8 GENERAL WARRANTIES AND
REPRESENTATIONS.........................................................70
8.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents...........71
8.2 Validity and Priority of Security
Interest.....................................................71
8.3 Organization and
Qualification.................................................................71
8.4 Corporate Name; Prior
Transactions.............................................................71
8.5 Subsidiaries and
Affiliates....................................................................71
8.6 Financial Statements and
Projections...........................................................72
8.7
Capitalization..................................................................
...............72
8.8
Debt............................................................................
...............72
8.9
Distributions...................................................................
...............72
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Section
PAGE
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8.10 Title to
Property........................................................................
......72
8.11 Real Estate;
Leases..........................................................................
..73
8.12 Proprietary
Rights..........................................................................
...73
8.13 Trade
Names...........................................................................
.........73
8.14
Litigation......................................................................
...............73
8.15 Restrictive
Agreements......................................................................
...73
8.16 Labor
Disputes........................................................................
.........73
8.17 Environmental
Laws............................................................................
.74
8.18 No Violation of
Law............................................................................7
5
8.19 No
Default.........................................................................
............75
8.20 ERISA
Compliance......................................................................
.........75
8.21
Taxes...........................................................................
...............75
8.22 Regulated
Entities........................................................................
.....75
8.23 Use of Proceeds; Margin
Regulations............................................................76
8.24 Copyrights, Patents, Trademarks and Licenses,
etc..............................................76
8.25 Year 2000
Compliance......................................................................
.....76
8.26 Full
Disclosure......................................................................
..........76
8.27 Material
Agreements......................................................................
......76
8.28 Bank
Accounts........................................................................
..........77
8.29 Governmental
Authorization...................................................................
..77
8.30
Guarantors......................................................................
...............77
8.31 The
Orders..........................................................................
...........77
ARTICLE 9 AFFIRMATIVE AND NEGATIVE
COVENANTS.............................................................77
9.1 Taxes and Other
Obligations....................................................................7
7
9.2 Corporate Existence and Good
Standing..........................................................78
9.3 Compliance with Law and Agreements; Maintenance of
Licenses....................................78
9.4 Maintenance of
Property........................................................................
78
9.5
Insurance.......................................................................
...............78
9.6
Condemnation....................................................................
...............79
9.7 Environmental
Laws............................................................................
.80
9.8 Compliance with
ERISA..........................................................................8
1
9.9 Mergers, Consolidations or
Sales...............................................................81
9.10 Distributions; Capital Change; Restricted
Investments..........................................81
9.11 Transactions Affecting Collateral or
Obligations...............................................81
9.12
Guaranties......................................................................
...............81
9.13
Debt............................................................................
...............81
9.14
Prepayment......................................................................
...............82
9.15 Transactions with
Affiliates...................................................................82
9.16 Investment Banking and Finder's
Fees...........................................................82
9.17 Intentionally
omitted.........................................................................
.82
9.18 Business
Conducted.......................................................................
......82
9.19 Liens and Reclamation
Claims...................................................................82
9.20 Sale and Leaseback
Transactions................................................................82
iii
Section
PAGE
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9.21 New
Subsidiaries....................................................................
...........83
9.22 Fiscal
Year............................................................................
........83
9.23 Capital
Expenditures....................................................................
.......83
9.24 Intentionally
Omitted.........................................................................
.83
9.25
EBITDAR.........................................................................
...............83
9.26 Use of
Proceeds........................................................................
........84
9.27 Further
Assurances......................................................................
.......84
9.28 Chapter 11
Claims..........................................................................
....84
9.29 Orders; Payment of
Claims......................................................................84
ARTICLE 10 CONDITIONS OF
LENDING.........................................................................
.85
10.1 Conditions Precedent to Making of Loans on the Closing
Date....................................85
10.2 Conditions Precedent to Each
Loan..............................................................87
ARTICLE 11 DEFAULT;
REMEDIES........................................................................
......88
11.1 Events of
Default.........................................................................
.....88
11.2
Remedies........................................................................
...............91
ARTICLE 12 TERM AND
TERMINATION.....................................................................
......93
12.1 Term and
Termination.....................................................................
......93
ARTICLE 13 AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS;
SUCCESSORS....................................94
13.1 Amendments and
Waivers.........................................................................
94
13.2 Assignments;
Participations..................................................................
..95
ARTICLE 14 THE
AGENT...........................................................................
...........97
14.1 Appointment and
Authorization..................................................................9
7
14.2 Delegation of
Duties..........................................................................
.97
14.3 Liability of
Agent...........................................................................
..97
14.4 Reliance by
Agent...........................................................................
...98
14.5 Notice of
Default.........................................................................
.....98
14.6 Credit
Decision........................................................................
........98
14.7
Indemnification.................................................................
...............99
14.8 Agent in Individual
Capacity...................................................................99
14.9 Successor
Agent...........................................................................
.....99
14.10 Withholding
Tax.............................................................................
...97
14.11 Co-
Agents..........................................................................
...........101
14.12 Collateral
Matters.........................................................................
...101
14.13 Restrictions on Actions by Lenders; Sharing of
Payments.......................................102
14.14 Agency for
Perfection......................................................................
...103
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Section
PAGE
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14.15 Payments by Agent to
Lenders..................................................................103
14.16 Concerning the Collateral and the Related Loan
Documents......................................103
14.17 Field Audit and Examination Reports; Disclaimer by
Lenders....................................104
14.18 Relation Among
Lenders........................................................................1
04
ARTICLE 15
MISCELLANEOUS...................................................................
..............104
15.1 No Waivers; Cumulative
Remedies...............................................................104
15.2
Severability....................................................................
..............105
15.3 Governing Law; Choice of Forum; Service of
Process............................................105
15.4 WAIVER OF JURY
TRIAL..........................................................................1
06
15.5 Survival of Representations and
Warranties....................................................106
15.6 Other Security and
Guaranties.................................................................106
15.7 Fees and
Expenses........................................................................
.....106
15.8
Notices.........................................................................
..............107
15.9 Waiver of
Notices.........................................................................
....108
15.10 Binding
Effect..........................................................................
......108
15.11 Indemnity of the Agent and the Lenders by the Borrower and
each Guarantor.....................109
15.12 Limitation of
Liability.......................................................................
109
15.13 Final
Agreement.......................................................................
........110
15.14
Counterparts....................................................................
..............110
15.15
Captions........................................................................
..............110
15.16 Right of
Setoff..........................................................................
.....110
15.17 Joint and Several
Liability...................................................................110
15.18 Waivers and
Releases........................................................................
..111
v
EXHIBITS AND SCHEDULES
EXHIBIT A - TERM NOTE
EXHIBIT B - FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C - FINANCIAL STATEMENTS
EXHIBIT D - NOTICE OF BORROWING
EXHIBIT E - NOTICE OF CONVERSION/CONTINUATION
EXHIBIT F - INTERIM ORDER
EXHIBIT G - FINAL ORDER
EXHIBIT H - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 1.1 - COMMITMENTS
SCHEDULE 1.2 - CONTRACTS
SCHEDULE 6.3 - LOCATIONS
SCHEDULE 8.3 - ORGANIZATION AND QUALIFICATIONS
SCHEDULE 8.5 - SUBSIDIARIES AND AFFILIATES
SCHEDULE 8.8 - DEBT
SCHEDULE 8.11 - REAL ESTATE; LEASES
SCHEDULE 8.12 - PROPRIETARY RIGHTS
SCHEDULE 8.13 - TRADE NAMES
SCHEDULE 8.14 - LITIGATION
SCHEDULE 8.16 - LABOR DISPUTES
SCHEDULE 8.17 - ENVIRONMENTAL LAW
SCHEDULE 8.20 - ERISA COMPLIANCE
SCHEDULE 8.27 - MATERIAL AGREEMENTS
SCHEDULE 8.28 - BANK ACCOUNTS
i
SCHEDULE 8.30 - INACTIVE DOMESTIC SUBSIDIARIES
SCHEDULE 9.15 - TRANSACTIONS WITH AFFILIATES
SCHEDULE 11.1(p) - IRB properties; IRb claimants
2
POST-PETITION LOAN AND SECURITY AGREEMENT
Post-Petition Loan and Security Agreement, dated as of December 29,
1999, among the financial institutions listed on Schedule 1.1 hereto (such
financial institutions, together with their respective successors and assigns,
are referred to hereinafter each individually as a "Lender" and collectively as
the "Lenders"), Bank of America, N.A. with an office at 231 South LaSalle
Street, Chicago, Illinois 60697, as agent for the Lenders (in its capacity as
agent, the "Agent"), Fruit of the Loom, Inc., a Delaware corporation, with
offices at 200 West Madison Street, Suite 2700, Chicago, Illinois 60606 (the
"Borrower"), and certain of the Domestic Subsidiaries of the Borrower and Fruit
of the Loom, Ltd., a Cayman Islands corporation (collectively, the
"Guarantors"), each of which is a debtor and debtor-in-possession in a case
pending under chapter 11 of the Bankruptcy Code (the cases of the Borrowers
each, a "Bankruptcy Case" and, collectively the "Bankruptcy Cases").
W I T N E S S E T H:
WHEREAS, on December 29, 1999, the Borrower and the Guarantors filed
voluntary petitions with the Bankruptcy Court initiating the Bankruptcy Cases;
WHEREAS, the Borrower and the Guarantors have continued in the
possession of their respective assets and in the management of their respective
businesses as debtors-in-possession pursuant to sections 1107 and 1108 of the
Bankruptcy Code;
WHEREAS, the Borrower and the Guarantors have requested the Lenders to
make available to the Borrower a revolving line of credit for loans and letters
of credit in an amount not to exceed $475,000,000 and to make a term loan to the
Borrower in the aggregate principal amount of $150,000,000, which extensions of
credit the Borrower will use for the working capital needs and general business
purposes of the Borrower and the Guarantors and for other purposes not
prohibited by the terms hereof;
WHEREAS, to provide security for the repayment of the loans and letters
of credit made available pursuant hereto and payment of the other obligations of
the Borrower and the Guarantors under the Loan Documents, the Borrower and the
Guarantors have agreed to provide the Agent and the Lenders with the following:
(a) with respect to the obligations of the Borrower and the
Guarantors hereunder and under the other Loan Documents, an allowed
administrative expense claim in each of the Bankruptcy Cases pursuant
to section 364(c)(1) of the Bankruptcy Code having priority over all
administrative expenses of the kind specified in sections 503(b),
507(b) and 546(c) of the Bankruptcy Code;
(b) upon and after the entry of the Interim Order pursuant to
Section 364(d)(1) of the Bankruptcy Code, a first priority, senior,
priming, perfected Lien upon all right, title and interest of the
Borrower and the Guarantors in, to and under all property of any kind
(other than Avoidance Recoveries) owned by any or all of the Borrower
and the
1
Guarantors that on the Petition Date is subject to a Lien securing any
obligations other than the Obligations; and
(c) pursuant to Section 364(c)(2) of the Bankruptcy Code, a
first priority, perfected Lien upon all right, title and interest of
the Borrower and the Guarantors in, to and under all Collateral that is
not otherwise encumbered on the Petition Date by a validly perfected
Lien;
WHEREAS, all of the claims and Liens granted in the Bankruptcy Cases to
the Agent and the Lenders shall be subject to the Carve-Out to the extent
provided in SECTION 6.18(c);
WHEREAS, the Lenders have agreed to make available to the Borrower a
revolving credit facility and term loan upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lenders, the Agent, and the
Borrower and Guarantors hereby agree as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 DEFINITIONS. As used herein:
"ACCOUNTS" means all of the Borrower's and the Guarantors' now
owned or hereafter acquired or arising accounts, as defined in the UCC,
including any rights to payment for the sale or lease of goods or rendition of
services, whether or not they have been earned by performance.
"ACCOUNT DEBTOR" means each Person obligated in any way on or
in connection with an Account.
"ACH TRANSACTIONS" means any cash management or related
services including the automatic clearing house transfer of funds by the Bank
for the account of the Borrower pursuant to agreement or overdrafts.
"ADEQUATE PROTECTION ORDER" shall mean the Order regarding use
of cash collateral and adequate protection with respect to the Pre-Petition
Secured Indebtedness.
"ADJUSTED NET EARNINGS FROM OPERATIONS" means, with respect to
any fiscal period of the Borrower, the Borrower's and the Guarantors' net income
on a consolidated basis after provision for income taxes for such fiscal period,
as determined in accordance with GAAP and reported on the Financial Statements
for such period, excluding any and all of the following included in such net
income: (a) gain or loss arising from the sale of any capital assets, business
unit or line of business; (b) gain arising from any write-up in the book value
of any asset; (c) loss
2
arising from any write-down of Fixed Assets and severance costs in connection
with plant closings; (d) earnings or losses of any Person, substantially all
the assets of which have been acquired by the Borrower or any Guarantor in
any manner, to the extent realized by such other Person prior to the date of
acquisition; (e) earnings of any Person to which assets of the Borrower or
any Guarantor shall have been sold, transferred or disposed of, or into which
the Borrower or any Guarantor shall have been merged, or which has been a
party with the Borrower or any Guarantor to any consolidation or other form
of reorganization, prior to the date of such transaction; (f) gain or loss
arising from the acquisition of debt or equity securities of the Borrower or
any Guarantor or from cancellation or forgiveness of Debt; and (g) gain or
loss arising from any extraordinary item, as determined in accordance with
GAAP.
"ADMINISTRATION FEE" has the meaning specified in Section 3.8.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, five percent
(5%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
"AGENT" means the Bank, solely in its capacity as agent for
the Lenders, and any successor agent.
"AGENT ADVANCES" has the meaning specified in SECTION 2.2(i).
"AGENT'S LIENS" means the Liens in the Collateral granted to
the Agent, for the benefit of the Lenders, Bank, and Agent pursuant to this
Agreement and the other Loan Documents.
"AGENT-RELATED PERSONS" means the Agent, together with its
Affiliates, and the officers, directors, employees, agents and attorneys-in-fact
of the Agent and such Affiliates.
"AGGREGATE REVOLVER OUTSTANDINGS" means, at any date of
determination: the sum of (a) the unpaid balance of Revolving Loans; (b) without
duplication of the amount referred to in clause (a), the aggregate amount of
Pending Revolving Loans; (c) one hundred percent (100%) of the aggregate undrawn
face amount of all outstanding Letters of Credit; and (d) the aggregate amount
of any unpaid reimbursement obligations in respect of Letters of Credit.
"AGREEMENT" means this Loan and Security Agreement.
"ANNIVERSARY DATE" means each anniversary of the Closing Date.
"APPLICABLE MARGIN" means
(i) with respect to Base Rate Loans and all other Obligations
(other than LIBOR Rate Loans), 1.00% per annum; and
3
(ii) with respect to LIBOR Loans, 2.50% per annum.
"ASSIGNED CONTRACTS" means, collectively, all of the Borrower's
and the Guarantors' rights and remedies under, and all moneys and claims for
money due or to become due to the Borrower or any Guarantor under those
contracts set forth on SCHEDULE 1.2, and any other material contracts, and
any and all amendments, supplements, extensions, and renewals thereof
including all rights and claims of the Borrower or any Guarantor now or
hereafter existing: (i) under any insurance, indemnities, warranties, and
guarantees provided for or arising out of or in connection with any of the
foregoing agreements; (ii) for any damages arising out of or for breach or
default under or in connection with any of the foregoing contracts ; (iii) to
all other amounts from time to time paid or payable under or in connection
with any of the foregoing agreements; or (iv) to exercise or enforce any and
all covenants, remedies, powers and privileges thereunder.
"ASSIGNEE" has the meaning specified in SECTION 13.2(a).
"ASSIGNMENT AND ACCEPTANCE" has the meaning specified in
SECTION 13.2(a).
"ATTORNEY COSTS" means and includes all reasonable fees,
expenses and disbursements of any law firm or other counsel engaged by the
Agent, the reasonably allocated non-duplicative costs of internal legal services
of the Agent and the reasonable expenses of internal counsel to the Agent.
"AVAILABILITY" means, at any time, (a) the Borrowing Base MINUS
(b) the Aggregate Revolver Outstandings.
"AVOIDANCE RECOVERIES" means recoveries by the Borrower or any
Guarantor as a result of preferences, fraudulent conveyances and other avoidance
powers or claims arising under Sections 544, 546, 547, 548, 549, 550 or 553 of
the Bankruptcy Code, other than any such recovery with respect to the
Securitization Arrangement.
"BANK" means Bank of America, N.A., a national banking
association, or any successor entity thereto.
"BANK PRODUCTS" means any one or more of the following types
of services or facilities extended to the Borrower by the Bank or any affiliate
of the Bank in reliance on the Bank's agreement to indemnify such affiliate: (i)
credit cards; (ii) ACH Transactions; and (iii) Hedge Agreements.
"BANK PRODUCT RESERVES" means all reserves which the Agent
from time to time establishes in its reasonable discretion for the Bank Products
then outstanding.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11
U.S.C. ss. 101 ET SEQ.).
"BANKRUPTCY COURT" means the United States Bankruptcy Court
for the District of Delaware, or any other court having jurisdiction over the
Bankruptcy Cases from time to time,
4
including, without limitation, the United States District Court for the
District of Delaware if and to the extent it withdraws the reference with
respect to the Bankruptcy Cases, any part thereof, or any matter or
proceeding therein.
"BASE RATE" means, for any day, the rate of interest in effect
for such day as publicly announced from time to time by the Bank in
Charlotte, North Carolina as its "prime rate" (the "prime rate" being a rate
set by the Bank based upon various factors including the Bank's costs and
desired return, general economic conditions and other factors, and is used as
a reference point for pricing some loans, which may be priced at, above, or
below such announced rate). Any change in the prime rate announced by the
Bank shall take effect at the opening of business on the day specified in the
public announcement of such change. Each Interest Rate based upon the Base
Rate shall be adjusted simultaneously with any change in the Base Rate.
"BASE RATE LOANS" means, collectively, the Base Rate Revolving
Loans and the Base Rate Term Loans.
"BASE RATE REVOLVING LOAN" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.
"BASE RATE TERM LOAN" means any portion of the Term Loan
during any period in which such portion bears interest based on the Base Rate.
"BLOCKED ACCOUNT AGREEMENT" means an agreement among the
Borrower, the Agent and a Clearing Bank, in form and substance reasonably
satisfactory to the Agent, concerning the collection of payments which represent
the proceeds of Accounts or of any other Collateral, which agreements may
consist of existing blocked account agreements with Agent, amended to refer to
this Agreement.
"BORROWING" means a borrowing hereunder consisting of
Revolving Loans or the Term Loan made on the same day by the Lenders to the
Borrower or by Bank in the case of a Borrowing funded by Non-Ratable Loans or by
the Agent in the case of a Borrowing consisting of an Agent Advance, or the
issuance of Letters of Credit hereunder.
"BORROWING BASE" means, at any time, an amount equal to (a) the
lesser of (i) the Maximum Revolver Amount or (ii) the sum of (A) eighty-five
percent (85%) of the Net Amount of Eligible Accounts; plus (B) sixty-five
percent (65%) of the book value of Eligible Inventory consisting of finished
goods (valued at the lower of FIFO cost or market); plus (C) fifty percent
(50%) of the book value of Eligible Inventory consisting of raw materials and
work-in-process (valued at the lower of FIFO cost or market); MINUS (b) the
sum of (i) the Bank Product Reserves, (ii) reserves for unpaid professional
fees and expenses for two months set forth in the Fee Budget (including one
statutory committee approved in the Bankruptcy Cases), and (iii) all other
reserves which the Agent deems necessary in the exercise of its reasonable
credit judgment to maintain with respect to the Borrower's account after
giving notice thereof to the Borrower, including reserves for any amounts
which the Agent or any Lender may be obligated to pay in the future for the
account of the Borrower or any Guarantor. For purposes of calculating
Availability, Revolving Loans shall be deemed to be advanced, first, against
Eligible Accounts
5
and, second, against Eligible Inventory. Aggregate Revolving Loans advanced
against Eligible Inventory shall not exceed $375,000,000.
"BORROWING BASE CERTIFICATE" means a certificate by a
Responsible Officer of the Borrower, substantially in the form of EXHIBIT B
(or another form reasonably acceptable to the Agent) setting forth the
calculation of the Borrowing Base, including a calculation of each component
thereof, all in such detail as shall be reasonably satisfactory to the Agent.
All calculations of the Borrowing Base in connection with the preparation of
any Borrowing Base Certificate shall originally be made by the Borrower and
certified to the Agent; provided, that the Agent shall have the right to
review and adjust, in the exercise of its reasonable credit judgment, any
such calculation after giving notice thereof to the Borrower, (1) to reflect
its reasonable estimate of declines in value of any of the Collateral
described therein, and (2) to the extent that such calculation is not in
accordance with this Agreement.
"BUSINESS DAY" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in Chicago, Illinois or Charlotte, North
Carolina are required or permitted to be closed, and (b) with respect to all
notices, determinations, fundings and payments in connection with the LIBOR
Rate or LIBOR Rate Loans, any day that is a Business Day pursuant to CLAUSE
(a) above and that is also a day on which trading in Dollars is carried on by
and between banks in the London interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
"CAPITAL EXPENDITURES" means all payments made in respect of
the cost of any fixed asset or improvement, or replacement, substitution, or
addition thereto, which has a useful life of more than one year, including,
without limitation, those costs arising in connection with the direct or
indirect acquisition of such asset by way of increased product or service
charges or in connection with a Capital Lease, but excluding payments made
with respect to the Synthetic Lease.
"CAPITAL LEASE" means any lease of property by the Borrower or
any Guarantor which, in accordance with GAAP, should be reflected as a
capital lease on the balance sheet of Borrower or such Guarantor.
"CARVE-OUT" has the meaning set forth in SECTION 6.18(c).
"CARVE-OUT EVENT" has the meaning set forth in SECTION 6.18(c).
"CHANGE OF CONTROL" means any of the following: (a) any Person
or group of Persons (within the meaning of the Securities and Exchange Act of
1934, as amended) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under the Securities and Exchange Act of 1934, as amended) of 50.1% or more
of the issued and outstanding shares of capital stock of Parent having the
right to
6
vote for the election of directors of Parent under ordinary circumstances;
(b) any Person or group of Persons (as defined above) shall have acquired
beneficial ownership (as defined above) of 40% or more of the outstanding
capital stock of Parent and shall direct the management or policies of Parent
or Borrower; (c) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the board of
directors of Parent (together with any new directors whose election by the
board of directors of Parent or whose nomination for election by the
Stockholders of Parent was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office; and (d) Parent ceases to own and
control all of the economic and voting rights associated with all of the
outstanding capital stock of Borrower other than convertible preferred stock
of the Borrower outstanding as of the date hereof.
"CLEARING BANK" means the Bank, Bank One or any other banking
institution with whom a Payment Account has been established pursuant to a
Blocked Account Agreement.
"CLOSING DATE" means the first Business Day on which the
Conditions in Section 10 have been met.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute, and regulations promulgated
thereunder.
"COLLATERAL" has the meaning specified in SECTION 6.1.
"COMMITMENT" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"COMMITMENT" on Schedule 1.1 hereto or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 13.2, as such
Commitment may be adjusted from time to time in accordance with the
provisions of SECTION 13.2, and "COMMITMENTS" means, collectively, the
aggregate amount of the commitments of all of the Lenders.
"CONTAMINANT" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos in any form or condition,
polychlorinated biphenyls ("PCBs"), or any constituent of any such substance
or waste, other than insignificant amounts of such substances maintained or
used in compliance with the Environmental Laws.
"CREDIT SUPPORT" has the meaning specified in SECTION 2.4(a).
"DEBT" means, without duplication, all liabilities, obligations
and indebtedness of the Borrower or any Guarantor to any Person, of any kind
or nature, now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed or otherwise, and including, without in any way
limiting the generality of the foregoing: (i) the Borrower's and each
Guarantor's liabilities and
7
obligations to trade creditors; (ii) all Obligations; (iii) all obligations
and liabilities of any Person secured by any Lien on the Borrower's or any
Guarantor's property, even though the Borrower or such Guarantor shall not
have assumed or become liable for the payment thereof; PROVIDED, HOWEVER,
that all such obligations and liabilities which are limited in recourse to
such property shall be included in Debt only to the extent of the book value
of such property as would be shown on a balance sheet of the Borrower or the
applicable Guarantor prepared in accordance with GAAP as of the date of such
valuation; (iv) all obligations or liabilities created or arising under any
Capital Lease or conditional sale or other title retention agreement with
respect to property used or acquired by the Borrower, even if the rights and
remedies of the lessor, seller or lender thereunder are limited to
repossession of such property; PROVIDED, HOWEVER, that all such obligations
and liabilities which are limited in recourse to such property shall be
included in Debt only to the extent of the book value of such property as
would be shown on a balance sheet of the Borrower or the applicable Guarantor
prepared in accordance with GAAP as of any date of determination; (v) all
obligations of the Borrower or any Guarantor under any synthetic lease,
including the Synthetic Lease (and regardless of whether such amounts would
be classified as debt in accordance with GAAP); and (vi) without duplication,
all obligations and liabilities under Guaranties.
"DEBT FOR BORROWED MONEY" means, as to any Person, Debt for
borrowed money or as evidenced by notes, bonds, debentures or similar
evidences of any such Debt of such Person, the deferred and unpaid purchase
price of any property or business (other than trade accounts payable incurred
in the ordinary course of business and constituting current liabilities), all
obligations under Capital Leases and all obligations under synthetic leases,
including the Synthetic Lease.
"DEFAULT" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured, waived, or
otherwise remedied during such time) constitute an Event of Default.
"DEFAULTED ACCOUNT" means an Account: (a) as to which any
payment, or part thereof, remains unpaid for more than sixty (60) days from
the original due date for such payment or remains unpaid for more than thirty
(30) days from the due date for such Account if the due date for such Account
was thirty-one (31) to one hundred eighty (180) days after the original
invoice date, (b) with regard to the Account Debtor of which a matured or
unmatured Event of Bankruptcy has occurred or (c) which has been written off
as uncollectible by the Borrower or the applicable Guarantor or which,
consistent with the credit and collection policies of the Borrower should be
written off as uncollectible.
"DEFAULTING LENDER" has the meaning specified in SECTION
2.2(g)(ii).
"DEFAULT RATE" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate PLUS
(b) two percent (2%) per annum. Each Default Rate shall be adjusted
simultaneously with any change in the applicable Interest Rate. In addition,
with respect to Letters of Credit, the Default Rate shall mean an increase in
the Letter of Credit Fee by two (2) percentage points.
8
"DISTRIBUTION" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in
respect of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for such stock) of the same class; or (b) the redemption or other
acquisition by such corporation of any capital stock (or any options or
warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or any
successor department or agency.
"DOLLAR" and "$" means dollars in the lawful currency of the
United States.
"DOMESTIC SUBSIDIARIES" has the meaning specified in Section
8.30.
"EBITDAR" means, with respect to any fiscal period of the
Borrower and the Guarantors, Adjusted Net Earnings from Operations, PLUS, to
the extent deducted in the determination of Adjusted Net Earnings from
Operations for that fiscal period, interest expenses, Federal, state, local
and foreign income taxes for such period, depreciation, amortization and
Restructuring Expenses.
"ELIGIBLE ACCOUNT" means an Account owned by the Borrower or
any Subsidiary Guarantor that the Agent in the exercise of its reasonable
commercial discretion determines to be an Eligible Account; provided,
however, that notwithstanding any other provision of this definition
(including, without limitation, the general guidance provided by clause (p)
below) or this Agreement to the contrary, the decision as to whether any
Account Debtor is creditworthy and the extent to which (if at all) an Account
of such Account Debtor may be included among Eligible Accounts shall be made
by the Agent and, when the Agent is so directed, the Majority Lenders in the
exercise of the Agent's and the Majority Lenders' reasonable commercial
judgment. Without limiting the discretion of the Agent to establish other
criteria of eligibility, at any time of determination thereof, an Eligible
Account shall be limited to the unpaid portion (valued in Dollars) of the Net
Amount of Eligible Accounts, net of limits and deductions provided for by the
Agent in its reasonable commercial judgment. Also without limiting the
discretion of the Agent to establish other criteria of eligibility, Eligible
Accounts shall, unless the Agent in its reasonable commercial discretion
determines to the contrary, include an Account:
(a) which represents a BONA FIDE obligation resulting from a
sale of goods and services in the ordinary course of business of the Borrower
or a Subsidiary Guarantor, such business to be the apparel and textile
business and businesses reasonably related thereto;
(b) which is an "account" as defined in the Uniform Commercial
Code as in effect in such jurisdiction;
(c) that is not of an Account Debtor with regard to which a
matured or unmatured Event of Bankruptcy has occurred;
(d) as to which no more than 50% of the unpaid balance of all
the Accounts owed by such Account Debtor are, at any time, Defaulted
Accounts; PROVIDED, HOWEVER, this
9
clause (d) shall not apply if the aggregate unpaid balance of all Accounts
owed by such Account Debtor does not exceed $100,000;
(e) except as provided in (d) above, is not a Defaulted Account;
(f) with regard to which the representations, warranties,
covenants, and agreements contained in Section 6.8 are true and correct;
(g) the granting of Agent's Lien does not contravene or
conflict with any law, rule or regulation or any contractual or other
restriction, limitation or encumbrance;
(h) which is denominated and payable only in Dollars or
Canadian Dollars;
(i) which arises under a contract that has been duly authorized
and that, together with such Account, is in full force and effect and
constitutes the legal, valid and binding obligation of the Account Debtor of
such Account enforceable against such Account Debtor in accordance with its
terms and is not subject to a reduction, cancellation, rebate or refund or
any dispute, offset, counterclaim or defense whatsoever (except the discharge
in bankruptcy of such Account Debtor prior to the occurrence thereof);
(j) which, together with the contract related thereto, conforms
in all material respects with any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations relating
to usury, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and with
respect to which no party to the contract related thereto is in violation of
any such law, rule or regulation in any material respect if such violation
would impair the collectability of such Account;
(k) which arises under a contract (i) the performance of which
has been completed by the Borrower or the applicable Subsidiary Guarantor and
by all other parties thereto and accepted by the Account Debtor, to the
extent of the amount of the related Account, (ii) which has been invoiced by
the Borrower or the applicable Subsidiary Guarantor and (iii) which requires
such Account to be paid in full within thirty (30) days or less of the
original billing date therefor; PROVIDED, HOWEVER, that with respect to this
clause (iii), an Account, the contract with respect to which requires such
Account to be paid in full within not less than thirty one (31) days nor more
than one hundred eighty (180) days shall also be an Eligible Account, if,
when the unpaid balance of such Account is added to the aggregate unpaid
balance of all other Eligible Accounts payable in full within not less than
thirty one (31) days nor more than one hundred eighty (180) days, the
aggregate unpaid balance of all such Eligible Accounts does not exceed
fifteen percent (15%) of the aggregate unpaid principal balance of all
Eligible Accounts;
(l) as to which the Agent's first priority Lien has been
perfected under the applicable UCC or Bankruptcy Court order;
(m) the Account Debtor of which is not a government or a
governmental subdivision or agency, unless all rights of the Borrower or the
applicable Subsidiary Guarantor with respect to such account have been
assigned to the Agent for the ratable benefit of the Lenders and the Agent on
terms acceptable to the Agent pursuant to the Assignment of Claims
10
Act of 1940, as amended, or except as otherwise provided in this clause (m),
the perfection or enforceability of Agent's lien and Agent's right to obtain
direct payment of the Account is not governed by any statute other than the
UCC;
(n) which does not represent a progress billing (as hereinafter
defined) or as to which the Borrower or the applicable Subsidiary Guarantor
has extended the time for payment without the consent of the Agent; for the
purposes hereof "progress billing" means any invoice for goods sold or leased
or services rendered under a contract pursuant to which the Account Debtor's
obligation to pay such invoice is conditioned upon the Borrower's or the
applicable Subsidiary Guarantor's completion of any further performance under
the contract;
(o) not more than fifty percent (50%) of the aggregate Dollar
amount of outstanding Accounts owed at such time by the Account Debtor
thereon is classified as ineligible under the other criteria set forth herein
or otherwise established by the Agent;
(p) the Account is not owing by an Account Debtor whose
Accounts owing to the Borrower and the Subsidiary Guarantors in the aggregate
exceed in the aggregate the credit limit determined by Agent in its
reasonable commercial judgment, but only to the extent such Accounts exceed
such limit;
(q) neither the Borrower nor the applicable Subsidiary
Guarantor is indebted to the Account Debtor in any way, and the Account is
not subject to any right of setoff or recoupment by the Account Debtor,
unless the Account Debtor has entered into an agreement reasonably acceptable
to the Agent to waive setoff rights; or if the Account Debtor thereon has
disputed liability or made any claim with respect to any other Account due
from such Account Debtor; but in each such case only to the extent of such
indebtedness, setoff, recoupment, dispute, or claim;
(r) the Account is not one which represents a sale on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis;
(s) the Account is not one which is evidenced by a promissory
note or other instrument or by chattel paper;
(t) the Agent believes, in the exercise of its reasonable
commercial judgment, that there is no impairment of the prospect of
collection of such Account or likelihood that the Account may not be paid by
reason of the Account Debtor's financial inability to pay;
(u) that is owing by an Account Debtor that is organized under
the laws of, and has its headquarters in, the United States or Canada or any
state or province thereof, excluding the province of Newfoundland and the
Northwest Territories and the Territory of Nunavut; and
(v) if the Account Debtor is located in any state requiring the
filing of a Notice of Business Activities Report or similar report in order
to permit the Borrower or the applicable Account Debtor to seek judicial
enforcement in such State of payment of such
11
Account, the Borrower or the applicable Account Debtor 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.
If any Account at any time ceases to be an Eligible Account, then such
Account shall promptly be excluded from the calculation of Eligible Accounts.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank, commercial
finance company or other asset based lender, having total assets in excess of
$1,000,000,000; (b) any Lender listed on the signature page of this
Agreement; (c) any Affiliate of any Lender; and (d) if an Event of Default
has occurred and is continuing, any Person reasonably acceptable to the
Agent; provided that any Person which has contested any of Agent's Liens
shall not be an Eligible Assignee.
"ELIGIBLE INVENTORY" means Inventory, valued at the lower of
cost (on a first-in, first-out basis) or market, which the Agent, in its
reasonable discretion, determines to meet all of the following requirements:
(a) such Inventory is owned by the Borrower or one of the
Guarantors,
(b) such Inventory is subject to the Agent's Liens, which are
perfected as to such Inventory, and is subject to no other Lien whatsoever
(other than the Liens described in CLAUSE (D) of the definition of Permitted
Liens provided that such Permitted Liens (i) are junior in priority to the
Agent's Liens and (ii) do not impair directly or indirectly the ability of
the Agent to realize on or obtain the full benefit of the Collateral),
(c) such Inventory consists of finished goods, work-in-process,
or raw materials,
(d) such Inventory does not consist of supplies or shipping and
packing materials but may, in Agent's reasonable commercial judgment, include
shrink wrap and other packaging for finished goods,
(e) such Inventory is in good condition, not unmerchantable,
and meets all standards imposed by any Governmental Authority having
regulatory authority over such goods, their use or sale,
(f) such Inventory is currently either usable or salable, at
prices approximating at least cost, in the normal course of the Borrower's or
the applicable Guarantor's business, and is not slow moving or stale,
(g) such Inventory is not obsolete or repossessed or used goods
taken in trade,
(h) such Inventory is located within the United States or
Canada (and not in-transit from vendors or suppliers),
(i) if such Inventory is located in a public warehouse or in
possession of a bailee or in a facility leased by the Borrower or any
Guarantor, the warehouseman, or the bailee,
12
or the lessor has delivered to the Agent, if requested by the Agent, a
subordination agreement in form and substance satisfactory to the Agent,
(j) if such Inventory contains or bears any Proprietary Rights
licensed to the Borrower or any Guarantor by any Person, the Agent shall be
satisfied that it may sell or otherwise dispose of such Inventory in
accordance with ARTICLE 11 without infringing on the rights of the licensor
of such Proprietary Rights or violating any contract with such licensor (and
without payment of any royalties) and, if the Agent deems it necessary, the
Borrower or the applicable Guarantor shall deliver to the Agent a consent or
sublicense agreement from such licensor in form and substance acceptable to
the Agent, and
(k) such Inventory is not determined by the Agent in its
reasonable discretion, to be ineligible for any other reason.
If any Inventory at any time ceases to be Eligible Inventory,
such Inventory shall promptly be excluded from the calculation of Eligible
Inventory.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for a Release or
injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case
relating to environmental, health, safety and land use matters.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment.
"EQUIPMENT" means all of the Borrower's and each Guarantor's
now owned and hereafter acquired machinery, equipment, furniture,
furnishings, fixtures, and other tangible personal property (except
Inventory), including motor vehicles with respect to which a certificate of
title has been issued, aircraft, dies, tools, jigs, and office equipment, as
well as all of such types of property leased by the Borrower or any Guarantor
and all of the Borrower's and each Guarantor's rights and interests with
respect thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes for any of
the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located. For purposes
of the definition of "Fixed Assets" as such term is used in the definition of
"Adjusted Net Earnings from Operations," the term "Equipment" shall also
include the items set forth above that are owned by Subsidiaries of the
Borrower and the Guarantors.
13
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code
for purposes of provisions relating to Section 412 of the Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan, (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Sec
