EXHIBIT 10.53
CREDIT FACILITY AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
AND ITS SUBSIDIARIES
AND
SOUTHTRUST BANK, N.A.
DATED AS OF MAY 31, 2000
$17,500,000 Revolving Credit Facility
and
$15,000,000 Line of Credit Facility
Nexsen, Pruet, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
Charlotte, North Carolina
TABLE OF CONTENTS
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PAGE
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ARTICLE 1. Definitions..................................................... 1
1.1 "Account Debtor"........................................... 1
1.2 "Accounts"................................................. 2
1.3 "Adjusted Consolidated Income"............................. 2
1.4 "Affiliate"................................................ 2
1.5 "Agreement"................................................ 2
1.6 "Applicable Margin"........................................ 2
1.7 "Applicable Base Rate"..................................... 3
1.8 "Assignment of Leases...................................... 3
1.9 "Authorized Officer"....................................... 3
1.10 "Base Rate"................................................ 3
1.11 "Base Rate Loan"........................................... 3
1.12 "Borrowing Base Amount" ................................... 3
1.13 "Borrowing Base Certificate" .............................. 3
1.14 "Borrowing Notice"......................................... 3
1.15 "Capital Leases" .......................................... 4
1.16 "Certain Predetermined Used Equipment Inventory"........... 4
1.17 "Closing Date"............................................. 4
1.18 "Code" .................................................... 4
1.19 "Collateral" .............................................. 4
1.20 "Commitment" .............................................. 4
1.21 "Commitment Fee" ......................................... 4
1.22 "Consolidated Fixed Charge Ratio".......................... 4
1.23 "Consolidated Interest Expense" ........................... 5
1.24 "Consolidated Tangible Assets" ............................ 5
1.25 "Consolidated Tangible Net Worth".......................... 5
1.26 "Consolidated Total Assets"................................ 5
1.27 "Consolidated Total Liabilities" .......................... 5
1.28 "Contingent Liabilities"................................... 5
1.29 "Default".................................................. 5
1.30 "Default Rate"............................................. 5
1.31 "Documentary Letters of Credit"............................ 5
1.32 "Dollars".................................................. 5
1.33 "Domestic Business Day".................................... 6
1.34 "EBITDA" ................................................... 6
1.35 "Eligible Accounts"........................................ 6
1.36 "Eligible Inventory"....................................... 6
1.37 "Eligible New Equipment Inventory"......................... 6
1.38 "Eligible Parts Inventory"................................. 7
1.39 "Eligible Used Equipment Inventory"........................ 7
1.40 "Environmental Laws"....................................... 7
1.41 "ERISA".................................................... 7
1.42 "Event of Default"......................................... 7
1.43 "Excess Borrowing Base Amount"............................. 7
1.44 "Facility Number 1"........................................ 7
1.45 "Facility Number 2"........................................ 8
1.46 "Facility Number 1 Termination Date"....................... 8
1.47 "Facility Number 2 Termination Date"....................... 8
1.48 "Fiscal Year" ............................................ 8
1.49 "Fiscal Year End" ......................................... 8
1.50 "Funded Debt" ............................................. 8
1.51 "Hazardous Material" ...................................... 8
1.52 "Indebtedness" ............................................ 8
1.53 "Interest Periods"......................................... 9
1.54 "Inventory"................................................ 9
1.55 "Letter of Credit Application"............................. 9
1.56 "LIBOR Business Day" ...................................... 9
1.57 "LIBOR Loan"............................................... 10
1.58 "LIBOR Rate" .............................................. 10
1.59 "Lien"..................................................... 10
1.60 "Loan" or "Loans".......................................... 10
1.61 "Loan Documents"........................................... 10
1.62 "Obligations".............................................. 10
1.63 "Obligors"................................................. 11
1.64 "Operating Cash Flow"...................................... 11
1.65 "Outstanding Facilities Balance"........................... 11
1.66 "PBGC"..................................................... 11
1.67 "Permitted Encumbrances"................................... 11
1.68 "Person" .................................................. 12
1.69 "Plan"..................................................... 12
1.70 "Principal Office of Bank"................................. 12
1.71 "Prohibited Transaction"................................... 12
1.72 "Regulatory Change"........................................ 12
1.73 "Reimbursement Agreements"................................. 12
1.74 "Reimbursement Obligations"................................ 12
1.75 "Reportable Event"......................................... 13
1.76 "Revolving Credit Commitment".............................. 13
1.77 "Revolving Credit Loan".................................... 13
1.78 "Revolving Credit Note" or "Note".......................... 13
1.79 "Schedule of Accounts"..................................... 13
1.80 "Security Agreements"...................................... 13
1.81 "Standby Letter of Credit"................................. 13
1.82 "Stock Pledge Agreement"................................... 13
1.83 "Subsidiary.................................................13
1.84 "Supplement"................................................13
1.85 "SWAP Agreement"............................................14
1.86 "Value of Inventory"........................................14
1.87 Accounting Terms and Determinations.........................14
ARTICLE II. Facility Number 1............................................... 14
2.1 Revolving Credit Loan...................................... 14
2.2 Types of Loans............................................. 15
2.3 Interest................................................... 15
2.4 Standby Letters of Credit Subfacility.......................16
2.5 Payments................................................... 17
(a) Obligation to Pay .................................17
(b) Revolving Credit Loan............................. 17
(c) Payments to Principal Office; Debit Authority..... 17
(d) Non-conforming Payments........................... 17
2.6 Notes...................................................... 17
2.7 Conversions................................................ 18
2.8 Statement of Account....................................... 18
2.9 Commitment/Renewal Fee/Unused Commitment Fee............... 18
ARTICLE III. Facility Number 2.............................................. 19
3.1 Documentary Letters of Credit.............................. 19
3.2 Repayment.................................................. 19
3.3 Indemnification............................................ 20
3.4 Administrative fees........................................ 20
3.5 Conditions to Issuance of Documentary Letters of Credit.... 20
3.6 Temporary Standby Letter of Credit .........................21
ARTICLE IV. Borrowing Base and Over Advancements............................ 21
4.1 Borrowing Base Limit....................................... 21
4.2 Over Advancement........................................... 21
ARTICLE V. Collateral....................................................... 22
5.1 Description................................................ 22
5.2 Supplemental Documentation and Delivery of Collateral ......22
5.3 Inspection .................................................23
5.4 Insurance ..................................................23
5.5 Payment for Insurance/Discharge of Taxes ...................23
ARTICLE VI. Representations and Warranties Given by Obligors................ 24
6.1 Representations and Warranties............................. 24
6.2 Incorporation.............................................. 24
6.3 Power and Authority........................................ 24
6.4 Financial Condition........................................ 24
6.5 Title to Assets............................................ 25
6.6 Contingent Liabilities..................................... 25
6.7 Pending Actions............................................ 25
6.8 Taxes...................................................... 25
6.9 Contract or Restriction Affecting the Company.............. 26
6.10 Trademarks, Franchises and Licenses........................ 26
6.11 No Default................................................. 26
6.12 Governmental Authority..................................... 26
6.13 No Untrue Statements....................................... 26
6.14 Regulation U............................................... 26
6.15 ERISA Requirements......................................... 27
6.16 Hazardous Material......................................... 27
6.17 Solvency................................................... 27
ARTICLE VII. Closing........................................................ 27
7.1 Conditions of Closing...................................... 27
ARTICLE VIII. Events of Default............................................. 30
8.1 Events of Default.......................................... 30
8.2 Certain Subsidiaries....................................... 32
ARTICLE IX. Rights and Remedies After Event of Default...................... 33
9.1 Rights and Remedies........................................ 33
9.2 Collections: the Bank's Right to Notify Account Debtors.... 34
9.3 Application of Proceeds.................................... 34
9.4 Appointment of the Bank as the Obligor's Lawful Attorney... 34
9.5 Rights and Remedies Cumulative; Non-Waiver; Etc............ 35
ARTICLE X. Affirmative Covenants of the Obligors............................ 36
10.1 Financial Reports and Other Data........................... 36
10.2 Account Warranties and Representations..................... 37
10.3 Verification of Accounts................................... 38
10.4 Notice Regarding Disputed Accounts......................... 38
10.5 Taxes and Liens............................................ 38
10.6 Business and Existence..................................... 38
10.7 Insurance on Properties.....................................38
10.8 Maintain Property.......................................... 39
10.9 Observe all Laws........................................... 39
10.10 Payment of Obligations..................................... 39
10.11 Books of Record and Account................................ 39
10.12 Company's Knowledge of Default............................. 39
10.13 Suits or Other Proceedings................................. 40
10.14 ERISA...................................................... 40
10.15 Right of Inspection........................................ 40
10.16 Consolidated Tangible Net Worth............................ 40
10.17 Total Liabilities to Tangible Net Worth.................... 40
10.18 Fixed Change Coverage Ratio................................ 41
10.19 Funded Debt Coverage Ratio .................................41
10.20 Use of Proceeds ........................................... 41
10.21 Notice of Discharge of Hazardous Materials or
Environmental Complaint .................................. 41
10.22 Maintenance of Operating Accounts ..........................41
ARTICLE XI. Negative Covenants of the Obligors...............................42
11.1 Negative Covenants..........................................42
ARTICLE XII. Miscellaneous...................................................45
12.1 Amendment...................................................45
12.2 No Waiver...................................................45
12.3 Survival....................................................45
12.4 Costs, Expenses and Taxes..................................45
12.5 Notices.....................................................45
12.6 Liens; Set Off by Bank......................................46
12.7 Governing Law...............................................47
12.8 Commercially Reasonable Manner..............................47
12.9 Stamp or Other Tax..........................................47
12.10 Counterparts and Effectiveness..............................48
12.11 Assignments and Participations..............................48
12.12 Indirect Acts...............................................48
12.13 Severability................................................48
12.14 No Third Party Beneficiary..................................48
12.15 Usury ......................................................49
EXHIBIT 1.13 Borrowing Base Certificate
EXHIBIT 1.14 Borrowing Notice
EXHIBIT 1.66 Permitted Encumbrances
EXHIBIT 1.73A Standby Letter of Credit Application and Reimbursement
Agreement
EXHIBIT 1.73B Documentary Letter of Credit Application and Reimbursement
Agreement
EXHIBIT 1.79 Schedule of Accounts
EXHIBIT 2.6 Form of Note
EXHIBIT 3.6 Notice of Payment
EXHIBIT 6.2 Schedule of Subsidiaries
EXHIBIT 6.4 Financial Statements
EXHIBIT 6.5 Title to Assets
EXHIBIT 6.6 Contingent Liabilities
EXHIBIT 6.7 Pending Actions
EXHIBIT 6.8 Taxes
EXHIBIT 6.10 Trademarks, Franchises and Licenses
EXHIBIT 6.16 Hazardous Material
EXHIBIT 11.1(a) List of Indebtedness
EXHIBIT 11.1(b) Limitations on Liens
CREDIT FACILITY AGREEMENT
THIS CREDIT FACILITY AGREEMENT ("Agreement") made and entered into as
of the 31st day of May, 2000 by and between ▇▇▇▇▇▇▇▇ INDUSTRIES, INC., a
Delaware company ("Company"), ▇▇▇▇▇▇▇▇ YARN EQUIPMENT, INC., a South Carolina
company ("▇▇▇▇▇▇▇▇ Yarn"), WINK ▇▇▇▇▇ EQUIPMENT COMPANY, INC., a Georgia company
("Wink ▇▇▇▇▇"), ▇▇▇▇ MOTION CONTROLS, INC., a North Carolina company ("▇▇▇▇
Motion" and together with ▇▇▇▇▇▇▇▇ Yarn, Wink ▇▇▇▇▇ and any future or indirect
subsidiaries of the Company or of any other entities listed above, the
"Subsidiaries"), jointly and severally and their respective successors and
assigns, and SOUTHTRUST BANK, N.A. ("Bank").
W I T N E S S E T H:
WHEREAS, the Company and the Subsidiaries desire to obtain from the
Bank a credit facility in the aggregate amount of $32,500,000 consisting of (a)
Facility 1: a three year Revolving Credit Facility in the maximum principal
amount of $17,500,000 and (b) Facility 2: a 364-day guidance line of credit for
the issuance of Documentary Letters of Credit in the maximum face amounts of
$15,000,000, in each case for the purposes described herein; and
WHEREAS, the Bank is willing to provide the line of credit and make
available the letters of credit to the Company from time to time in the Bank's
discretion, upon the terms and conditions set forth herein:
NOW, THEREFORE, the Company and the Bank do hereby agree as follows:
ARTICLE I - Definitions
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "Account Debtor" means any Person who is or who may become
obligated to the Company or any of the Subsidiaries under or on account of an
Account.
1
1.2 "Accounts" or "Accounts Receivable" means: all accounts (as that
term is defined in Section 25-9-106, General Statutes of North Carolina
Annotated (1999 Edition) owed to the Company and the Subsidiaries, which shall
include but not be limited to all accounts receivable, which are not evidenced
by negotiable paper.
1.3 "Adjusted Consolidated Income" means the gross revenues of the
Company and its Subsidiaries less all operating and nonoperating expenses of the
Company and Subsidiaries for a Fiscal Year, but excluding as income: (i) gains
on the collection of proceeds of life insurance policies, (ii) any write-up of
any asset, and (iii) any other gain or credit of an extraordinary nature.
1.4 "Affiliate" means a Person (i) which directly or indirectly through
one or more intermediaries controls, or is controlled by, or is under common
control with the Company or a Subsidiary; (ii) which beneficially owns or holds
5% or more of any class of the outstanding voting stock (or in the case of a
Person which is not a corporation, 5% or more of the equity interest) of the
Company or a Subsidiary; or (iii) 5% or more of any class of the outstanding
voting stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by the Company or
a Subsidiary. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting stock, by contract or otherwise.
1.5 "Agreement" means this Credit Facility Agreement, including all
exhibits and schedules hereto, as the same may from time to time be modified,
amended or supplemented.
1.6 The "Applicable Margin", means, for any fiscal quarter, the
applicable rate per annum set forth in the table below determined by the ratio
of Funded Debt to EBITDA for the preceding four quarters as of the last day of
the immediately preceding fiscal quarter.
----- --------------------------------------- ----------- -------------
Level Funded Debt to EBITDA Ratio LIBOR + Base Rate +
----- --------------------------------------- ----------- -------------
2
I Less than or equal to 1.5:1 150 bps 0 bps
----- --------------------------------------- ----------- -------------
II Less than or equal to 2.0:1 but greater 175 bps 25 bps
than 1.5:1
----- --------------------------------------- ----------- -------------
III Less than or equal to 2.5:1 but greater 200 bps 50 bp
than 2.0:1
----- --------------------------------------- ----------- -------------
IV Less than or equal to 3.0:1 but greater 225 bps 75 bps
than 2.5:1
----- --------------------------------------- ----------- -------------
V Greater than 3.0:1 250 bps 100 bps
----- --------------------------------------- ----------- -------------
1.7 "Applicable Base Rate" means the Base Rate plus the Applicable
Margin.
1.8 "Assignment of Leases" means the Assignment of Tenants' Interest in
Real Estate Lease and Agreements executed by the Company and each of the
Subsidiaries, dated the date hereof, for the benefit of the Bank and all
amendments thereto.
1.9 "Authorized Officer" of the Company or the Bank, as the case may
be, means an officer or officers of the Company or the Bank designated in
writing (if an Authorized Officer of the Company, such written designation shall
be made by the President of the Company) from time to time to be an Authorized
Officer.
1.10 "Base Rate" means the prime, base or equivalent rate of interest
announced by the Bank from time to time to be its prime rate (which rate is not
necessarily the lowest rate offered by the Bank), any change in such rate to
become effective on the date of such change.
1.11 "Base Rate Loan" means a Loan for which the interest rate is
determined in relation to the Bank's Base Rate.
1.12 "Borrowing Base Amount" means an amount equal to the dollar value
of (a) 85%
3
of Eligible Accounts, plus (b) 60% of Eligible New Equipment Inventory and
Certain Predetermined Used Equipment Inventory, plus (c) 30% of Eligible Used
Equipment Inventory, plus (d) 40% of Eligible Parts Inventory; (provided that,
the portion of the Borrowing Base Amount based on Eligible Inventory value under
(b), (c) and (d) shall in no case exceed 50% of Outstanding Facilities Balance),
plus (e) 60% of the face amount of Documentary Letters of Credit issued under
Article III hereof for which documents and drafts have not been presented and
accepted by the Bank for certain imported Eligible Inventory which is in transit
and which is not otherwise included within Eligible Inventory under (b), (c) or
(d) above.
1.13 "Borrowing Base Certificate" means a certificate substantially in
the form of Exhibit 1.13 attached hereto.
1.14 "Borrowing Notice" means the telephonic request by an Authorized
Officer of the Company to an Authorized Officer of the Bank to obtain or convert
advances under the Loan of any type hereunder, as the obtaining or conversion of
such advances shall be otherwise permitted herein. Any Borrowing Notice shall be
binding on and irrevocable by the Company, and shall be confirmed in writing by
the Company utilizing the form attached as Exhibit 1.14 with appropriate
insertions.
1.15 "Capital Leases" means all leases which have been or should be
capitalized in accordance with generally accepted accounting practices as in
effect from time to time including statement No. 13 of the Financial Accounting
Standards Board and any successor thereof.
1.16 "Certain Predetermined Used Equipment Inventory" means certain
used equipment held as inventory by ▇▇▇▇▇▇▇▇ Yarn within the United States or
Canada, which is not subject to any lien or security interest of any party other
than the Bank and which has been determined by the Bank, in its sole and
absolute discretion, to be Certain Predetermined Used Equipment Inventory.
1.17 "Closing Date" means the date this Agreement is signed by the
parties hereto and the conditions of Article VII are fulfilled to the
satisfaction of the Bank.
4
1.18 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including any rules and regulations promulgated thereunder.
1.19 "Collateral" means and includes all assets (whether current or
non-current), property or interests in property of the Company and of the
Subsidiaries, including, but not limited to, all accounts, documents, chattel
paper, instruments, inventory, furniture, fixtures, equipment and general
intangibles, as such terms are defined in the Uniform Commercial Code of the
State of North Carolina, Section 25-9-101, et seq. of the General Statutes of
North Carolina Annotated whether now owned or hereafter acquired by the Company
and any of the Subsidiaries.
1.20 "Commitment" means the Revolving Credit Commitment of the Bank to
make Revolving Credit Loans pursuant to Section 2.1 hereof.
1.21 "Commitment Fee" means, as defined in Section 2.9 hereof.
1.22 "Consolidated Fixed Charge Ratio" means, with respect to the
Company and the Subsidiaries for the most recently completed four-quarter period
ending on the date of computation thereof, the ratio of (a) the sum of after-tax
income, total depreciation and amortization, lease expenses, interest expense
and a one-time charge of $191,000 accrued in March, 2000 to (b) the sum of lease
expense, interest expense and current maturities of long-term debt, each as
determined on a consolidated basis in accordance with generally accepted
accounting principals.
1.23 "Consolidated Interest Expense" means any and all interest expense
of the Company and Subsidiaries for any Fiscal Year.
1.24 "Consolidated Tangible Assets" means Consolidated Total Assets
minus consolidated intangible assets of the Company and the Subsidiaries
including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks and brand names (excluding
leasehold improvements and capitalized portions of leases, all determined in
accordance with generally accepted accounting principles.
5
1.25 "Consolidated Tangible Net Worth" means Consolidated Tangible
Assets minus Consolidated Total Liabilities.
1.26 "Consolidated Total Assets" means the consolidated assets of the
Company and the Subsidiaries determined in accordance with generally accepted
accounting principles.
1.27 "Consolidated Total Liabilities" means all liabilities of the
Company and its Subsidiaries (including fully subordinated debt), on a
consolidated basis, as determined in accordance with generally accepted
accounting principles.
1.28 "Contingent Liabilities" means all contingent liabilities required
to be disclosed in the consolidated financial statements of the Company and its
Subsidiaries in accordance with generally accepted accounting principles as in
effect from time to time including Statement No. 5 of the Financial Accounting
Standards Board and any successor thereto.
1.29 "Default" means any event which with the giving of notice would
become an Event of Default.
1.30 "Default Rate" means the annual interest rate equal to the Base
Rate plus 2%.
1.31 "Documentary Letters of Credit" means any letter of credit issued
by the Bank pursuant to Section 3.1 hereof.
1.32 "Dollars" and the sign "$" means lawful money of the United States
of America.
1.33 "Domestic Business Day" means a day other than a Saturday, Sunday
or day on which commercial banks are authorized or permitted to close in North
Carolina.
1.34 "EBITDA" means earnings before interest, taxes, depreciation and
amortization as reflected on the income statement of the Company and
Subsidiaries on a consolidated basis.
6
1.35 "Eligible Accounts" means all Accounts of the Company and
Subsidiaries created or acquired by the Company and Subsidiaries in the ordinary
course of its business as presently conducted (i) which are 180 days or less
from date of original invoice and which are not more than 60 days past due; (ii)
which are from Account Debtors located within the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, the District of Columbia and Canada; (iii) which are not from Account
Debtors which are affiliates of the Company or any of the Subsidiaries; (iv)
which are not from Account Debtors in which 50% or more of the Accounts of such
Person are 60 days or more past due; and (v) which the Bank, in its reasonable
discretion, deems to be Eligible Accounts. The Bank may determine, on a daily
basis, whether any Accounts constitute and continue to constitute an Eligible
Account and if an Eligible Account subsequently becomes ineligible for any
reason, its ineligibility shall become effective immediately.
1.36 "Eligible Inventory" means Eligible New Equipment Inventory,
Eligible Used Equipment Inventory, Certain Predetermined Used Equipment
Inventory and Eligible Parts Inventory located in the United States or Canada or
in transit thereto which is subject to a first priority security interest in
favor of the Bank pursuant to this Agreement, but shall not include any such
inventory (a) that is subject to, or any proceeds thereof would be subject to,
any Lien (except the Lien of the Bank), (b) any sale on approval or sale or
return transaction or any consignment (unless approved in writing by the Bank),
(c) that is not in the possession of the Company, its Subsidiaries or a bailee
acceptable to the Bank, or if such inventory is covered by documents of title,
instruments or chattel paper and the Company, its Subsidiaries or custodian
acceptable to the Bank is not the owner and holder of such documents,
instruments or chattel paper free of all Liens, (d) that is the subject of any
lease, (e) with respect to which any insurance proceeds are not payable to the
Bank as loss payee, and (f) that for any other reason is at any time deemed by
the Bank to be ineligible, in its reasonable discretion.
1.37 "Eligible New Equipment Inventory" means new equipment (which has
not been used for its intended purpose or otherwise) which is located in the
United States or Canada as inventory for sale by the Company or the
Subsidiaries, which is not subject to any lien or security interest of any party
other than the Bank and which has been determined by the Bank, in its sole and
absolute discretion, to be Eligible New Equipment Inventory.
7
1.38 "Eligible Parts Inventory" means equipment parts (not assembled or
attached to any equipment) which is located in the United States or Canada as
inventory for sale by the Company and the Subsidiaries, which is not subject to
any lien or security interest of any party other than the Bank and which has
been determined by the Bank, in its sole and absolute discretion, to be Eligible
Parts Inventory.
1.39 "Eligible Used Equipment Inventory" means used equipment which is
located in the United States or Canada as inventory for sale by the Company and
the Subsidiaries, which is not subject to any lien or security interest of any
party other than the Bank and which has been determined by the Bank, in its sole
and absolute discretion, to be Eligible Used Equipment Inventory.
1.40 "Environmental Laws" means, state, federal or local environmental
laws or regulations, including but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.ss.9601 et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.ss.11001
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.ss.6901 et seq.;
the Hazardous Materials Transportation Act of 1974, 49 U.S.C.ss.1801 et seq.;
the Federal Water Pollution Control Act, 33 U.S.C.ss.1251 et seq.; the Clean Air
Act, 42 U.S.C.ss.4701 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C.ss.136 et seq.; the Safe Drinking Water Act, 42
U.S.C.ss.3001 et seq.; the Toxic Substances Control Act, 15 U.S.C.ss.2601 et
seq.; the Oil Pollution Act of 1990, 33 U.S.C.ss.2701 et seq.; and any laws
regulating the use of biological agents or substances including medical or
infectious wastes, each as amended or supplemented, and any analogous future or
present local, state, and federal statutes, regulations, and ordinances
promulgated pursuant thereto which may be applicable.
1.41 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder.
1.42 "Event of Default" has the meaning given such term in Article VIII
hereof.
1.43 "Excess Borrowing Base Amount" means the excess, if any, of the
Borrowing
8
Base Amount minus the Outstanding Facilities Balance.
1.44 "Facility Number 1" means the Revolving Line of Credit facility
and Standby Letter of Credit Subfacility described under Article II of this
Agreement.
1.45 "Facility Number 2" means the Documentary Letters of Credit
facility described under Article III of this Agreement.
1.46 "Facility Number 1 Termination Date" means May 31, 2003, or such
later date as the Bank may, in its sole and absolute discretion, consent to in
writing pursuant to Section 2.1 hereof.
1.47 "Facility Number 2 Termination Date" means May 30, 2001, or such
later date as the Bank may, in its sole and absolute discretion, consent to in
writing pursuant to Section 3.1 hereof.
1.48 "Fiscal Year" means the period of the Company ending on the
Saturday closest to June 30 of each calender year.
1.49 "Fiscal Year End" means the last day of the Company's Fiscal Year.
1.50 "Funded Debt" means the sum of all indebtedness for borrowed money
(including, without limitation, capital lease obligations, subordinated debt,
and unreimbursed drawings under letters of credit) or evidenced by a note, bond,
debenture, or similar instrument of the Company or its Subsidiaries.
1.51 "Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Laws
now or hereafter in effect.
1.52 "Indebtedness" means all items which would, in conformity with
generally accepted accounting principles, be classified as liabilities on a
balance sheet of the Company and
9
the Subsidiaries as of the date such determination of indebtedness is made and
in any event including: (a) all indebtedness of the Company and the Subsidiaries
for borrowed money or for the deferred purchase price of property or services;
(b) all liabilities guaranteed or assumed, directly or indirectly, in any
manner, or endorsed (otherwise than for collection or deposit in the ordinary
course of business) or discounted with recourse; (c) the face amount of all
letters of credit issued for the account of the Company or the Subsidiaries and,
without duplication, all drafts drawn thereunder; (d) all indebtedness in effect
guaranteed by the Company or the Subsidiaries, directly or indirectly, whether
through an agreement, contingent or otherwise, to purchase or repurchase such
indebtedness or to purchase, sell or lease (as lessee or lessor) any property or
services primarily for the purpose of enabling the debtor to make payment of
such indebtedness or to assure the owner of the indebtedness against loss, or to
advance or supply funds to or to invest in any other manner in the debtor,
whether through purchasing stock, making a loan, advance or capital contribution
or by means of agreeing to maintain or cause such debtor to maintain a minimum
working capital or net worth, or otherwise; (e) all liabilities secured by any
Lien on any property owned by the Company or the Subsidiaries, to the extent
attributable to such Person's interest in such property, even though it has not
assumed or become liable for the payment thereof; and (f) obligations of the
Company or the Subsidiaries under Capital Leases; but Indebtedness shall exclude
accounts payable and letters of credit issued to support accounts payable,
income taxes payable, accrued salaries, wages and bonuses, minority interest,
deferred income taxes and other accrued expenses and sundry liabilities incurred
in the ordinary course of business (except for borrowed funds) including, but
not limited to, accrued commissions, accrued royalties and accrued interest.
1.53 "Interest Periods" means the one month, two month or three month
periods for U.S. dollar deposits in determining the LIBOR Rate.
1.54 "Inventory" means all inventory of the Company and the
Subsidiaries located within the United States, Canada or Mexico or in transit
thereto, including without limitation, all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in process, and finished
merchandise, or component materials and all supplies, goods, incidentals, office
supplies, packaging materials and any and all items used or consumed in the
operation of
10
the business of the Company and the Subsidiaries or which may contribute to the
finished products or to the sale, promotion and shipment thereof, in which the
Company and the Subsidiaries now or at any time hereafter may have an interest,
whether or not the same is in transit or in the constructive, actual or
exclusive occupancy or possession of the Company or any of the Subsidiaries or
is held by the Company or any of the Subsidiaries or by others for the Company's
and any of the Subsidiaries' account, and the proceeds and products thereof.
1.55 "Letter of Credit Application" means the form of application and
reimbursement agreement for the issuance of a Standby Letter of Credit, which
form may be provided to the Company by the Bank from time to time.
1.56 "LIBOR Business Day" means a day on which banking transactions are
conducted in the financial markets in London, England and which is also a
Domestic Business Day.
1.57 "LIBOR Loan" means any Revolving Credit Loan for which the
interest rate is determined by reference to the LIBOR Rate.
1.58 "LIBOR Rate" means the London Interbank Offering Rate (LIBOR),
adjusted for customary reserves, as published from time to time by the Bank.
1.59 "Lien" means any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purposes of this Agreement, the Company and its
Subsidiaries shall be deemed to be the owners of any property which it or they
have acquired or hold subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the property has been retained
by or vested in some other Person for security purposes.
11
1.60 "Loan" or "Loans" means any borrowing by the Company and
Subsidiaries hereunder and/or any extension of credit by the Bank to or for the
Company or Subsidiaries hereunder, and shall include the Revolving Credit Loan
and the face amount of any Documentary Letters of Credit or Standby Letters of
Credit issued hereunder together with any Reimbursement Obligations including
any renewal, amendment, modification, or extension of any of these.
1.61 "Loan Documents" means this Agreement, the Revolving Credit Note,
Stock Pledge Agreement, Assignment of Leases, the Security Agreement and all
other documents, security instruments, instruments, certificates, reports, and
insurance policies required herein or executed and/or delivered (or required to
be executed and/or delivered) in connection with this Agreement and/or herewith
as such may be amended or modified in the future.
1.62 "Obligations" means all of the undertakings and promises,
including, but not limited to, promises to pay principal and interest under the
Note, to pay any Reimbursement Obligations and any other duty or obligation of
the Company and the Subsidiaries under the Loan Documents including, without
limitation, all agreements, representations, warranties and covenants therein.
1.63 "Obligors" means the Company and the Subsidiaries, and "Obligor"
means each of them.
1.64 "Operating Cash Flow" means the sum of (a) net income after tax
effects plus (b) depreciation and amortization expense for the Fiscal Year for
which such determination is made.
1.65 "Outstanding Facilities Balance" means the aggregate amount of
Loans outstanding at any one time.
1.66 "PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
1.67 "Permitted Encumbrances" means and includes:
12
(i) liens for taxes, assessments or similar governmental
charges not in default or being contested in good
faith;
(ii) worker's, vendor's, mechanic's and materialmen's
liens and similar liens incurred in the ordinary
course of business remaining undischarged or not
bonded over for not longer than 30 days from the
receipt of notice thereof, provided that an
additional 30 days will be permitted if such lien is
being contested in good faith by the Company and
adequate reserves have been established;
(iii) liens in respect of pledges or deposits under
worker's compensation laws, unemployment insurance or
similar legislation arising in the ordinary course of
business and not as a result of the failure of the
Company or any Subsidiary to pay any amount or tax or
to make any required deposit, and in respect of
pledges or deposits to secure bids, tenders,
contracts (other than contracts for the payment of
money), leases or statutory obligations, or in
connection with surety, appeal and similar bonds
incidental to the conduct of litigation;
(iv) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances
affecting real property so long as they do not
materially impair the value of or interfere with the
intended use of such property;
(v) those shown on Exhibit 1.66.
1.68 "Person" means any individual, joint venture, corporation,
company, voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity.
1.69 "Plan" means any employee benefit or other plan established or
maintained or to which contributions have been made by the Company or any
Subsidiary and which is covered by Title IV of ERISA or to which Section 412 of
the Code applies.
13
1.70 "Principal Office of Bank" means the principal office of the Bank
at SouthTrust Plaza, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such
other address as the Bank may from time to time designate.
1.71 "Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
1.72 "Regulatory Change" means any change after the date of this
Agreement in United States federal, state or foreign laws or regulations
(including Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks including
the Bank of or under any United States federal or state, or any foreign, laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
1.73 "Reimbursement Agreements" means with respect to Standby Letters
of Credit, the terms of reimbursement stated on the Letter of Credit Application
substantially in the form attached hereto as Exhibit 1.72A, with such changes as
the Bank may make from time to time in its discretion, and with respect to
Documentary Letters of Credit, one or more Master Letter of Credit Reimbursement
Agreements between the Company, the Subsidiaries and the Bank, substantially in
the form of Exhibit 1.73B attached hereto with such changes and modifications as
are acceptable to the Bank.
1.74 "Reimbursement Obligations" means the joint and several
obligations of the Company and the Subsidiaries to reimburse the Bank for any
draws on any Standby Letter of Credit or Documentary Letter of Credit and to pay
all related fees and costs of the Bank related thereto, all as further provided
in one or more Reimbursement Agreements.
1.75 "Reportable Event" has the meaning given such term in Section
4043(b) of Title IV of ERISA.
1.76 "Revolving Credit Commitment" means the commitment of the Bank to
make revolving line of credit loans outstanding at any time to the Company and
its Subsidiaries in
14
amounts not to exceed the lesser of (i) $17,500,000.00 minus the face amount of
any outstanding Standby Letters of Credit or (ii) the Borrowing Base Amount.
1.77 "Revolving Credit Loan" has the meaning given such term in Section
2.1 hereof.
1.78 "Revolving Credit Note" or "Note" means the Revolving Credit Note
as defined in Section 2.6 hereof and all amendments and supplements thereto.
1.79 "Schedule of Accounts" means an aged summary of Eligible Accounts
made by Company and Subsidiaries in the form set forth in Exhibit 1.79 certified
by an authorized officer of the Company or applicable Subsidiary.
1.80 "Security Agreements" mean those certain Security Agreements
between the Company and the Bank, and between each of the respective
Subsidiaries and the Bank, each dated as of the date of this Agreement.
1.81 "Standby Letters of Credit" means standby letters of credit issued
from time to time pursuant to Section 2.4 hereof.
1.82 "Stock Pledge Agreement" means the Stock Pledge Agreement dated as
of the dated hereof between the Company and the Bank and all amendments thereto.
1.83 "Subsidiary" means each of, and "Subsidiaries" means collectively,
▇▇▇▇▇▇▇▇ Yarn Equipment, Inc., ▇▇▇▇ Motion Controls, Inc. and Wink ▇▇▇▇▇
Equipment Company, Inc., and any corporation of which at least a majority of the
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by the Company and/or one or more of the
Subsidiaries listed above.
1.84 "Supplement" means any amendment, modification or supplement which
may be hereafter executed by the Company, the Subsidiaries and the Bank and
shall be incorporated herein with the same force and effect as if set forth
freely herein.
15
1.85 "SWAP Agreement" means an International Swap Dealers Association,
Inc. ("ISDA") form interest rate swap agreement from a financial institution
acceptable to the Bank and the Company, the form of which is acceptable to the
Bank, and which is pledged to the Bank as additional collateral under the
Security Agreement with the Company.
1.86 "Value of Inventory" means the United States Dollar value of
Inventory determined in accordance with generally accepted accounting
principles.
1.87 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent with that applied in the audited consolidated financial
statements of the Company and its Subsidiaries referred to in Section 6.4
hereof.
ARTICLE II - Facility Number 1
2.1 Revolving Credit Loan.
(a) Subject to the terms and conditions of this Agreement, and
so long as no Event of Default shall have occurred and be continuing, the Bank
agrees to make loans and advances to the Company (the "Revolving Credit Loan")
from time to time from the Closing Date until the Facility Number 1 Termination
Date up to but not exceeding the Revolving Credit Commitment. Within such
limits, and so long as no Defaults or Event of Default shall have occurred and
be continuing, the Company may borrow, repay and reborrow, on a Domestic
Business Day from the date of this Agreement until, but not including, the
Facility Number 1 Termination Date and in an amount not to exceed the Borrowing
Base Amount, as set forth in the most recent calculation of the Borrowing Base
Amount as stated in a Borrowing Base Certificate delivered to the Bank, subject
to verification by the Bank, and provided that the Bank's
16
calculation of the Borrowing Base Amount shall be conclusive and final on all
parties hereto. Except as otherwise permitted under Section 4.2 hereunder, at no
time shall the Revolving Credit Loan, plus the sum of all outstanding Standby
Letters of Credits exceed the Revolving Credit Commitment. The Company shall
have the right to repay the amounts outstanding under the Revolving Credit Loan
at any time in whole or in part plus, in the case of prepayment of a LIBOR Loan,
the Bank's direct costs associated with the breakage of any LIBOR contracts
resulting from such prepayment. The Company may terminate the financing
arrangements under this Agreement at the Facility's Number 1 Termination Date or
at any extension thereof by giving Lender written notice of such termination, in
the manner set forth in Section 12.5 below, at least five (5) days prior
thereto; provided that in order for any such notice of termination to become
effective, the Company shall, on or before the Facility Number 1 Termination
Date, pay the outstanding principal amount of the Revolving Credit Loan together
with all Reimbursement Obligations, plus accrued interest to Bank, in full, in
immediately available funds.
(b) The Bank's obligation to make loans and advances under
Facility Number 1 shall at all times be subject to delivery of the Borrowing
Base Certificates and related Schedules required hereunder within the required
time-frame.
2.2 Types of Loans. Pursuant to a Borrowing Notice, the Company shall
have the option of constituting the Loan as a Base Rate Loan or a LIBOR Loan,
and of converting the same from time to time pursuant to Section 2.7 hereof.
2.3 Interest. The Company shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Loan made by the Bank for the
period commencing on the date of such Loan until such Loan shall be paid at (i)
in the case of a Base Rate Loan, the Applicable Base Rate, and (ii) in the case
of a LIBOR Loan, the LIBOR Rate for Interest Periods of one, two or three months
as requested by the Company at the time of making the LIBOR Loan, plus the
Applicable Margin. Upon the occurrence of an Event of Default under Section 8.1
(a) or (b), interest shall accrue on the outstanding principle amount of the
Loans at the Default Rate until all amounts of principle and interest due is
paid.
Interest on the Loan shall be calculated on the basis of a year of 360
days for the actual
17
number of days elapsed. Any change in the Base Rate or the LIBOR Rate shall be
effective as of the Domestic Business Day such change is announced. Interest on
the Loan shall be paid on the first Domestic Business Day of each calendar month
during each year, commencing on the first such date to occur after the date of
the first borrowing hereunder.
Each advance under the Loan shall be in the amount of $100,000 or any
integral multiples of $10,000 in excess thereof, or if applicable the balance of
the Revolving Credit Commitment (subject to Over-Advancements permitted under
Section 4.2 hereof), and shall be paid by the Bank to the Company. Within such
limits, the Company may borrow, repay and reborrow hereunder, on the Domestic
Business Day in the case of a Base Rate Loan and on a LIBOR Business Day in the
case of a LIBOR Loan, from the date hereof until, but (as to borrowings and
reborrowings) not including, the Facility Number 1 Termination Date; provided,
however, that no LIBOR Loan shall be made which has an Interest Period that
extends beyond the Termination Date.
2.4 Standby Letters of Credit Subfacility. (a) The Bank shall, from
time to time, upon the request of the Company, issue standby or trade letters of
credit in an aggregate amount not to exceed the amount of the Revolving Credit
Commitment less the amount of the Revolving Credit Loan and all letters of
credit then issued by the Bank for the benefit of the Company and for the use by
the Company in the ordinary course of its business. The issuance of such Letters
of Credit shall be issued only upon receipt of a properly completed Letter of
Credit Application and such other documentation as may from time to time be
required by the Bank including, but not limited to, an effective Reimbursement
Agreement executed by all parties hereto. The Letter of Credit Application and
related documents must be submitted to the Bank at least three Domestic Business
Days prior to the requested date of issuance of the Letter of Credit. The
Company agrees to pay the Bank its letter of credit fee and costs set by the
Bank from time to time in connection with the issuance of each Standby Letter of
Credit. In no event shall the aggregate face amount of all Standby Letters of
Credit outstanding hereunder exceed $4,000,000. No Standby Letter of Credit
shall (x) have an original expiry date more than one year from the date of
issuance or (y) as originally issued or as extended, have an expiry date
extending beyond the Facility Number 1 Termination Date. In addition to the
terms of this Agreement, each Standby
18
Letter of Credit and the Reimbursement Obligations and other terms shall be
subject to the Reimbursement Agreement executed in connection with such Standby
Letter of Credit.
(b) Reimbursement. In the event of any drawing under any
Standby Letter of Credit, the Bank will promptly notify the Company. Unless the
Company shall immediately notify the Bank that the Company intends to otherwise
immediately reimburse the Bank for such drawing and does make such immediate
reimbursement, the Company shall be deemed to have requested that the Bank make
a Revolving Loan in the amount of the drawing on the related Letter of Credit,
the proceeds of which will be used to satisfy the related Reimbursement
Obligations. The Company and each Subsidiary, jointly and severally, promise to
reimburse the Bank on the day of drawing under any Standby Letter of Credit
(either with the proceeds of a Revolving Loan obtained hereunder or otherwise)
the amount of such drawing in same day funds. If the Company shall fail to
reimburse the Bank as provided herein above, the unreimbursed amount of such
drawing shall bear interest at a per annum rate equal to the Default Rate. The
Company's and Subsidiaries' Reimbursement Obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment against the Bank or the beneficiary
of the Letter of Credit drawn upon or any other Person, including without
limitation any defense based on any failure of the Company or any Subsidiary to
receive consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit.
2.5 Payments.
(a) Obligation to Pay. The Company and each Subsidiary,
jointly and severely, hereby agree to pay the Revolving Credit Loan when due
pursuant to the terms of this Agreement and the Notes. Such obligation is and
shall be absolute as to each of the Company and the Subsidiaries, without
notice, claim, defense or setoff.
(b) Revolving Credit Loan. The Revolving Credit Loan shall
have a stated maturity date and the Revolving Credit Loan shall become due and
payable in full on the Facility Number 1 Termination Date.
19
(c) Payments to Principal Office; Debit Authority. Each
payment of principal (including any prepayment) and payment of interest shall be
made to the Bank at the Principal Office of the Bank, in Dollars and in
immediately available funds before 2:00 P.M. Charlotte, North Carolina time on
the date such payment is due. The Bank may, but shall not be obligated to, debit
the amount of any such payment which is not made by such time to any ordinary
deposit account of the Company or any of the Subsidiaries with the Bank.
(d) Non-conforming Payments. The Bank shall deem any payment
by or on behalf of the Company and the Subsidiaries hereunder or under Section
2.4 herein above that is not made both (a) in Dollars and in immediately
available funds and (b) prior to 2:00 P.M. Charlotte, North Carolina time to be
a non- conforming payment. Any such payment shall not be deemed to be received
by the Bank until the time such funds become available funds. The Bank shall
give prompt telephonic notice to the Company if any payment is non-conforming.
For the first thirty (30) days after payment is due, interest shall continue to
accrue on any principal as to which a non-conforming payment is made until such
funds become available funds at the then applicable standard rate of interest as
provided in Section 2.3 hereof.
2.6 Notes. The Revolving Credit Loan shall be evidenced by promissory
note of the Company and the Subsidiaries substantially in the form attached
hereto as Exhibit 2.6 (the "Revolving Credit Note" or "Note"). The Loan and all
payments and prepayments made on account of the principal thereof, shall be
recorded by the Bank in its books and records and at its discretion in the
Schedule attached to such Note (provided that any failure by the Bank to make
any such notation shall not affect the obligations of the Company hereunder or
under the Note.)
2.7 Conversions. Provided that no Default or Event of Default shall
have occurred and be continuing and subject to the limitations set forth below,
the Company may on five (5) Domestic Business Days' notice on or before 11:00
A.M. Charlotte, North Carolina time, convert a Base Rate Loan to a LIBOR Loan,
or a LIBOR Loan to a Base Rate Loan at the expiration of the applicable Interest
Period for such LIBOR Loan and provided the amount connected is at least
$100,000.
20
Notice of any such conversions shall be communicated in writing to the
Bank by a Borrowing Notice.
2.8 Statement of Account. The Bank shall provide the Company and the
Subsidiaries with a statement(s) of account on a monthly basis and each
statement of account which is delivered by the Bank to the Company and
Subsidiaries and which relates to the Obligations shall be presumed correct and
accurate, shall constitute an account stated between the Company and the Bank,
and shall be deemed correct and conclusively binding upon the Company and the
Bank, unless thereafter waived in writing by the Bank or unless, within twenty
(20) days after the Company's receipt of such statement, the Company delivers to
the Bank written objection thereto specifying the error or errors, if any,
contained in any such statements.
2.9 Commitment/Renewal Fee/Unused Commitment Fee.
(i) The Company and the Subsidiaries and the Bank acknowledge that in
connection with providing the Revolving Credit Loan and the execution and
delivery of this Agreement, the Company has paid or will pay on or before the
Closing Date to the Bank a one-time Commitment Fee of $150,000 such fee shall be
earned in full and non-refundable upon the execution of this Agreement by the
Bank.
(ii) In addition to the Commitment Fee under (i) above, the Company and
the Subsidiaries shall pay to the Bank an unused commitment fee at a rate per
annum equal to one-quarter of one percent (.25%) on the Average Daily Unused
Portion of the Revolving Credit Commitment. The unused commitment fee shall be
payable in arrears quarterly on April 1, July 1, October 1 and January 1of each
calendar year during the term of this Agreement, and on the date the Termination
Date. For purposes hereof, "Average Daily Unused Portion" shall mean the
Revolving Credit Commitment amount minus (a) the average daily balance of Loans
outstanding during the period, plus (b) the average aggregate face amount of
Standby Letters of Credit outstanding during the period.
ARTICLE III - Facility Number 2
21
3.1 Documentary Letters of Credit. From time to time the Company may
request that the Bank issue one or more Documentary Letters of Credit for the
benefit of the Company to facilitate the purchase and importation of Eligible
Inventory. The Bank shall have no commitment to issue any such Documentary
Letter of Credit and its decision to issue any Documentary Letter of Credit
shall be in its sole and absolute discretion. The aggregate maximum principal
face amount of Documentary Letters of Credit which may be outstanding at any one
time shall not exceed $15,000,000 (subject to reduction as provided below);
provided no Documentary Letter of Credit under this Facility Number 2 will be
issued if (i) after such issuance, the aggregate amount of Documentary Letters
of Credit issued and outstanding shall exceed the excess of the Borrowing Base
Amount over the principal amount outstanding under the Revolving Credit Loan or
(ii) any Default exists hereunder. The Company shall execute the Bank's
customary applications and other documentation (including Reimbursement
Agreements) in connection with each request for, or issuance of, a Documentary
Letter of Credit. The fees to be charged by the Bank for issuance of each
Documentary Letter of Credit, the duration of each Documentary Letter of Credit,
the collateral therefor, the beneficiaries thereof and other related terms and
conditions will be negotiated and agreed upon by the Company and Bank at the
time of the issuance of each Documentary Letter of Credit. The Bank shall not
issue any Documentary Letters of Credit after the Facility Number 2 Termination
Date, and no Documentary Letters of Credit will be issued having a term
extending beyond 180 days following the Facility Number 2 Termination Date.
3.2 Repayment. The Company and Subsidiaries, jointly and severally
hereby unconditionally agree to pay to the Bank on demand all amounts required
to reimburse the Bank for all amounts drawn or drafts purporting to be drawn
under the Documentary Letters of Credit, and any and all expenses of every kind
incurred by the Bank in connection with the Documentary Letters of Credit, and
in any event and without demand to place in the Bank's possession sufficient
funds to pay all debts and liabilities arising under any Documentary Letter of
Credit. Such payment by the Company and Subsidiaries shall be made, if not
demanded earlier, immediately after (and before 4:00 p.m. Charlotte, North
Carolina time on the same Domestic Business Day as) the Bank gives the Company
and Subsidiaries notice of such drawing under a Documentary Letter of Credit.
The Company's and Subsidiaries' obligations to pay the Bank
22
under this Section, and the Bank's right to receive the same, shall be absolute
and unconditional and shall not be affected by any circumstance whatsoever.
Unless otherwise stated in a Reimbursement Agreement executed by the Company and
the Subsidiaries in connection with the issuance of any Documentary Letter of
Credit, the Company and Subsidiaries agree to pay the Bank interest on all
amounts not paid when due at the Base Rate plus the Applicable Margin at the
time of issuance, or the maximum rate as may be permitted by applicable law,
whichever is lower. The Bank may charge any account that the Company or
Subsidiaries may have with it for any and all amounts the Bank pays under the
Documentary Letter of Credit, plus the Bank's fees, charges and expenses.
3.3 Indemnification. Without duplication of any other provision hereof,
the Company and Subsidiaries hereby indemnify and hold harmless the Bank from
and against any and all claims and damages, losses, liabilities, costs or
expenses which the Bank may incur (or which may be claimed against the Bank) by
any person by reason of or in connection with the issuance or transfer of or
payment or failure to pay under any Documentary Letter of Credit; provided that
the Company and Subsidiaries shall not be required to indemnify the Bank for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, (i) caused by the willful misconduct or gross negligence of the
party to be indemnified or (ii) caused by the Bank's failure to pay under any
Documentary Letter of Credit after the presentation to it of a request strictly
complying with the terms and conditions of such Documentary Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The agreements of this Section shall survive repayment of all Reimbursement
Obligations hereunder.
3.4 Administrative fees. The Company and Subsidiaries shall pay to the
Bank administrative and other fees, if any, in connection with the Documentary
Letters of Credit in such amounts and at such times as the Bank and the Company
and Subsidiaries shall agree from time to time.
3.5 Conditions to Issuance of Documentary Letters of Credit. Without
limitation in any manner of the sole discretion of the Bank to issue any
Documentary Letter of Credit, the Bank will not issue any Documentary Letter of
Credit hereunder prior to the satisfaction of the
23
following conditions:
(i) the Bank shall have received a notice and application from
the Company in form and substance satisfactory to the Bank requesting
issuance of a Documentary Letter of Credit;
(ii) at the time of each issuance of each Documentary Letter
of Credit, no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to the issuance of the
requested Documentary Letter of Credit issued, outstanding and undrawn,
or drawn and not reimbursed, does not exceed the maximum amount
calculated under Section 3.1 above; and
(iv) the Company and Subsidiaries execute a Reimbursement
Agreement in form and substance acceptable to the Bank and pay all fees
and costs associated with such issuance.
3.6 Temporary Standby Letter of Credit. As a means of facilitating
Closing and to provided for the repayment of existing obligations of the Company
on certain outstanding documentary letters of credit issued by Bank or America,
the Bank will issue a standby letter of credit for the account of the Company
and Subsidiaries and for the benefit of Bank of America in the face amount of $
8,200,000 (the "Temporary Letter of Credit"). Upon each payment by the Company
to Bank of America for the reimbursement of draws paid by Bank of America under
its letters of credit, the Company will execute and forward to Bank of America
for its signature, and cause to be send to the Bank by facsimile transmission
with original to follow by mail, a "Notice of Payment and Request for Reduction
of Standby Letter of Credit" in the foram attached hereto as Exhibit 3.6. Upon
receipt of each Notice of Payment and Request for Reduction of Standby Letter of
Credit, the Bank shall reduce the face amount of the Temporary Letter of Credit
by amendment thereof. The Temporary Letter of Credit shall be issued by the Bank
under Facility Number 2, and the reimbursement of draws thereunder shall be
included as part of the Obligations of the Company and the Subsidiaries under
this Agreement. The Company may request advances under Facility Number 1 for
payment of reimbursements to the Bank required hereunder. The Company and
Subsidiaries shall execute a Letter of Credit Application for the Temporary
Letter of Credit.
24
ARTICLE IV - Borrowing Base and Over Advancements
4.1 Borrowing Base Limit. Notwithstanding any other provision of this
Agreement, and except as permitted under Section 4.2 below, at no time will the
amount advanced by the Bank under Facility Number 1 or the face amount of
Documentary Letters of Credit issued under Facility Number 2 exceed the lesser
of (i) the Excess Borrowing Base Amount or (ii) the stated amount of each
Facility (i.e., $17,500,000 under Facility 1 and $15,000,000 under Facility 2).
The Bank may reject any request for advances or issuance of letters of credit
if, as a result of such advance or letter of credit issuance, the amount
outstanding under either Facility Number 1 or Facility Number 2 exceeds the
limits stated above. The Bank may also demand payment of any amount necessary to
place the Company in compliance with the above limits, in which event the
Company shall immediately pay such amount to the Bank.
4.2 Over Advancement. From time to time the Company may borrower funds
under either Facility 1 or Facility 2 or both in excess of the amount that would
otherwise be available but for the Borrowing Base limit under Section 4.1 above
(an "Over-Advance Condition"), up to a maximum of $1,000,000, but in any event
not in excess of the stated amounts of each Facility. Such Over-Advance
Condition shall be cured within 30 days of its creation. There shall be at least
30 days between the repayment in full of any borrowing under this Section and
the request for any new borrowing hereunder due to an Over-Advance Condition.
ARTICLE V - Collateral
5.1 Description. As security for the Obligations, each Obligor has
granted or does hereby grant to the Bank a continuing first priority lien and
security interest in, pledge of and right of set-off against the following:
(a) Accounts, Inventory and other Property. All Collateral
wherever located, and in the proceeds and products thereof, including
without limitation the proceeds of insurance covering any of the
Collateral; and
25
(b) Funds Held By Bank. All funds and investments held by the
Bank in all accounts with the Bank and in all proceeds thereof; and
(c) all stock of the Subsidiaries held by the Company; and
(d) assignment of interests in all leases of both real and
personal property.
5.2 Supplemental Documentation and Delivery of Collateral. At the
Bank's request, each Obligor shall execute and/or deliver to the Bank, at any
time or times hereafter, all documents, instruments and other written matter
that the Bank may reasonably request to perfect and maintain perfected the
Bank's security interest in the Collateral or other assets listed in Section
5.1, including without limitation UCC financing statements to be filed in all
jurisdictions reasonably requested by the Bank, in form and substance acceptable
to the Bank, and pay all charges, expenses and fees the Bank may reasonably
incur in filing or recording any of such documents, and all taxes relating
thereto. Each Obligor hereby irrevocably makes, constitutes and appoints the
Bank (and all Persons designated by the Bank for that purpose) as its true and
lawful attorney (and agent-in-fact) to sign the name of such Obligor on any of
such documents, and to deliver the same to such Persons as the Bank, in its sole
discretion, may elect. Each Obligor ratifies and approves all acts of such
attorney and agrees that such power is irrevocable so long as any Obligations of
such Obligor are outstanding. Each Obligor agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or a financing statement is
sufficient as a financing statement and may be filed by the Bank in any filing
office. In addition, the Obligors shall deliver to the Bank or its custodian any
Collateral as may be necessary to perfect the Bank's security interest therein.
5.3 Inspection. The Bank (by any of its officers, employees and agents)
shall have the right, at any time or times during any Obligor's usual business
hours, to inspect the Collateral, all records related thereto (and to make
extracts from such records), and the premises, affairs and financing with the
Company, any Subsidiary or any Person and to verify the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral.
26
5.4 Insurance. Each Obligor shall insure the Collateral against all
loss or damage by fire and other hazards included within the term "extended
coverage", against all loss or damage in the shipment of any Collateral and
against such other risks as are specified from time to time by the Bank, in each
case in such amounts and with such insurance companies as are acceptable to the
Bank. Each policy of insurance covering any of the Collateral will (i) contain a
loss payable clause in favor of and in form acceptable to the Bank; (ii) provide
full replacement coverage and in any event equal to at least 110% of the value
of the collateral; and (iii) provide that the Bank shall be notified in writing
at least ten (10) days before any policies are terminated or there is any
material change in coverage. Upon request by the Bank, each Obligor will, from
time to time, furnish the Bank with satisfactory evidence of compliance with
this section and will upon request of the Bank deliver mortgagee/lienholder
copies of such policies to the Bank.
5.5 Payment for Insurance/Discharge of Taxes. The Bank shall have the
right at any time, from time to time without notice to any Obligor to: (i)
obtain insurance covering any of the Collateral if any Obligor fails to do so;
(ii) discharge taxes, liens, security interests and other encumbrances at any
time levied or placed upon any of the Collateral except Permitted Encumbrances;
and (iii) pay for the maintenance and preservation of any of the Collateral. Any
amounts so disbursed by the Bank shall accrue interest at the Prime Rate plus
two percent (2%) from the date disbursed by the Bank until the date
reimbursement in full is made. The Company will reimburse the Bank, on demand,
for any payment made or any expense incurred by the Bank plus all interest
accrued thereon pursuant to this authorization. Each Obligor hereby assigns to
the Bank all of its right to receive the proceeds of insurance covering the
Collateral, and such Obligor shall direct any insurer to pay all proceeds
directly to the Bank and authorize the Bank to endorse the name of such Obligor
on any draft for such proceeds.
ARTICLE VI - Representations and Warranties Given by Obligors.
6.1 Representations and Warranties. In order to induce the Bank to
enter into this Agreement and to make the Loans, each Obligor represents and
warrants to the Bank, in its respective individual capacity (which
representations and warranties shall survive the delivery of the documents
mentioned herein and the making of the Loans contemplated hereby) as follows:
27
6.2 Incorporation. Each Obligor is a corporation duly organized,
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has the corporate power to own its properties and to carry on
its business as now being conducted, and is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of its business makes such qualification necessary. The Company
has no Subsidiaries or investments in other corporations other than as set forth
in Exhibit 6.2 attached hereto.
6.3 Power and Authority. Each Obligor is duly authorized under all
applicable provisions of law to execute and deliver the Note and each Obligor is
duly authorized to execute, deliver and perform this Agreement and the other
Loan Documents and all corporate action on its part required for the lawful
execution, delivery and performance thereof has been duly taken; and this
Agreement, the other Loan Documents and the Note, upon the due execution and
delivery thereof, will be the valid and enforceable instruments and obligations
of the Obligors, as the case may be, in accordance with their terms. Neither the
execution of this Agreement and the Loan Documents nor the creation or issuance
of the Note, nor the fulfillment of or compliance with their provisions and
terms, will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a violation of or default under any applicable law,
regulation, writ or decree or the Articles of Incorporation or Bylaws of any
Obligor, or any agreement or instrument to which any Obligor is now a party, or
create any lien, charge or encumbrance (except as provided in this Agreement)
upon any of the property or assets of any Obligor pursuant to the terms of any
agreement or instrument to which such Obligor is a party or by which it is
bound.
28
6.4 Financial Condition. The consolidated balance sheets of the Company
and its Subsidiaries for the Fiscal Years ended on July 1, 1995, June 29, 1996,
June 28, 1997, June 27, 1998 and July 3, 1999, and the related consolidated
statements of income, changes in stockholder's equity and changes in financial
condition for each Fiscal Year then ended, certified by B.D.O. ▇▇▇▇▇▇▇,
certified public accountants, copies of all of which have been furnished to the
Bank, are correct and complete and fairly present the financial condition of the
Company and its Subsidiaries as at the dates of said balance sheets and the
results of their operations for said periods. Except as set forth in Exhibit 6.4
hereto, the Company and its Subsidiaries do not have any material direct
liabilities or Contingent Liabilities as of the date of this Agreement which are
not reflected in such balance sheets or referred to in notes thereto. All such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis maintained throughout the
period involved. Except as set forth in Exhibit 6.4 hereto, there has been no
material adverse change in the business, properties or condition, financial or
otherwise, of the Company or any Subsidiary since June 30, 1999.
6.5 Title to Assets. The Obligors, except as set forth in Exhibit 6.5,
have good and marketable title to their respective properties and assets
including the properties and assets reflected in the financial statements and
notes thereto described in Section 6.4, except for such assets as have been
disposed of in the ordinary course of business since the date of said financial
statements and all such properties and assets are free and clear of all liens,
mortgages, pledges, encumbrances or charges of any kind except for Permitted
Encumbrances, the security, mortgages and encumbrances required by this
Agreement in favor of the Bank, and except as described in such financial
statements and notes thereto and Exhibit 6.5 hereto. Except as set forth on
Exhibit 6.5, upon the execution and delivery of this Agreement and upon the
filing of appropriately completed UCC financing statements with the States of
Alabama, California, Delaware, District of Columbia, Florida, Illinois,
Maryland, New Jersey, New York, North Carolina, Tennessee, South Carolina and
Virginia, the Bank will have a first priority perfected security interest in the
Collateral in which a security interest can be perfected by filing.
6.6 Contingent Liabilities. No Obligor has guaranteed any obligations
of others, or is contingently liable in any manner, direct or indirect, other
than as disclosed in the financial statements and notes thereto referred to in
Section 6.4 hereof or as reflected in Exhibit 6.6
29
hereto.
6.7 Pending Actions. Except as set forth in Exhibit 6.7, there are no
pending or, to the knowledge of any Obligor, threatened actions, suits or
proceedings before any court, arbitrator or governmental or administrative body
or agency which may materially adversely affect the properties, business or
condition, financial or otherwise, of such Obligor.
6.8 Taxes. The Obligors have filed all income tax returns required to
be filed by them and all taxes shown thereon have been paid, and except as set
forth in Exhibit 6.8 no material controversy in respect of additional income
taxes, state or Federal, of the Obligors is pending, or, to the knowledge of any
Obligor, threatened. The Federal and state income taxes of the Obligors have
been examined and reported on or closed for all Fiscal Years to and including
the Fiscal Year Ended 1999. Adequate reserves have been established for the
payment of all such taxes for periods ended subsequent to June 30, 1999 except
as set forth in Exhibit 6.8.
6.9 Contract or Restriction Affecting the Company. No Obligor is a
party to nor is it bound by any contract or agreement or subject to any charter
or other corporate restrictions which may materially and adversely affect the
business, properties or condition, financial or otherwise, of such Obligor,
except as disclosed in the financial statements and notes thereto described in
Section 6.4 hereof.
6.10 Trademarks, Franchises and Licenses. Except as set forth in
Exhibit 6.10, the Obligor's own, possess, or have the right to use all necessary
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights and copyrights to conduct their respective businesses as now
conducted, without known material conflict with any patent, license, franchise,
trademark, trade name, or copyright of any other Person.
6.11 No Default. No Obligor is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it or they are a party and
which default could materially adversely affect the properties, business or
condition, financial or otherwise, of such Obligor.
30
6.12 Governmental Authority. The Obligors have received the written
approval of all Federal and state governmental authorities, if any, necessary to
carry out the terms of this Agreement and to conduct their respective businesses
as presently conducted, and no further consents or approvals are required in the
making or performance of this Agreement or any of the other Loan Documents.
6.13 No Untrue Statements. Neither this Agreement nor any reports,
schedules, certificates, or instruments executed heretofore or simultaneously
with this Agreement, the Notes or other Loan Documents delivered to the Bank
contains any misrepresentation or untrue statement of material fact or omits to
state any material facts necessary to make the statements herein or therein, in
light of the circumstances under which they are made, not misleading.
6.14 Regulation U. No part of the proceeds of the Loans made pursuant
to this Agreement will be or have been used to purchase or carry or to reduce or
retire any loan incurred to purchase or carry, any margin stocks (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any such
margin stocks. Neither of the Obligors are engaged as one of its important
activities in extending credit for the purpose of purchasing or carrying such
margin stocks. If requested by the Bank, the Obligors will furnish to the Bank,
in connection with the Loans, a statement in conformance with the requirements
of Federal Reserve Form U-1 referred to in said Regulation. In addition, no part
of the proceeds of the Loans will be used for the purchase of commodity future
contracts (or margins therefor for short sales), for any commodity not required
for the normal raw material inventory of the Obligors or any of them.
6.15 ERISA Requirements. The Obligors have not incurred any material
accumulated funding deficiency within the meaning of ERISA, or incurred any
material liability to the PBGC (or any successor thereto under ERISA) in
connection with any Plan established or maintained by any Obligor and no
Reportable Event has occurred or is occurring with respect to any such Plan.
6.16 Hazardous Material. Neither the Obligors, nor to the Obligor's
best knowledge
31
any previous owner or operator of any real property currently owned or operated
by the Obligors (collectively, the "Property") has generated, stored, or
disposed of any Hazardous Material on any portion of the Property, or
transferred any Hazardous Material from the Property to any other location in
violation of any applicable Environmental Laws, which has not been fully
remedied. To the best of the Obligor's knowledge after due investigation, no
Hazardous Material has been generated, stored, or disposed of on any portion of
the Property by any other Person, or are now located on the Property. The
Obligors are in full compliance with all applicable Environmental Laws and
neither the Company nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which calls into question compliance by the Company
or any of the Subsidiaries with any Environmental Laws or which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Material.
All of the foregoing is subject to the information contained in Exhibit 6.16
hereto.
6.17 Solvency. Company and each Subsidiary are now, and after giving
effect to the Revolving Credit Loan and issuance of the Standby Letters of
Credit and the Documentary Letters of Credit will be, solvent.
ARTICLE VII - Closing.
7.1 Conditions of Closing. The obligation of the Bank to make the Loan
is subject to the continuing accuracy of all representations and warranties of
the Obligors contained herein and the performance of all agreements by the
Obligors contained herein, including the following:
(a) Legal Opinions. At the Closing Date, the Bank has received the
favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C., counsel for the Obligors,
addressed to the Bank, in form and substance satisfactory to counsel for the
Bank, as to (i) the matters specified in Sections 6.2, 6.3, 6.7, 6.11 and 6.12;
(ii) the due execution and delivery and the enforceability of the Loan
Documents; (iii) the perfected security interest of the Bank in all
jurisdictions in the Collateral, and (iv) as to such other matters as the Bank
has reasonably requested.
(b) Closing Documents and other Requirements. Obligors shall deliver or
cause to be
32
delivered to the Bank on or prior to the Closing Date each of the following, in
form and substance satisfactory to the Bank and its counsel, and shall have
complied with the following requirements:
(i) the executed Notes and executed counterparts of this
Agreement, the Security Agreements and other Loan Documents;
(ii) Uniform Commercial Code financing statements covering the
Collateral for filing in each jurisdiction necessary to perfect the
Bank's security interest in all Collateral;
(iii) resolutions of the Board of Directors of each of the
Obligors certified by the Secretary of the Obligors as of the Closing
date, approving the transactions contemplated by this Agreement, and
approving the form of this Agreement, the Security Agreement, the Notes
and the Loan Documents, and authorizing execution, delivery and
performance thereof;
(iv) specimen signatures of all officers of each of the
Obligors, certified by an officer of each Obligor;
(v) (a) as to the Company and each Subsidiary, copies of Good
Standing Certificates from the State of Delaware concerning the Company
(and of the Subsidiaries from their states of incorporation) and the
Articles of Incorporation certified by the Secretary of State to be a
true and correct as currently in effect and a copy of the Bylaws
certified by the Secretary of the Company or Subsidiary to be a true
and correct copy as currently in effect and (b) copy of a Good Standing
Certificate of the State of Georgia concerning Wink ▇▇▇▇▇ and the
Articles of Incorporation of Wink ▇▇▇▇▇ certified by the Secretary of
State of Georgia to be a true and correct copy as currently in effect
and a copy of the Bylaws certified by the Secretary of Wink ▇▇▇▇▇ to be
a true and correct copy as currently in effect;
(vi) certificate of a recent date of the Secretary of State of
North Carolina as to the authority of the Company and the Subsidiaries
to do business in North Carolina and the good standing of the Company
and the Subsidiaries;
(vii) evidence of insurance in form and amounts satisfactory
to the Bank, and meeting the requirements of Section 5.4 hereof;
(viii) a certificate of the chief financial officer of the
Company and each
33
Subsidiary to the effect that no litigation or proceedings are pending
or threatened which might reasonably be expected to adversely affect
the Obligors' ability to perform its obligations under this Agreement
or operation of the Obligors' business;
(ix) a Borrowing Base Certificate, dated as of May 24, 2000
completed and executed by the chief financial officer of Company which
Borrowing Base Certificate showing proforma Excess Borrowing Base
Amount in the amount of $1,000,000 or more assuming the initial
advances at Closing;
(x) a certificate of the chief financial officer of the
Borrower that the Borrower at the Borrower is in full compliance with
the terms of Sections 11.15, 11.16, 11.18 and 11.19 hereof;
(xi) evidence all existing liens and financing statements in
favor of Persons other than the Bank and covering the Collateral for
the Loans and the obligations in respect of the Documentary Letters of
Credit have been cancelled or released;
(xii) the consolidated financial statements of the Company and
its Subsidiaries for the Fiscal Years 1995, 1996, 1997, 1998, and 1999,
including balance sheets, income and cash flow statements, audited by
independent public accountants acceptable to the Bank and prepared in
conformity with generally accepted accounting principles, and
consolidated financial statements of the Company for each of the fiscal
quarters in Fiscal Year 2000;
(xiii) evidence there shall not have occurred a material
adverse change since the Company's most recent annual consolidated
financial statements in the business, assets, operations, condition
(financial or otherwise) or prospects of the Company's and its
Subsidiaries, or in the fact and information regarding such entities as
represented to Bank to date;
(xiv) evidence of the absence of any action, suit,
investigation or proceeding pending or threatened in any court or
before any arbitrator or governmental authority that purports to affect
the Company or its Subsidiaries, or any transaction contemplated hereby
or that could have a material adverse effect on the Company and its
Subsidiaries or any transaction contemplated hereby or on the ability
of the Company and its Subsidiaries to perform their obligations under
the documents to be executed in connection with this Agreement;
(xv) the Company and its Subsidiaries shall be in compliance
with all their
34
existing financial obligations;
(xvi) receipt and review, with results satisfactory to the
Bank and its special counsel, of information regarding litigation, tax,
accounting, labor, insurance, pension liabilities (actual or
contingent), real estate leases, material contracts, debt agreements,
property ownership, and contingent liabilities of the Company and its
Subsidiaries;
(xvii) the Bank having completed a field examination of
Company's and its Subsidiaries receivables and inventory and concluded
that the same are satisfactory; and
(xviii) payment in immediately available funds of the
Commitment Fee plus the payment of all other costs and expenses of the
Bank, including but not limited to, the fees and expenses of counsel to
the Bank and all filing and recording costs, relating to the Loan;
(xix) the Company having purchased a SWAP Agreement with such
terms, and otherwise in form and substance acceptable to the Bank;
(xx) Stock Pledge Agreement executed by the Company pledging
all of the stock in the subsidiaries to the Bank;
(xxi) Assignment of Interest in Leases; and
(xxii) such other documents, instruments and certificates as
the Bank may reasonably request.
ARTICLE VIII - Events of Default
8.1 Events of Default. An Event of Default shall exist if any of the
following shall occur:
(a) Payment of Principal. If the Obligors fail to pay any principal of
the Note when due or any Reimbursement Obligations when due; or
(b) Payment of Interest and Fees. If the Obligors defaults in the
payment of any interest upon the Note or any fees hereunder when due (including,
but not limited to, fees due pursuant to the Standby Letter of Credit
Subfacility or Facility Number 2); or
35
(c) Payment of Other Obligations. If any Obligor defaults in the
payment of principal of, by acceleration or otherwise, or interest on any
Indebtedness beyond any period of grace provided with respect thereto, or in the
performance of any other term or condition contained in any agreement under
which any such Indebtedness is created, if the effect of such default is to
cause, or permit the holder or holders of such Indebtedness to cause such
Indebtedness to become due prior to its stated maturity; or
(d) Representation or Warranty. If any representation or warranty made
by the Obligors herein, or in any writing furnished in connection with or
pursuant to this Agreement shall be false, misleading or inaccurate or
incomplete in any material respect on the date as of which made; or
(e) Liquidation or Dissolution. Liquidation or dissolution of any
Obligor or suspension of the business of any Obligor or filing by any Obligor of
a voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, arrangement, readjustment of its or their debts or for any other
relief under the Bankruptcy Code, as amended, or under any other insolvency act
or law, state or Federal, now or hereafter existing, or any other action of any
Obligor indicating its or their consent to, approval of, or acquiescence in any
petition or proceedings; the application by any of such Obligor for, or the
appointment by consent or acquiescence of, a custodian, receiver or a trustee of
such Obligor or for all or a substantial part of its or their property; the
making by any Obligor of an assignment for the benefit of creditors, the
inability of any Obligor or the admission by any Obligor in writing of its or
their inability to pay its or their debts as they mature or the failure to pay
its or their debts as they mature; or
(f) Bankruptcy, Etc. Filing of an involuntary petition against any
Obligor in bankruptcy or seeking reorganization, arrangement, readjustment of
its or their debts or for any other relief under the Bankruptcy Code, as
amended, or under any other insolvency act or law, state or Federal, now or
hereafter existing, or the involuntary appointment of a custodian, receiver or
trustee for any Obligor or for all or a substantial part of its or their
property, or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of any Obligor, and the
continuance of any of such events for sixty (60) days
36
undismissed or undischarged; or
(g) Order of Dissolution. If any order is entered in any proceedings
against any Obligor decreeing its dissolution or split-up, and such order
remains in effect for more than sixty (60) days; or
(h) Judgment. If a final judgment, which with other outstanding final
judgments against any Obligor exceeds an aggregate of $100,000, shall be
rendered against such Obligor and if within thirty (30) days after entry thereof
such judgment shall not have been discharged, bonded or execution thereof stayed
pending appeal, or if within thirty (30) days after the expiration of any such
stay such judgment shall not have been discharged; or
(i) Pension Plan. If (a) any material unfunded or underfunded or
statutory liability is incurred by any Obligor under ERISA, or (b) any
Reportable Event occurs under ERISA which event the PBGC determines to
constitute grounds for termination of any employee benefit plan established or
maintained by any Obligor; or
(j) Other Instruments. If an Event of Default shall occur under any
other Loan Document, or if for any reason other than the release or termination
thereof by the Bank, any Loan Document shall be deemed unenforceable by a court
of competent jurisdiction or shall no longer be effective, or the Company or any
Subsidiary shall contend that this Agreement or any other Loan Document(s) are
not enforceable; or
(k) Management and Ownership. If (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or (ii) ▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall fail to remain active in the day-to-day
operations of the Company and the Subsidiaries; or
(l) Certain Covenants. If any Obligor defaults in the performance or
observance of any agreement or covenant binding on it contained in Article X and
Article XI hereof; or
(m) Other Covenants. If any Obligor defaults in the performance or
observance of any
37
other agreement, covenant, term or condition binding on it contained herein and
not otherwise referenced in this Article VIII and such default shall not have
been remedied within thirty (30) days; or
(n) Default Under Reimbursement Obligation. If there is any failure to
reimburse the Bank for any amount drawn under either the Standby Letters of
Credit or the Documentary Letters of Credit when the same shall become due, or
the failure to pay any fee or cost associated with any Standby Letter of Credit
or Documentary Letter of Credit when due, or the failure to perform any
obligation or the breach of or default under any Reimbursement Agreement
executed by the Company or any Subsidiary relating to any Standby Letters of
Credit or Documentary Letters of Credit; and
(o) Notice of Certain Defaults. With respect to those events described
under Section 8.01 (c), (d), (i), (j), (k), (l) or (m), such event will not
constitute an Event of Default hereunder unless the Bank has declared an Event
of Default and has sent written notice thereof to the Obligors.
8.2 Certain Subsidiaries. Notwithstanding anything to the contrary
herein, the insolvency or liquidation of ▇▇▇▇ Motion, or the sale of ▇▇▇▇ Motion
by the Company, will not, in and of itself, constitute and Event of Default
hereunder, provided the Bank is notified of such liquidation or sale and
consents thereto.
ARTICLE IX - Rights and Remedies After Event of Default.
9.1 Rights and Remedies. If any Event of Default shall occur, then, at
any time thereafter the Bank may, at its option, cease making Loans or issuing
Standby Letters of Credit and Documentary Letters of Credit and/or declare the
Note and all other Obligations owing by the Company and the Subsidiaries to the
Bank pursuant to the Facility Number 1 and Facility Number 2 to be forthwith due
and payable, and pay the face amount of all outstanding letters of credit
whereupon the Notes and any other such Obligations and the face amounts of all
outstanding letters of credit shall forthwith become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything
38
contained herein or in the other Loan Documents to the contrary notwithstanding.
In addition, upon the occurrence of an Event of Default and acceleration of the
Obligations pursuant to this Section, the Bank shall have, in addition to all
other rights and remedies which the Bank may have under this Agreement, the
other Loan Documents, and applicable law, the following rights and remedies, all
of which may be exercised with or without further notice to any Obligor:
(a) all of the rights and remedies of a secured party under the
Uniform Commercial Code or other laws of the State of North
Carolina or any other state where such rights and remedies are
asserted;
(b) to foreclose the liens and security interests created under
this Agreement and the other Loan Documents or under any other
agreement relating to the Collateral, by any available
judicial procedure or without judicial process;
(c) to enter any premises where the Collateral may be located,
through self-help and without judicial process, without first
obtaining a final judgement or giving any Obligor notice and
opportunity for a hearing on the validity of the Bank's claim,
for the purpose of taking possession or removing the same, or
require any Obligor to assemble the Collateral and make it
available to the Bank at a place to be designated by the Bank;
(d) to sell, assign, lease or otherwise dispose of the Collateral
or any part hereof, either at public or private sale, in lots
or in bulk, for cash, on credit or otherwise, with or without
representation or warranties, and upon such terms as shall be
acceptable to the Bank, in its sole discretion, and the Bank
may bid or become the purchaser at any such public sale, free
from any right of redemption which is hereby expressly waived
by each Obligor, and the Bank shall have the option to apply
or be credited with the amount of all or any part of the
Obligations owing to the Bank against the purchase price bid
by the Bank at any such sale;
(e) to exercise all rights has holder of the stock of the
Subsidiaries, including, but not limited to, the voting of
such stock or the sale thereof.
39
The Bank may, if it deems it reasonable, postpone or adjourn any sale
of the Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, without being required to give a new notice of
sale. Each Obligor agrees that the Bank has no obligation to preserve rights to
the Collateral against prior parties or to marshal any Collateral for the
benefit of any Person. In addition, each Obligor agrees that in the event notice
is necessary under applicable law, written notice mailed to such Obligor in the
manner specified in Section 12.5 hereof ten (10) days prior to the date of
public sale of any of the Collateral or prior to the date after which any
private sale or other disposition of the Collateral will be made shall
constitute commercially reasonable notice to each Obligor.
9.2 Collections: the Bank's Right to Notify Account Debtors. Upon and
after an Event of Default, each Obligor hereby authorizes the Bank to: notify
any or all Account Debtors that the Accounts have been assigned to the Bank and
that the Bank has a security interest therein; and to direct such Account
Debtors to make all payments due from them to such Obligor upon the Accounts
directly to the Bank or to a lockbox maintained by the Company with the Bank.
The Bank shall promptly furnish such Obligor with a copy of any such notice sent
and each Obligor hereby agrees that any such notice, in the Bank's sole
discretion, may be sent on such Obligor's stationery, in which event such
Obligor shall co-sign such notice with the Bank.
9.3 Application of Proceeds. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied first to the expenses (including all attorneys' fees) of
retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like, and then to the satisfaction of all
Obligations, application as to particular Obligations or against principal or
interest to be in the Bank's absolute discretion. The Obligors shall be liable
to the Bank and shall pay to the Bank on demand any deficiency which may remain
after such sale, disposition, collection or liquidation of the Collateral. The
Bank shall remit to the Company or the Person entitled thereto any surplus
remaining after all Obligations have been paid in full.
9.4 Appointment of the Bank as Obligor's Lawful Attorney. Upon and
after an Event of Default, each Obligor irrevocably designates, makes,
constitutes and appoints the Bank (and
40
all Persons designated by the Bank) as such Obligor's true and lawful attorney
(and agent-in-fact) and the Bank, or the Bank's agent, may, without notice to
any Obligors, and at such time or times thereafter as the Bank or said agent, in
its sole discretion, may determine, in the Obligor's or the Bank's name, (a)
demand payment of the Accounts; (b) enforce payment of the Accounts, by legal
proceedings or otherwise; (c) exercise all the Obligor's rights and remedies
with respect to the collection of the Accounts; (d) settle, adjust, compromise,
extend or renew the Accounts; (e) settle, adjust or compromise any legal
proceedings brought to collect the Accounts; (f) if permitted by applicable law,
sell or assign the Accounts upon such terms, for such amounts and at such time
or times as the Bank deems advisable; (g) prepare, file and sign the Obligor's
name on a proof of claim in bankruptcy or similar document against any Account
Debtor; (h) prepare, file and sign the Obligor's name on any notice of lien,
assignment or satisfaction of lien or similar document in connection with the
Accounts; (i) employ and maintain in the Company's premises a custodian selected
by the Bank who shall have full authority to do all this necessary to protect
the Bank's interest; and (j) do all acts and things and execute all documents
necessary, in the Bank's sole discretion, to collect the Accounts or to fulfill
each Obligor's obligations under this Agreement. All acts of the Bank or its
designee taken pursuant to this Section or Section 9.1 are hereby ratified and
confirmed by each Obligor and the Bank or its designee shall not be liable for
any acts of omission or commission nor for any error of judgment or mistake of
fact or law (other then from the gross negligence or willful misconduct of the
Bank). This power, being coupled with an interest, is irrevocable by the
Obligors until all Obligations to the Bank are paid in full.
9.5 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
the Bank's rights and remedies set forth in this Agreement is not intended to be
exhaustive and the exercise by the Bank of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder, under the Loan Documents or under any other agreement between the any
Obligor or the Bank or which may now or hereafter exist in law or in equity or
by suit or otherwise. The Bank shall not be required to pursue its rights and
remedies in any particular sequence. No delay or failure to take action on the
part of the Bank in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any
41
such right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between any Obligor and the
Bank or its agents or employees shall be effective to change, modify or
discharge any provision of this Agreement or to constitute a waiver of any Event
of Default. The Bank shall not, under any circumstances or in any event
whatsoever, have any liability for any error, omission or delay of any kind
occurring in the liquidation of the Collateral or for any damages resulting
therefrom.
ARTICLE X - Affirmative Covenants of the Obligors
10.1 Financial Reports and Other Data. Each Obligor, for itself,
covenants that, so long as any portion of the indebtedness evidenced by the
Notes remains unpaid or any Obligation remains outstanding and unless the Bank
otherwise consents in writing, it will:
(1) Within 30 days after the end of each calendar month,
deliver to the Bank a Borrowing Base Certificate,
showing the Borrowing Base Amount and the Excess
Borrowing Base Amount, together with summaries of
Inventory, Eligible Inventory (specifying character
of the Eligible Inventory), Eligible Accounts and
such other information as the Bank may request from
time to time, and shall deliver written assignments
of all Eligible Accounts therewith in form and
content acceptable to the Bank; provided, however,
the failure of any Obligor to execute and deliver
such schedules of Eligible Accounts or assignments
shall not affect or limit the Bank's security
interest to other rights in and to any Accounts.
(2) Within 10 days after the end of each quarter,
schedules of all Inventory and Accounts in such
detail and format as is reasonably acceptable to the
Bank.
(3) As soon as practicable and in any event within 120
days after each Fiscal Year End, deliver to the Bank
consolidated and consolidating balance sheets of the
Company and Subsidiaries as at such Fiscal Year End,
and related consolidated and consolidating statements
of income, retained earnings and cash flows for such
Fiscal Year, all in reasonable detail and
42
satisfactory in scope to the Bank, and certified by
and containing (as to the consolidated financial
statements) an unqualified opinion of independent
certified public accountants satisfactory to the
Bank. The Bank acknowledges that as of the date
hereof B.D.O. ▇▇▇▇▇▇▇ Company is satisfactory to the
Bank.
(4) As soon as practicable and in any event within sixty
(60) days after the end of each quarterly period of
the Company, deliver to the Bank consolidated and
consolidating balance sheets of the Company and
Subsidiaries as at the end of such quarterly period,
and related consolidated and consolidating statements
of income and retained earnings for the period from
the beginning of the current Fiscal Year to the end
of such quarterly period, all to be in reasonable
detail and certified by the chief financial officer
of the Company and each Subsidiary, to have been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis,
subject only to changes resulting from normal,
recurring year-end adjustments;
(5) Copies of all filings made with the U.S. Securities
and Exchange Commission as and when filed therewith;
(6) As soon as practicable and in any event within sixty
(60) days after the end of each quarterly period of
the Company, deliver to the Bank quarterly a
certificate of the Chief Financial Officer of the
Company and each Subsidiary stating that no Defaults
or Events of Default have occurred during the related
quarter, or specifying the nature and circumstances
of any Default or Event of Default which has occurred
during such period.
(7) Promptly deliver to the Bank a copy of the portions
of all reports and management letters, if any,
submitted to the Company and its Subsidiaries by its
independent public accountants which relate to
financial controls and substantive financial matters;
(8) With reasonable promptness, deliver such additional
financial or other data as the Bank may reasonably
request.
43
10.2 Account Warranties and Representations. With respect to its
Accounts, each Obligor represents and warrants to the Bank and the Bank may
rely, in determining which Accounts listed on any Schedule of Accounts are
Eligible Accounts, on all statements or representations made by any Obligor on
or with respect to any such Schedule of Accounts, and, unless otherwise
indicated in writing by such Obligor, that each account listed on the Schedule
of Accounts: (a) will be owned by such Obligor free and clear of any liens,
claims or encumbrances except those in favor of the Bank and will cover a bona
fide sale and delivery of Inventory usually dealt in by such Obligor, or the
rendition by each Obligor of services, to an Account Debtor in the ordinary
course of business; (b) will be for a liquidated amount maturing as stated in
the Schedule of Accounts and in the duplicate invoice covering said sale; (c)
the Bank's security interest therein will not be subject to any offset,
deduction, counterclaim, lien or other adverse condition; (d) there are no
discounts, allowances, claims, setoffs, counterclaims or disputes of any kind or
description existing or asserted with respect thereto except as may be stated in
the Schedule of Accounts and in the duplicate invoice covering said sale; (e)
there are, to the best of each Obligor's knowledge, no facts, events, or
occurrences which would in any way impair the validity or enforcement thereof;
(f) the goods giving rise thereto are not, and are not at the time of the sale
thereof, subject to any lien, claim, encumbrance or security interest except
those held by the Bank; and (g) to the best of each Obligor's knowledge, each
Person obligated on an Account is solvent and will continue to be fully able to
pay all Accounts on which he is obligated in full when due. If any warranty is
breached as to any Account, then the Bank may deem ineligible any or all
Accounts owing by that Account Debtor, but the Bank shall retain its security
interest in all Accounts, eligible and ineligible, until all Obligations of each
Obligor has been paid and satisfied in full.
10.3 Verification of Accounts. Any of the Bank's officers, employees,
or agents shall have the right, at any time or times hereafter, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise.
10.4 Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of Two Hundred Fifty Thousand ($250,000) Dollars are in
dispute between any Account Debtor and any Obligor (which shall include, without
limitation, any dispute in which an offset, claim or counterclaim may result),
such Obligor shall notify the Bank of the same immediately
44
(within two Domestic Business Days), explaining in detail the reason for the
dispute, all claims relating thereto and the amount in controversy.
10.5 Taxes and Liens. Each Obligor shall promptly pay, or cause to be
paid, all taxes, assessments or other governmental charges which may lawfully be
levied or assessed upon the income or profits of any Obligor, or upon any
property, real, personal or mixed, belonging to any Obligor, or upon any part
thereof, and also any lawful claims for labor, material and supplies which, if
unpaid, might become a lien or charge against any such property; provided,
however, no Obligor shall be required to pay any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be actively contested in
good faith by proper proceedings and provided the Company shall, if requested by
the Bank, set up reserves therefor satisfactory to the Bank (such reserves not
required to be separately funded); but provided further that any such tax,
assessment, charge, levy or claim shall be paid forthwith upon the commencement
of proceedings to foreclose any lien securing the same.
10.6 Business and Existence. Each Obligor shall do or cause to be done
all things necessary to preserve and to keep in full force and effect its
corporate existence, rights and franchises, trade names, patents, trademarks and
permits; and continue to engage principally in the business currently conducted
by the Obligors.
10.7 Insurance on Properties. Each Obligor shall keep its business and
properties (including but not limited to all Collateral) insured at all times
with responsible insurance companies and carry such types and amounts of
insurance as are usually carried by corporations engaged in the same or a
similar business similarly situated as is reasonably satisfactory to the Bank
and provide the Bank with copies of all such policies or certificates of
insurance which insure property encumbered hereunder naming the Bank as an
additional insured and/or lienholder.
10.8 Maintain Property. Each Obligor shall maintain its properties in
good order and repair and, from time to time, make all needful and proper
repairs, renewals, replacements, additions and improvements thereto, provided
that nothing in this Section 10.8 shall prevent any Obligor from discontinuing
the operation and maintenance of any of such properties if such
45
discontinuance is, in the judgment of such Obligor, desirable in the conduct of
the business of such Obligor and not disadvantageous in any material respects to
the Bank.
10.9 Observe all Laws. Each Obligor shall conform to and duly observe
all laws, regulations and other valid requirements of any regulatory authority
with respect to the conduct of its business.
10.10 Payment of Obligations. Each Obligor shall pay when due, all its
obligations and liabilities, except for intercompany obligations and liabilities
(provided, however, that such intercompany obligations and liabilities do not
violate the provisions of Section 11.1(l) hereof), and except where the same may
be contested in good faith by appropriate proceedings diligently prosecuted and
appropriate reserves for the accrual of same are maintained.
10.11 Books of Record and Account. Each Obligor shall (a) Keep proper
books of record and accounts in which full, true and correct entries, shall be
made of its transactions in accordance with generally accepted accounting
principles applied on a basis consistent with those applied in the preparation
of the financial statements described in Section 10.1 hereof; and (b) Set aside
on its books from its earnings for each Fiscal Year all such proper reserves,
including reserves for depreciation, depletion, obsolescence and amortization of
their properties during such Fiscal Year, as shall be required in accordance
with generally accepted accounting principles consistently applied.
10.12 Company's Knowledge of Default. Each Obligor shall immediately
(within one Domestic Business Day) give notice to the Bank of the occurrence of
any Default or Event of Default hereunder or under any other material obligation
of any Obligor, of which any Obligor has knowledge, specifying the nature
thereof, the period of existence thereof and what action the Company or
Subsidiary proposes to take with respect thereto. In addition, as to all
Subsidiaries, the Company shall notify the Bank of such of the foregoing as may
materially adversely affect the operations or financial condition of any such
Subsidiary.
10.13 Suits or Other Proceedings. Each Obligor shall immediately
(within two Domestic Business Days) give the Bank written notice of any
litigation, dispute or proceeding involving a
46
claim for $100,000 or more instituted against any Obligor and not fully covered
by insurance, or any attachment, levy, execution, or other process involving a
claim for $100,000 or more being instituted against any assets of any Obligor
and not fully covered by insurance, and establish or cause to be established
appropriate and adequate reserves to cover any such claim, levy, attachment,
execution or other process; however, each Obligor shall give the Bank immediate
written notice of any litigation, dispute or proceeding, whether or not fully
insured, involving a claim in excess of $500,000. In addition, as to all
Subsidiaries, the Company shall notify the Bank of such of the foregoing as may
materially adversely affect the operations or financial condition of any such
Subsidiary.
10.14 ERISA. Each Obligor shall substantially comply with all
requirements of ERISA applicable to it and furnish to the Bank as soon as
possible and in any event within thirty (30) days after any Obligor or duly
appointed administrator of a Plan knows or has reason to know that any
Reportable Event with respect to any Plan has occurred, a statement of the
President of such Obligor setting forth details as to such Reportable Event or
any action which such Obligor proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event given to the PBGC or a
statement that said notice will be filed with the annual report to the United
States Department of Labor with respect to such Plan if such filing has been
authorized. Each Obligor shall promptly deliver to the Bank copies of all
correspondence from and to the PBGC or any other governmental authority with
respect to any such Reportable Event.
10.15 Right of Inspection. Each Obligor shall permit the Bank at the
Bank's expense, to visit and inspect any of the properties, corporate books and
financial reports of the Obligors and to discuss their affairs, finances and
accounts with their principal officers and their independent public accountants,
all at such reasonable times and as often as the Bank may reasonably request.
10.16 Consolidated Tangible Net Worth. The Obligors shall maintain at
all times, a Consolidated Tangible Net Worth of not less than $18,000,000.00 for
Fiscal Year 2000, with annual increases thereto equal to 50% of net income (as
determined under generally accepted accounting principles) for the previous
Fiscal Year with no adjustment for losses.
10.17 Total Liabilities to Tangible Net Worth. Maintain a ratio of
Consolidated Total
47
Liabilities to Consolidated Tangible Net Worth of not greater than 2.50 to 1.00.
10.18 Fixed Change Coverage Ratio. Maintain at all times a Consolidated
Fixed Charge Ratio of 1.75 to 1.0 computed on a trailing four quarter average
basis.
10.19 Funded Debt Coverage Ratio. Maintain at each fiscal quarter-end a
ratio Consolidated Funded Debt to EBITDA of not greater than 4.00 to 1.00,
computed on a trailing four quarter average basis.
10.20 Use of Proceeds. The Company will use the proceeds of the
Revolving Credit Loan for its working capital and other general corporate
purposes. No part of the proceeds of the Loans will be used to "purchase" or
"carry" "margin stock" as such terms are used in Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to others for the
purpose of purchasing or carrying margin stock and the use of such Loans, or any
of them, shall not result in any violation of Regulations G, T, U or X of said
Board.
10.21 Notice of Discharge of Hazardous Materials or Environmental
Complaint. Give to the Bank immediate written notice of any complaint, order,
directive, claim, citation or notice by any governmental authority or any Person
with respect to (i) air emissions, (ii) spills, releases or discharges to soils
or improvements located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing the Property,
(iii) noise emissions, (iv) solid or liquid waste disposal, or (v) the use,
generation, storage, transportation or disposal of Hazardous Material. Such
notices shall include, among other information, the name of the party who filed
the claim, the nature of the claim and the actual or potential amount of the
claim. The Company shall promptly comply with its obligations under law with
regard to such matters. However, the Company shall not be obligated to give such
notice to the Bank of any discharge of any Hazardous Material which occurs
legally in accordance with and pursuant to the terms and conditions of a valid
governmental permit, license, certificate or approval therefor.
10.22 Maintenance of Operating Accounts. Open its primary operating
accounts for the Company and each Subsidiary with the Bank within thirty (30)
days of Closing; keep and maintain such accounts with the Bank during the term
of the Loans and cause to be deposited
48
therein all revenues of the Company and each Subsidiary during such period of
time.
ARTICLE XI - Negative Covenants of the Obligors.
Section 11.1 Negative Covenants. Each Obligor, for itself, covenants
and agrees that from the date hereof until payment in full of the principal and
interest on the Notes, unless the Bank shall otherwise have consented prior
thereto in writing, it will not, either directly or indirectly:
(a) Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, however evidenced, except:
(i) Indebtedness to the Bank arising under this Agreement;
(ii) Indebtedness existing as of the date hereof and described in
Exhibit 11.1(a) attached hereto, which Indebtedness shall be
paid in accordance with its terms as they exist on the date
hereof;
(iii) Indebtedness incurred to acquire equipment not to exceed in
the aggregate amount outstanding at any time $100,000 provided
(a) such Indebtedness is secured by the equipment purchased
therewith and (b) such Indebtedness bears interest at a rate
less than the rate offered by the Bank in effect on the date
such competing financing is offered; and
(iv) trade Indebtedness created in the ordinary course of business;
provided such Indebtedness is not secured with any of the
Collateral on a equal or senior basis to the Bank's security
interest thereon.
(v) leases for motor vehicles and computers and software used in
the ordinary course of business.
(b) Limitations on Liens. Incur, create, assume or permit to exist any
Liens of any
49
kind upon any of its property now owned or hereafter acquired or assets of any
character, including those arising under conditional sales or other title
retention agreements, except:
(i) Permitted Encumbrances;
(ii) Liens existing as of the date hereof and described in Exhibit
11.1(b) attached hereto;
(iii) Liens securing Indebtedness described in Section 11.1(a); and
(iv) Liens securing the indebtedness to the Bank under this
Agreement.
(c) Consolidation, Merger or Reorganization. Enter into any transaction
of merger or consolidation.
(d) Sale of Assets, Dissolution, Etc. Sell, assign, lease or otherwise
dispose of any properties or assets, or any of its accounts, notes, franchises
or contract rights, except in the ordinary course of business, or any stock or
any indebtedness of any Subsidiary, or any assets or properties necessary or
desirable for the proper conduct of its business, or wind up, liquidate or
dissolve, or agree to any of the foregoing, or permit any Subsidiary to do so.
(e) Loans and Investment. Lend or advance money, credit or property to
any Person, or invest in (by capital contribution or otherwise), or purchase or
repurchase the stock or Indebtedness or all or a substantial part of the assets
or properties of any Person, or agree to do any of the foregoing, except for (i)
obligations of the United States of America and agencies thereof maturing not
more than one year after the date of purchase thereof; (ii) obligations of banks
not to exceed the principal sum of $50,000 whose commercial paper has a rating
of P-1 by Standard and Poor's Corporation or A-1 by ▇▇▇▇▇'▇ Investor Service or
obligations of banks that are wholly-owned subsidiaries of bank holding
companies whose, commercial paper has a rating, of P-1 by Standard and Poor's
Corporation or A-1 by ▇▇▇▇▇'▇ Investor Service; (iii) accommodation loans to
employees not to exceed at any time outstanding the sum of $50,000; and (iv)
loans and advances permitted under Section 11.1(a) hereof;
50
(f) Guarantee. Guarantee, assume, endorse or otherwise become or remain
liable in connection with the obligations of any other Person, other than (i)
the endorsement of negotiable instruments in the ordinary course of business for
deposit or collection, and (ii) equipment financing guaranteed in part by the
Export Import Bank of the United States, provided the recourse amount of such
equipment financing shall not exceed at any given time $1,000,000 in the
aggregate for the Company and the Subsidiaries combined.
(g) Rental Obligations. Incur, create, assume or permit to exist, in
respect of leases of real or personal property during any Fiscal Year, rental
obligations or other commitments thereunder to make any direct or indirect
payment, whether as rent or otherwise, for fixed or minimum rentals, percentage
rentals, property taxes, or insurance premiums in excess of $2,500,000 for the
Company and the Subsidiaries combined.
(h) Dividends, Redemptions and Other Payments. (a) Declare or pay any
dividends (other than dividends payable solely in common stock on any shares of
stock of any class of the Company now or hereafter outstanding), or purchase,
redeem or otherwise retire any such shares in excess of $250,000, or apply or
set apart any of its assets therefor or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares, or agree to do
any of the foregoing; or (b) alter, amend or modify in any manner the capital
structure of the Company or any Subsidiary.
(i) Capital Expenditures. Make or become committed to make any
expenditures for fixed or capital assets amounting in the aggregate for the
Obligors during any Fiscal Year of the Company in excess of Operating Cash Flow
plus $500,000, minus scheduled principal payments of Funded Debt for such Fiscal
Year and the aggregate amount of dividends paid or declared on the capital stock
of the Company during such Fiscal Year. No Obligor shall be entitled to make any
such expenditures if after giving effect thereto it is in violation of any of
the other terms of this Agreement as a result of capital expenditures at any
time during such Fiscal Years.
51
(j) Fiscal Year. Change the method of determining its Fiscal Year.
(k) Nature of Business. Enter into any lines of business which are
unrelated to their current lines of business.
(l) Transactions with Subsidiaries. Permit at any time new loans or
advances aggregating $500,000 from the Company to the Subsidiaries, or amongst
the ones without the prior consent of the Bank.
(m) Affiliates. Purchase, acquire or lease any property from, or sell,
dispose of or lease any property to, or otherwise deal with, in the ordinary
course of business or otherwise, any Affiliate, except upon terms not less
favorable to the Obligor than if no such relationship existed, except for
reasonable intercompany discounts.
(n) Non - U.S. Subsidiaries. Not undertake any material business or
transfer or hold any material assets or any Collateral in any Non-United States
based or located Person without the Bank's written consent which may be granted
in its sole and absolute discretion. For purposes of this Subsection (n)
"Material" shall mean any asset or Collateral with a value of $100,000 or more.
ARTICLE XII - Miscellaneous.
12.1 Amendment. Any provision of this Agreement and the other Loan
Documents may be waived or modified only by an instrument in writing signed by
the Obligors and the Bank.
12.2 No Waiver. No failure on the part of the Bank to exercise, and not
delay in exercising, and no course of dealing with respect to any right
hereunder shall operate as a waiver thereof or preclude any other or further
exercise thereof or the exercise of any other right nor shall the single or
partial exercise of any right precluded any other further exercise thereof. The
52
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
12.3 Survival. All representations and warranties made herein shall
survive the making of the Loans hereunder.
12.4 Costs, Expenses and Taxes. The Company agrees to pay on demand all
out-of-pocket costs and expenses in connection with the preparation, execution,
delivery, filing, recording and administration of this Agreement, the Note or
any of the other Loan Documents, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the Bank, with respect thereto
and with respect to advising the Bank as to its respective rights and
responsibilities under this Agreement, the Note or any of the other Loan
Documents, and all costs and expenses, if any, in connection with the
enforcement of this Agreement, the Notes, or any of the other Loan Documents, in
addition, the Company shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing or recording of this Agreement, the Note, or other Loan Documents and the
other documents to be delivered under any such Loan Document, and agrees to hold
the Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
12.5 Notices. All notices, requests and demands to or upon the
respective parties hereto (other than routine billing notices) shall be deemed
to have been given or made on the Domestic Business Day deposited in the mail,
postage prepaid, or when delivered by Federal Express, in the case of
telegraphic notice, when delivered to the telegraph company, addressed as
follows or to such other address as may be hereafter designated in writing by
the respective parties hereto:
The Company: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Industries, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
53
Post Office ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ Bigger, Jr., Esquire
▇▇▇▇▇ ▇▇▇▇▇, Esquire
Grove, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, 4th Floor
Post Office Box 32248 (28232-2248)
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Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Bank: SouthTrust Bank, N.A.
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Attention: Corporate Banking
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
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Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12.6 Liens; Set Off by Bank The Obligors hereby grant to the Bank a
continuing lien for the Notes upon any and all monies, securities and other
property of the Obligors and the
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proceeds thereof, now or hereafter held or received by or in transit to the Bank
from or for the Obligors, and also upon any and all deposits (general or
special) and credits of the Obligors against the Bank, at any time existing.
Upon the occurrence of any Event of Default as specified above, the Bank is
hereby authorized at any time and from time to time, without notice to the
Obligors, to set off, appropriate, and apply any and all items herein above
referred to against all Obligations to the Bank.
12.7 Governing Law. GOVERNING LAW, JURISDICTION, VENUE AND SERVICE.
THIS AGREEMENT, THE NOTE AND ALL OTHER LOAN DOCUMENTS SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NORTH CAROLINA
WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES. OBLIGORS HEREBY CONSENT TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF MECKLENBURG COUNTY, NORTH CAROLINA
AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA,
AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN
FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. OBLIGORS
EXPRESSLY WAIVE ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM OR AN
IMPROPER FORUM BASED UPON LACK OF VENUE. OBLIGORS FURTHER WAIVE PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO OBLIGORS AT THE
ADDRESS SET FORTH HEREIN ITS SIGNATURE HERETO AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS
DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO OBLIGORS ADDRESS.
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12.8 Commercially Reasonable Manner. Unless otherwise provided herein,
the Bank, the Company and the Subsidiaries shall each act in a commercially
reasonable manner in taking any actions under this Agreement.
12.9 Stamp or Other Tax. Should any stamp or excise tax become payable
under the laws of the United States or North Carolina, or any subdivision
thereof or municipality therein in respect of this Agreement or the Notes or any
modification hereof or thereof, the Company shall pay the same (including
interest and penalties, if any) and shall hold the Bank harmless with respect
thereto.
12.10 Counterparts and Effectiveness. This Agreement may be executed by
the parties hereto in any number of counterparts and each counterpart shall be
deemed to be an original but all shall constitute together but one and the same
Agreement. This Agreement shall become effective as of the day and year first
above written.
12.11 Assignments and Participations. The Company and Subsidiaries
acknowledge and agrees that the Bank may, without prior consent of or notice to
the Company, assign, sell or transfer the Obligations or both of the Notes, in
whole or in part, or grant or sell one or more participations in the Obligations
or portions thereof from time to time. In the event the Bank assigns, sells or
transfers any portion of the Obligations or any interest in either Note, the
Company and Subsidiaries agree to execute and deliver any documents or
instruments necessary in the Bank's opinion to carry out such assignment,
transfer or sale, including without limitation execution and delivery of new
Notes in favor of the assignee, transferee or purchaser.
12.12 Indirect Acts. Any act which any Obligor is prohibited from doing
shall not be done indirectly through a subsidiary or by any other indirect
means.
12.13 Severability. In case any one or more of the provisions contained
in this Loan Agreement or in the Note shall be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained in the Note, shall not
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in any way be affected or impaired thereby, and this Agreement or in the Loan
Agreement and the Note shall otherwise remain in full force and effect.
12.14 No Third Party Beneficiary. The terms, provisions, conditions,
and requirements made and set forth herein are for the benefit of the parties
hereto only. In no event shall the Bank be construed to be any Obligor's agent,
and in no event is the Bank assuming any Obligor's responsibility for any
obligation. It is specifically intended that no party shall be a third-party
beneficiary hereunder, except and unless it is specifically provided herein that
any provision shall operate or inure to the use and benefit of a third party,
i.e., no subcontractor, or material supplier shall have any rights hereunder
against the Bank, or be entitled to protection of the covenants herein
contained, although such parties may have recourse to the Obligors or any of
them.
12.15 Usury. Anything contained herein or in the Note or any other
instrument securing the advances hereunder to the contrary notwithstanding, if
for any reason the effective rate of interest on such advances should exceed the
maximum lawful rate of interest, the effective rate of interest shall be deemed
reduced to and shall be such maximum lawful rate, and any sums of interest which
have been collected in excess of such maximum lawful rate shall be applied by
the holder of the Note as a credit against the unpaid principal amount due
thereunder.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Obligors and the Bank have caused this
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
COMPANY AND SUBSIDIARIES: BANK:
▇▇▇▇▇▇▇▇ INDUSTRIES, INC. (SEAL) SOUTHTRUST BANK, N.A. (SEAL)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇. ▇▇▇▇▇▇▇ Lower
-------------------------------------- -------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Lower
Its: President Its: Vice President
▇▇▇▇▇▇▇▇ YARN EQUIPMENT, INC. (SEAL)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
▇▇▇▇ MOTION CONTROLS, INC. (SEAL)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
WINK ▇▇▇▇▇ EQUIPMENT COMPANY, INC. (SEAL)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
Its: Vice President & Assistant Secretary
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