THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is executed to
be effective as of July 2, 1997, by and among FLEET CAPITAL CORPORATION
("FLEET"), a Rhode Island corporation, successor-in-interest by merger to Fleet
Capital Corporation, a Connecticut corporation (Fleet Capital Corporation, a
Connecticut corporation, being formerly known as Shawmut Capital Corporation,
and being the successor-in-interest by assignment to Barclays Business Credit,
Inc., a Connecticut corporation), with an office at 0000 Xxxxxxx Xxxxxx, Xxxxx
0000, XX00, Xxxxxx, Xxxxx 00000, BANKBOSTON, N.A. ("BOSTON"), a national banking
association (formerly known as The First National Bank of Boston) with an office
at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (Fleet and Boston are
collectively referred to as "Lenders" or each individually a "LENDER"), FLEET,
as Agent for Lenders (Fleet, in such capacity, the "AGENT"), and BRAZOS, INC.
("BRAZOS"), a Texas corporation (formerly known as Brazos Sportswear, Inc.),
with its chief executive office at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000,
and MORNING SUN, INC., a Washington corporation (formerly known as SolarCo.,
Inc.) ("MORNING SUN"), with its chief executive office at 0000 00xx Xxxxxx X.,
Xxxxxxxx X, Xxxxxx, Xxxxxxxxxx 00000 (Brazos and Morning Sun being hereinafter
individually and collectively referred to as "BORROWER", as governed by the
provisions of SECTION 1.5 and SECTION 1.6 of this Agreement).
A. Brazos and Fleet, as the sole Lender, entered into that certain Loan
and Security Agreement, dated as of May 6, 1992, as thereafter amended from time
to time, including, without limitation, as amended by (i) that certain First
Amendment Agreement, dated as of November 30, 1993, executed by Fleet and
Brazos, (ii) that certain Second Amendment to Loan and Security Agreement, dated
as of June 20, 1994, executed by Brazos and Fleet, and (iii) that certain Third
Amendment to Loan and Security Agreement, dated as of July 1, 1994, executed by
Brazos and Fleet (as amended, "ORIGINAL LOAN AGREEMENT").
B. Brazos and Fleet, as the sole Lender, amended, restated and modified
(but did not extinguish) the Original Loan Agreement by entering into that
certain Amended and Restated Loan and Security Agreement dated as of November
10, 1994, as amended by (i) that certain First Amendment to Amended and Restated
Loan and Security Agreement, dated as of June 2, 1995, (ii) that certain Second
Amendment to Amended and Restated Loan and Security Agreement, dated as of
January 11, 1996, (iii) that certain Third Amendment to Amended and Restated
Loan and Security Agreement, dated as of April 22, 1996 and (iv) that certain
Fourth Amendment to Amended and Restated Loan and Security Agreement, dated as
of May 2, 1996 (as amended, "RESTATED LOAN AGREEMENT").
C. Fleet and Boston as "LENDERS", Fleet, as "AGENT", and Brazos amended,
restated and modified (but did not extinguish) the Restated Loan Agreement by
entering into that certain Second Amended and Restated Loan and Security
Agreement, dated as of August 9, 1996, as amended by (i) that certain letter
agreement, dated December 11, 1996, between Brazos and Lenders, (ii) that
certain letter agreement, dated February 3, 1997, between Brazos and Lenders,
and (iii) that certain March 1997 Amendment to Second Amended and Restated Loan
and
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Security Agreement, dated March 14, 1997, executed by Borrower and Lenders (as
amended, the "SECOND RESTATED LOAN AGREEMENT").
D. Brazos Sportswear, Inc., a Delaware corporation, successor-in-interest
by merger to BSI Holdings, Inc., and the owner of 100% of the issued and
outstanding common stock of Brazos ("PARENT") and Brazos desire to enter into
and close the following simultaneous transactions (collectively, the
"TRANSACTION") as of the effective date of this Agreement:
(i) The consummation of each of the following (collectively, the
"MORNING SUN ACQUISITION"):
(a) The acquisition by Parent of all the capital stock of
SolarCo, Inc., a Washington corporation ("SOLARCO") and owner of all
the capital stock of Morning Sun, Inc., a Washington corporation
("OLD MORNING SUN") pursuant to the terms, conditions and provisions
of that certain Stock Purchase Agreement, dated May 8, 1997,
executed by Parent and the shareholders of SolarCo (the "STOCK
PURCHASE AGREEMENT") (the "MORNING SUN STOCK ACQUISITION");
(b) The immediate merger of Old Morning Sun into SolarCo, with
SolarCo being the surviving entity, and the surviving entity
changing its name to "Morning Sun, Inc.", and as a result thereof,
owning all of the assets of Old Morning Sun (the "MORNING SUN
MERGER"); and
(c) The immediate contribution by Parent to Brazos of all the
capital stock of such merged and renamed entity, such that Morning
Sun will be a wholly-owned Subsidiary of Brazos ("MORNING SUN
CONTRIBUTION");
(ii) The purchase by Brazos of all the assets of Premier Sports
Group, Inc., a Colorado corporation ("PREMIER"), pursuant to the terms,
conditions and provisions of that certain Asset Purchase Agreement, dated
May 30, 1997, by and among Brazos, Parent, Premier and Xxxxxxxx X. Xxxxx
(the "ASSET PURCHASE AGREEMENT") (the "PREMIER ASSET ACQUISITION"); and
(iii) The completion by Parent of its offering of $100,000,000
Senior Notes ("PARENT SENIOR NOTES") pursuant to and consistent with the
provisions of that certain Offering Memorandum regarding such Parent
Senior Notes, dated June ___, 1997 ("OFFERING MEMORANDUM"), the terms of
which Parent Senior Notes shall include those terms described on EXHIBIT S
attached hereto (the "SENIOR NOTES PLACEMENT"), the net proceeds of the
Senior Notes Placement to total at least $94,000,000, and such net
proceeds to be used for:
(a) paying the cash portion of the purchase price for
the Morning Sun Stock Acquisition and paying off in full the
indebtedness for borrowed money of SolarCo and Old Morning Sun and
any indebtedness for
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borrowed money assumed by Borrower or Parent in connection with the
Morning Sun Stock Acquisition;
(b) paying the cash portion of the purchase price for
the Premier Asset Acquisition and paying off in full any
indebtedness for borrowed money (other than the Contingent Amount
and the Convertible Note) assumed by Borrower or Parent in
connection with the Premier Asset Acquisition;
(c) paying off existing indebtedness for borrowed money
of Parent;
(d) paying off in full all subordinated debt of Parent
and Brazos existing prior to consummation of the Transaction;
(e) paying off in full the Term Loan (as defined in the
Second Restated Loan Agreement); and
(f) paying off existing indebtedness for borrowed money
of Brazos.
E. As a result of the Transaction, the parties hereto desire, among other
things, to effectuate the following revisions to the existing credit facilities
presently provided for in the Second Restated Loan Agreement:
(i) Decrease the revolving credit facility from $73,200,000 to
$50,000,000;
(ii) Pay off in full the Term Loan and not continue forward any term
loan facility;
(iii) Add Morning Sun as a co-borrower to the revolving credit
facility; and
(iv) Release all collateral securing obligations incurred pursuant
to the Second Restated Loan Agreement other than the Collateral described
in SECTION 4 hereof.
F. To effectuate the foregoing, the parties hereto wish to completely
amend, restate and modify (but not extinguish) the Second Restated Loan
Agreement through the execution of this Agreement, which will supersede all
prior agreements among the parties hereto.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
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SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACCOUNT DEBTOR - any Person who is or may become obligated under or on
account of an Account.
ACCOUNTS - all accounts, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquires any
interest.
ADJUSTED NET EARNINGS FROM OPERATIONS - with respect to any fiscal period,
means the Consolidated net earnings (or loss) after provision for income taxes
for such fiscal period of Borrower, all as reflected on the Consolidated
financial statement of Borrower supplied to Agent and Lenders pursuant to
SECTION 9.1(J) hereof, but excluding:
(a) any gain or loss arising from the sale of capital assets;
(b) any gain arising from any write-up of assets;
(c) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary;
(d) earnings of any corporation, substantially all the assets of
which have been acquired in any manner by Borrower, realized by such corporation
prior to the date of such acquisition;
(e) net earnings of any business entity (other than a Subsidiary) in
which Borrower has an ownership interest unless such net earnings shall have
actually been received by Borrower in the form of cash distributions;
(f) any portion of the net earnings of any Subsidiary which, at the
time of determination, the Subsidiary is prohibited (by contract or charter)
from paying as dividends to Borrower;
(g) the earnings of any Person to which any assets of Borrower shall
have been sold, transferred or disposed of, or into which Borrower shall have
merged, or been a party to any consolidation or other form of reorganization,
prior to the date of such transaction;
(h) any gain or loss arising from the acquisition of any Securities
of Borrower; and
(i) any gain or loss arising from extraordinary or non-recurring
items.
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ADVANCE - the disbursement by a Lender (or by Agent on behalf of Lenders)
of a Loan to Borrower pursuant to this Agreement.
AFFILIATE - a Person (other than a Subsidiary): (a) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Borrower; (b) which beneficially owns or holds 10%
or more of any class of the Voting Stock of Borrower; or (c)10% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 10% or more
of the equity interest) of which is beneficially owned or held by Borrower or a
Subsidiary of Borrower. For purposes hereof, "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 the ownership of Voting
Stock, by contract or otherwise.
AGENT - as defined in the preamble of this Agreement, and any successor
Agent appointed pursuant to the terms of this Agreement.
AGREEMENT - this Third Amended and Restated Loan and Security Agreement,
including all Exhibits hereto, as the same may be modified, supplemented,
extended, amended, or restated from time to time.
APPLICABLE ANNUAL RATE - as defined in SECTION 3.1(A) of this Agreement.
ASSET PURCHASE AGREEMENT - as defined in the preamble of this Agreement.
AVERAGE DAILY LOAN BALANCE - for any relevant period of time, the amount
obtained by adding the unpaid balance of the Loans owing by Borrower to Lenders
at the end of each day for each day during the time period in question and by
dividing such sum by the number of days in such time period.
AVERAGE MONTHLY LOAN BALANCE - the amount obtained by adding the unpaid
balance of Loans owing by Borrower to Lenders at the end of each day for each
day during the month in question and by dividing such sum by the number of days
in such month.
AVERAGE MONTHLY REVOLVING CREDIT LOANS USAGE - as defined in SECTION
3.1(F) of this Agreement.
BANK - Fleet National Bank and its successors and assigns.
BASE RATE - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if the prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
BASE RATE LOANS - all Base Rate Revolving Credit Loans.
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BASE RATE REVOLVING CREDIT LOANS - all Revolving Credit Loans other than
Eurodollar Revolving Credit Loans.
BORROWER SUBORDINATED DEBT - Indebtedness of Borrower that is expressly
subordinated to the Obligations upon terms satisfactory to Lenders, including,
without limitation, the Contingent Amount and such other Indebtedness, if any,
of Borrower described on EXHIBIT O attached hereto.
BORROWING - the combined Advances made to Borrower on a single date.
BORROWING BASE - as at any date of determination thereof, an amount equal
to the lesser of:
(a) (i) the Revolving Credit Commitment; MINUS (ii) 100% of the face
amount of all standby Letters of Credit issued by Agent or covered by the
provisions of an LC Risk Participation Agreement which are outstanding at such
date; MINUS (iii) 45% of the face amount of all documentary Letters of Credit
issued by Agent or covered by the provisions of an LC Risk Participation
Agreement which are outstanding at such date; MINUS (iv) any reserves for
accrued and unpaid royalty payments established by Agent and/or Lenders from
time to time pursuant to SECTION 2.1(A) hereof (based on the amount of such
accrued and unpaid royalty payments which are shown on Borrower's financial
statements); MINUS (v) all other reserves established by Agent and/or Lender
from time to time pursuant to SECTION 2.1(A) hereof; MINUS (vi) the FX Amount;
or
(b) an amount equal to:
(i) (A) 85% (or such lesser percentage as Lenders may in their
discretion determine from time to time after the occurrence of a Default)
of the net amount of Eligible Accounts outstanding as of the applicable
Calculation Date PLUS (B) the lesser of $500,000 or 85% (or such lesser
percentage as Lenders may in their discretion determine from time to time
after the occurrence of a Default) of the net amount of Eligible Dated
Accounts outstanding as of the applicable Calculation Date; PLUS (C) 85%
(or such lesser percentage as Lenders may in their discretion determine
from time to time after the occurrence of a Default) of the lesser of (a)
$3,000,000 or (b) the net amount of Japanese Accounts outstanding as of
the applicable Calculation Date;
PLUS
(ii) the lesser of (A) $30,000,000 or (B) the sum of: (1) (x)
the LESSER of (I) $9,000,000 or (II) 55% (or such lesser percentage as
Lenders may in their discretion determine from time to time after the
occurrence of a Default) of the value of Eligible Finished Goods Inventory
consisting of "printed" finished goods as of the applicable Calculation
Date PLUS (y) 55% (or such lesser percentage as Lenders may in their
discretion determine from time to time after
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the occurrence of a Default) of the value of Eligible Inventory (other
than Eligible Finished Goods Inventory consisting of "printed" finished
goods), as of the applicable Calculation Date PLUS (2) the Seasonal
Inventory Overadvance Amount as of the applicable Calculation Date.
MINUS
(subtract from the sum of CLAUSES (I) and (II) above)
(iii) the sum of: (a) 100% of the face amount of all standby Letters of
Credit issued by Agent or covered by the provisions of an LC Risk
Participation Agreement which are outstanding at such date, (b) 45% of the
face amount of all documentary Letters of Credit issued by Agent or
covered by the provisions of an LC Risk Participation Agreement which are
outstanding at such date, (c) any reserves for accrued and unpaid royalty
payments established by Agent and/or Lenders from time to time pursuant to
SECTION 2.1(A) hereof and based on the amount of such accrued and unpaid
royalty payments which are shown on Borrower's financial statements, (d)
all other reserves established by Agent and/or Lenders from time to time
pursuant to SECTION 2.1(A) hereof, and (e) the FX Amount.
For purposes of CLAUSE (B)(I) above, the net amount of Eligible Accounts
or Eligible Dated Accounts, as the case may be, at any time shall be the face
amount of such Eligible Accounts or such Eligible Dated Accounts, as the case
may be, less any and all returns, rebates, discounts (which may, at Agent's
option, be calculated on shortest terms), credits, allowances or excise taxes of
any nature at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time.
For purposes of CLAUSE (B)(II) above and the definition of "Seasonal
Inventory Overadvance Amount," the value of Eligible Inventory on a date shall
be calculated on the basis of the lower of cost or market. Cost shall be
calculated on a first-in, first-out basis.
Without limiting Lenders' discretion to adjust advance rates from time to
time after the occurrence of a Default as provided above, Borrower acknowledges
that Lenders may from time to time before or after the occurrence of a Default
reduce the Inventory advance rate if Lenders determine that the size mix of
Borrower's finished goods has materially changed from the size mix as of the
Closing Date.
BORROWING BASE REPORT - as defined in SECTION 9.1(R) hereof.
BOSTON - as defined in the preamble to this Agreement.
BUSINESS DAY - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Texas or is a day on which banking
institutions located in such state are closed; PROVIDED, HOWEVER, if any
determination of a "Business Day" shall relate to a
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Eurodollar Loan, the term "Business Day" shall in addition exclude any day on
which banks are not open for dealings in dollar deposits in the London interbank
market.
CALCULATION DATE - as at any date when the Borrowing Base is to be
determined the effective date of the most recent Borrowing Base Report submitted
to Agent pursuant to SECTION 9.1(R) hereof (provided that if the Borrowing Base
Report required by SECTION 9.1(R) hereof is due and has not been delivered by
Borrower to Agent, Agent shall have the right to determine in its credit
judgment what should be the relevant "Calculation Date" for purposes of
calculation of the Borrowing Base).
CAPITAL EXPENDITURES - expenditures made and liabilities incurred
(including the principal portion of Capitalized Lease Obligations, but excluding
capitalized interest) for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, and the amount of such Indebtedness shall be
the capitalized amount of such obligations determined in accordance with GAAP.
CHANGE IN CONTROL - the first date that those Persons who on the date of
this Agreement hold all of the outstanding Voting Stock of Brazos (including
options, warrants and other Securities convertible into or exchangeable with
such Voting Stock), together with their respective Affiliates, hold less than
fifty percent (50%) of the outstanding Voting Stock of the Brazos determined on
a fully diluted basis (assuming full conversion or exchange of all options,
warrants, or other Securities which are convertible into or exchangeable with
such Voting Stock).
CLOSING DATE - July 2, 1997.
CODE - the Uniform Commercial Code as adopted and in force in the State of
Texas, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property described in
SECTION 4 hereof.
CONSOLIDATED - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
CONTINGENT AMOUNT - as defined in SECTION 1.3.2 of the Asset Purchase
Agreement.
CONVERTIBLE NOTE - as defined in SECTION 1.3.1(B) of the Asset Purchase
Agreement.
DEFAULT - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
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DEFAULT RATE - as defined in SECTION 3.1(B) of this Agreement.
DESIGNATED PREFERRED STOCK - at any date any preferred stock of Brazos
issued after the Closing Date, on terms satisfactory to Lenders.
DISTRIBUTION - in respect of any corporation means and includes: (a) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (b) the redemption or
acquisition of its capital stock (or any rights, warrants or options relating to
the acquisition of Borrower's capital stock) unless made contemporaneously from
the net proceeds of the sale of Securities.
DOLLAR - lawful money of the United States of America.
DOMINION ACCOUNT - a special account of Lenders established by Borrower
pursuant to this Agreement at a bank selected by Borrower, but acceptable to
Agent, and over which Agent, for the benefit of Lenders, shall have sole and
exclusive access and control for withdrawal purposes.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Agent, in its
credit judgment, deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account shall be an Eligible Account if: (a) it
arises out of a sale made by Borrower to a Subsidiary or an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower; or (b) it is
unpaid for more than 60 days after the original due date shown on the invoice;
or (c) it is due or unpaid more than 90 days after the original invoice date; or
(d) 20% or more of the Accounts from an Account Debtor to Borrower are not
deemed Eligible Accounts or Eligible Dated Accounts hereunder; or (e) any
covenant, representation or warranty contained in this Agreement with respect to
such Account has been breached; or (f) the Account Debtor is also Borrower's
creditor or supplier, or has disputed liability with respect to such Account, or
has made any claim with respect to any other Account due from such Account
Debtor to Borrower, or the Account otherwise is subject to any right of setoff
by the Account Debtor, to the extent of any offset, dispute or claim; or (g) the
Account Debtor has commenced a voluntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, or made an assignment for the benefit
of creditors, or a decree or order for relief has been entered by a court having
jurisdiction in the premises in respect of the Account Debtor in an involuntary
case under the federal bankruptcy laws, as now constituted or hereafter amended,
or any other petition or other application for relief under the federal
bankruptcy laws has been filed against the Account Debtor, or if the Account
Debtor has failed, suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for it or
for all or a significant portion of its assets or affairs; or (h) it arises from
a sale to an Account Debtor outside the United States, unless a documentary
Letter of Credit has been issued with respect to such Account, by an issuer and
in form and substance satisfactory to Lenders, or the Lenders otherwise approve
such Account; or (i) it arises from a sale to the Account Debtor on a
xxxx-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or (j) Agent in good faith believes that
collection of such Account is insecure or that payment thereof is doubtful or
will be
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delayed by reason of the Account Debtor's financial condition; or (k) the
Account Debtor is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of such
Account to Agent, on behalf of Lenders, in form and substance satisfactory to
Agent, so as to comply with the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 203 ET SEQ.); or (l) the Account Debtor is located in either
the state of New Jersey, the state of Minnesota, the state of Indiana, the state
of West Virginia or any other state requiring the filing of a Business Activity
Report or similar document in order for Borrower to bring suit or otherwise
enforce its remedies against such Account Debtor in the courts or through any
judicial process of such state, unless Borrower has qualified to do business as
a foreign corporation or has filed a Notice of Business Activities Report or
similar required report with the appropriate officials in those states for the
then current year; or (m) the Account is subject to a Lien other than a
Permitted Lien (which Permitted Lien, if so required by Lenders, has been
satisfactorily subordinated to Agent's Lien, for the benefit of Lenders, in such
Account pursuant to an intercreditor agreement or similar document acceptable in
form and substance to Lenders, in their sole discretion); or (n) the goods
giving rise to such Account have not been delivered to and accepted by the
Account Debtor or the services giving rise to such Account have not been
performed by Borrower and accepted by the Account Debtor or the Account
otherwise does not represent a final sale; or (o) the total unpaid Accounts of
the Account Debtor exceed a credit limit determined by Agent to the extent such
Account exceeds such limit; or (p) the Account is evidenced by chattel paper or
an instrument of any kind, or has been reduced to judgment; or (q) Borrower has
made any agreement with the Account Debtor for any deduction therefrom, except
for discounts or allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances for prompt payment are
reflected in the calculation of the face value of each invoice related to such
Account, to the extent of such deduction; or (r) Borrower has made an agreement
with the Account Debtor to extend the time of payment thereof; or (s) the
Account arises from a retail sale of goods to a Person who is purchasing same
primarily for personal, family or household purposes; or (t) the Account is an
Eligible Dated Account; or (u) Lenders do not have a perfected first priority
Lien in the Account; or (v) the Account is a Japanese Account.
ELIGIBLE DATED ACCOUNTS - an Account arising in the ordinary course of
Borrower's business (i) as to which the relevant Account Debtor is given payment
terms of greater than sixty (60) days, but not greater than one hundred eighty
(180) days after the invoice date, (ii) which is not an Eligible Account because
it has been outstanding for more than ninety (90) days, and (iii) which Agent,
in its credit judgment, deems to be an Eligible Dated Account. Without limiting
the generality of the foregoing, no such dated Account of Borrower shall be an
Eligible Dated Account if such Account (i) is described in any of the lettered
clauses of the definition of an `Eligible Account' contained in this Agreement
(other than CLAUSES (B), (C), (D), and (T) of such definition), (ii) it is
unpaid for more than sixty (60) days after the original due date shown on the
invoice or more than one hundred eighty (180) days after the invoice date or
(iii) 20% or more of the dated Accounts to a Borrower from the Account Debtor to
such Borrower are not deemed Eligible Dated Accounts hereunder.
ELIGIBLE FINISHED GOODS INVENTORY - Eligible Inventory consisting of
"blank" or "printed" finished goods of Borrower.
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ELIGIBLE INVENTORY - such Inventory of Borrower (other than packaging
materials and supplies) which Agent, in its credit judgment, deems to be
Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory unless, in Agent's opinion, it (a) is (i)
cloth rolls, piece goods and other raw materials acceptable to Agent or (ii)
"blank" or "printed" finished goods of Borrower, (b) work in process of Borrower
(other than work in process of Brazos' "Garment" division), (c) is in good, new
and saleable condition, (d) is not obsolete or unmerchantable, (e) meets all
standards imposed by any governmental agency or authority, (f) conforms in all
respects to the warranties and representations set forth in SECTION 6.1 hereof,
(g) is at all times subject to Agent's, for the benefit of Lenders, duly
perfected, first priority security interest and no other Lien except a Permitted
Lien, (h) is situated at a location in compliance with SECTION 4.4 hereof and is
not in-transit; PROVIDED, HOWEVER, in-transit inventory of Borrower shall be
included within Eligible Inventory so long as a documentary Letter of Credit has
been issued in connection with the purchase of such Inventory by Borrower, such
Inventory satisfies the other requirements herein and title thereto is in the
name of Borrower; PROVIDED, FURTHER, Inventory which is situated at the location
of a processor of such Inventory shall not be included within Eligible Inventory
unless such processor has entered into a written agreement with Agent, on behalf
of and for the benefit of Lenders, in form and substance satisfactory to
Lenders, in their sole discretion, providing, among other things, that such
processor will not assert any lien with respect to any Collateral for unpaid
processing or storage charges, and (i) is not consigned by a Person to Borrower
or by Borrower to any Person.
EMBROIDERY - Brazos Embroidery, Inc., a Pennsylvania corporation.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
EQUUS - Equus II Incorporated, a Delaware corporation.
ERISA - the Employee Retirement Income Security Act of 1974 and all rules
and regulations promulgated thereunder.
EURODOLLAR BASE RATE - with respect to a Eurodollar Loan for the relevant
Eurodollar Interest Period, a rate per annum equal to the quotient of the
following: (a) the rate at which deposits in U.S. dollars in immediately
available funds are offered by Bank to first-class banks in the London interbank
market at approximately 11:00 a.m. (London, England time) two (2) Business Days
prior to the first day of such Eurodollar Interest Period, in the approximate
amount of the Eurodollar Loan and having a maturity approximately equal to the
Eurodollar Interest Period divided by (b) the difference of 1.00 minus the
Eurodollar Reserve Requirement.
EURODOLLAR BORROWING NOTICE - as defined in SECTION 2.4(A) of this
----------------------------- ---------------
Agreement.
EURODOLLAR INTEREST PERIOD - with respect to a Eurodollar Loan, a period
of one (1), two (2), three (3) or six (6) months commencing on a Business Day
selected by Borrower pursuant to
11
this Agreement. Such Eurodollar Interest Period shall end on (but exclude) the
day which corresponds numerically to such date one (1), two (2), three (3) or
six (6) months thereafter, PROVIDED, HOWEVER, that if there is no such
numerically corresponding day in such first (1st), second (2nd), third (3rd) or
sixth (6th) succeeding month, such Eurodollar Interest Period shall end on the
last Business Day of such first (1st), second (2nd), third (3rd) or sixth (6th)
succeeding month. If a Eurodollar Interest Period would otherwise end on a day
which is not a Business Day, such Eurodollar Interest Period shall end on the
next succeeding Business Day; PROVIDED, HOWEVER, that if said next succeeding
Business Day falls in a new month, such Eurodollar Interest Period shall end on
the immediately preceding Business Day.
EURODOLLAR LOANS - all Eurodollar Revolving Credit Loans.
EURODOLLAR RESERVE REQUIREMENT - on any day, means that percentage
(expressed as a decimal fraction) which is in effect on such day, as provided by
the Board of Governors of the Federal Reserve System (or any successor
governmental body) applied for determining the maximum reserve requirements
(including without limitation, basic, supplemental, marginal and emergency
reserves) under Regulation D with respect to "eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or successor regulation
with respect to eurocurrency liabilities or eurocurrency funding. Each
determination by Agent of the Eurodollar Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding.
EURODOLLAR REVOLVING CREDIT LOAN - a Revolving Credit Loan which bears
interest at a rate based on the Eurodollar Base Rate in accordance with SECTION
2 hereof.
EVENT OF DEFAULT - as defined in SECTION 11.1 of this Agreement.
EXCESS - as defined in SECTION 3.1(D) of this Agreement.
EXISTING BOSTON REVOLVING CREDIT NOTE - that certain Amended and Restated
Revolving Credit Note, dated as of March 17, 1997, in the original principal
amount of $30,158,400.00, executed by Brazos, and payable to the order of
Boston.
EXISTING FLEET REVOLVING CREDIT NOTE - that certain Amended and Restated
Revolving Credit Note, dated as of March 17, 1997, in the original principal
amount of $43,041,600.00, executed by Brazos, and payable to the order of Fleet.
FIXED CHARGE RATIO - for any period means the ratio for Borrower of (i)
Consolidated Adjusted Net Earnings from Operations for such period PLUS
Consolidated amortization expense and Consolidated depreciation expense for such
period (to the extent deducted in calculating Consolidated Adjusted Net Earnings
from Operations) PLUS Consolidated Interest Expense for such period, to (ii)
Consolidated Interest Expense for such period PLUS Consolidated Unfinanced
Capital Expenditures made during such period, PLUS scheduled principal payments
on Consolidated Funded Indebtedness during such period, PLUS Distributions paid
during such period to Parent pursuant to the provisions of SECTION 9.2(J) of
this Agreement (other than Distributions made pursuant to SECTION 9.2(J)(I)
hereof to the extent such amounts are already
12
reflected as a tax expense of Borrower, in the calculation of Borrower's
Consolidated Adjusted Net Earnings From Operations).
FLEET BANK RISK PARTICIPATION AGREEMENT - that certain Letter of Credit
Risk Participation Agreement executed by and between Fleet and Bank, dated
August 9, 1996, as amended and restated from time to time.
FUNDED INDEBTEDNESS - means Consolidated Indebtedness for Money Borrowed
of Borrower having a final maturity (or which is renewable or extendible at the
option of Borrower for a period ending) more than one year after the date of
creation thereof.
FX AMOUNT - at any time, the sum of (i) 10% of the aggregate amount of the
U.S. Dollar Equivalent of all FX Contracts consisting of foreign currency
forward purchase contracts or foreign currency forward sale contracts then
outstanding with a settlement date more than two (2) Business Days after the
date of determination, PLUS (ii) 100% of the aggregate amount of the U.S. Dollar
Equivalent of all FX Contracts consisting of foreign currency forward purchase
contracts or foreign currency forward sale contracts then outstanding with a
settlement date two (2) or less Business Days from the date of determination
PLUS (iii) 100% of the aggregate amount of the U.S. Dollar Equivalent of all FX
Contracts consisting of foreign currency spot purchase contracts or foreign
currency sale spot contracts then outstanding (not including such FX Contracts
which have been fully cash collateralized by the Borrower).
FX CONTRACT - any foreign currency forward or spot purchase contract or
foreign currency forward sale or spot contract entered into by Bank and Borrower
in the ordinary course of Borrower's business, in compliance with the terms of
SECTION 2.10 of this Agreement, the term of which shall not exceed 150 days.
FX GUARANTY - any guaranty, in form and substance satisfactory to Fleet,
executed by Agent and Bank in connection with an FX Contract, pursuant to which
Agent shall guaranty the payment or performance by Borrower of its obligations
to Bank under any such FX Contract.
FX PAYMENT - as defined in SUBSECTION 2.3(A) of this Agreement.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
GUARANTOR - Parent and any other Person who may hereafter guarantee
payment of or performance of the whole or any part of the Obligations.
GUARANTY AGREEMENTS - (i) the Second Amended and Restated Continuing
Guaranty Agreement which is to be executed on the Closing Date by Parent, in
favor of Agent, for the benefit of Lenders, in form and substance satisfactory
to Agent, covering all Obligations of Borrower to Lenders and Agent, and (ii)
the Morning Sun Guaranty Agreement.
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INDEBTEDNESS - as applied to a Person means, without duplication (a) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (b) all obligations of other Persons
which such Person has guaranteed and (c) in the case of Borrower (without
duplication), the portion of the Obligations which would be shown on the
liability side of a balance sheet of Borrower as at the date of determination.
INDENTURE - that certain indenture among Parent, as issuer, Brazos,
Morning Sun, the relevant trustee and others pursuant to which the Parent Senior
Notes are issued.
INTEREST EXPENSE - means for any period, the interest charges paid or
accrued by Borrower during such period (including imputed interest on
Capitalized Lease Obligations, but excluding amortization of debt discount and
expense) on Indebtedness.
INVENTORY - all of Borrower's inventory, whether now owned or hereafter
acquired and wherever located, including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all work in
process; all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in Borrower's business; and all documents
evidencing any of the foregoing.
JAPANESE ACCOUNTS - An account arising in the ordinary course of the
Japanese Subsidiary's business which has been assigned to Brazos in a manner
acceptable to Agent and Lenders; PROVIDED, HOWEVER, that no such Account shall
be a Japanese Account if (i) it is due or unpaid for more than 120 days after
the original invoice date, (ii) the Japanese Subsidiary incurs any Indebtedness
other than royalty payments and normal operating expenses incurred in the
ordinary course of business (provided the unpaid amount of such operating
expenses do not exceed $200,000 at any time), (iii) the Japanese Subsidiary has
failed to grant Brazos a valid, perfected first priority Lien (as determined
under applicable law) in all assets of the Japanese Subsidiary in a manner and
pursuant to executed documentation satisfactory to the Lenders, (iv) there is
any restriction under Japanese law preventing the transfer of funds to Brazos as
to payment of such Account (whether directly from the Account Debtor, indirectly
through the Japanese Subsidiary or otherwise), (v) the Account Debtor (other
than Jupiter Trading) fails to obtain a documentary Letter of Credit issued by a
financial institution satisfactory to Lenders, (vi) in the case of Accounts as
to which Jupiter Trading is the Account Debtor, Jupiter Trading fails to obtain
FCIA insurance which names Agent as the loss payee, (vii) 20% or more of the
Accounts from such Account Debtor to the Japanese Subsidiary (and assigned to
Brazos) are not deemed Japanese Accounts hereunder, and (viii) such Account is
described in any of the lettered clauses of the definition of an "Eligible
Account" contained in this Agreement (other than CLAUSES (D), (H) and (V) of
such definition); PROVIDED, FURTHER, HOWEVER, that, notwithstanding the
foregoing, in the case of Accounts as to which Jupiter Trading is the Account
Debtor, no more than $2,000,000 of such Accounts shall be deemed Japanese
Accounts.
14
JAPANESE SUBSIDIARY - Brazos Sportswear Japan, KK, a corporation organized
under the laws of Japan and a wholly-owed subsidiary of Brazos.
JUPITER TRADING - Jupiter Trading Company, a corporation organized under
the laws of Japan.
LC PAYMENT - as defined in SECTION 2.3(A) of this Agreement.
LC RISK PARTICIPATION AGREEMENT - each of the Fleet Bank Risk
Participation Agreement and each other agreement, in form and substance
satisfactory to Lenders, executed by Agent with a Person who has issued one or
more Letters of Credit for the account of Borrower, pursuant to which Agent
agrees to purchase a one hundred percent (100%) participation in any payments
made by the issuing Person under such Letter(s) of Credit which are not
immediately reimbursed to such Person by Borrower; PROVIDED, HOWEVER, that if
the issuing Person is not Bank, such Letters of Credit must be standby Letters
of Credit.
LETTER OF CREDIT - a standby or documentary Letter of Credit, as the case
may be, at any time issued by Agent, Bank or another Person for the account of a
Borrower.
LIEN - 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 security interest, security title or lien arising from a security agreement,
mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
LOAN ACCOUNT - the loan account established on the books of Agent pursuant
to SECTION 2.8 hereof.
LOAN DOCUMENTS - this Agreement, the Other Agreements and the Security
Documents.
LOANS - all loans and advances made by Lenders pursuant to this Agreement,
including, without limitation, all Revolving Credit Loans.
MAXIMUM LEGAL RATE - as defined in SECTION 3.1(C) of this Agreement.
MONEY BORROWED - as applied to Indebtedness, means (a) Indebtedness for
borrowed money; (b) Indebtedness, whether or not in any such case the same was
for borrowed money, (i) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (ii) which constitutes obligations evidenced
by bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (c) Indebtedness that
constitutes a Capitalized Lease Obligation; and (d) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under clauses (a) through (c) hereof.
MORNING SUN - as defined in the preamble of this Agreement.
15
MORNING SUN CONTRIBUTION - as defined in the preamble of this Agreement.
MORNING SUN GUARANTY AGREEMENT - the Continuing Guaranty Agreement which
is to be executed on the Closing Date by Morning Sun, in favor of Agent, for the
benefit of Lenders, in form and substance satisfactory to Agent, covering all
Obligations of Brazos to Lenders and Agent.
MORNING SUN MERGER - as defined in the preamble of this Agreement.
MORNING SUN STOCK ACQUISITION - as defined in the preamble of this
Agreement.
MULTI-EMPLOYER PLAN - has the meaning set forth in SECTION 4001(A)(3)
-------------------- -------------------
of ERISA.
NET WORTH - the total shareholders' equity (including capital stock,
additional paid-in capital and retained earnings after deducting treasury stock)
which would be shown on a Consolidated balance sheet of Borrower at such date in
accordance with GAAP, plus (without duplication) the aggregate amount of the
Designated Preferred Stock which would be shown on a balance sheet of Borrower
at such date in accordance with GAAP.
NOTES - the Revolving Credit Notes executed by Borrower and delivered
pursuant to the terms of this Agreement, together with any renewals, extensions
or modifications thereof.
OBLIGATIONS - all Loans and all other advances, reimbursement obligations
under Letters of Credit, LC Payments, FX Payments, obligations under FX
Guaranties, debts, liabilities, obligations, covenants and duties arising under
this Agreement or any of the other Loan Documents owing, arising, due or payable
from Borrower to Agent and/or Lenders of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and any other sums
chargeable to Borrower under any of the Loan Documents.
OFFERING MEMORANDUM - as defined in the preamble of this Agreement.
OLD MORNING SUN - as defined in the preamble of this Agreement.
ORIGINAL LOAN AGREEMENT - as defined in the preamble of this Agreement.
ORIGINAL TERM - as defined in SECTION 3.2 of this Agreement.
OSHA - the Occupational Safety and Health Act and all rules and
regulations from time to time promulgated thereunder.
16
OTHER AGREEMENTS - any and all agreements, instruments, certificates, and
documents (other than this Agreement and the Security Documents), heretofore,
now or hereafter executed by Borrower or delivered to Agent and/or Lenders in
respect to the transactions contemplated by this Agreement, including, without
limitation, the Revolving Credit Notes, all as amended, renewed, modified,
extended or restated from time to time.
OVERADVANCE - the amount, if any, by which the outstanding principal
amount of the Revolving Credit Loans exceeds the Borrowing Base.
PARENT - as defined in the preamble of this Agreement.
PARENT SENIOR NOTES - as defined in the preamble of this Agreement.
PERMITTED INSURER - an insurance company rated AA+, AA or higher by
Standard and Poors Corporation and AA or higher by Xxxxx'x Investor Services,
Inc. and which is otherwise reasonably satisfactory to Agent.
PERMITTED LIENS - any Lien of a kind specified in CLAUSES (I) THROUGH (X)
of SECTION 9.2(H) of this Agreement.
PERMITTED PAYMENT - a regularly scheduled payment of principal and/or
interest due and payable in accordance with the terms of Borrower Subordinated
Debt as such terms are in effect as of the Closing Date, IF AND ONLY IF (i) no
Default or Event of Default would be caused thereby, (ii) such payment would not
violate the terms of this Agreement, and (iii) such payment would not violate
the terms of any subordination agreement executed in connection with such
Borrower Subordinated Debt. In no event shall the definition of "Permitted
Payment" include any prepayment of any Borrower Subordinated Debt.
PERSON - an individual, partnership, corporation, joint stock company,
land trust, business trust or unincorporated organization, or a government or
agency or political subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
PREMIER - as defined in the preamble of this Agreement.
PREMIER ASSET ACQUISITION - as defined in the preamble of this Agreement.
PROHIBITED TRANSACTION - any transaction set forth in SECTION 406 of ERISA
or SECTION 4975 of the Internal Revenue Code of 1986.
PROJECTIONS - Borrower's forecasted (a) balance sheets, (b) profit and
loss statements, (c) cash flow statements, and (d) capitalization statements,
all prepared on a consistent basis with Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
17
PROPERTY - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
RENEWAL TERM - as defined in SECTION 3.2 of this Agreement.
RENTALS - as defined in SECTION 9.2(W) of this Agreement.
REPORTABLE EVENT - any of the events set forth in SECTION 4043(B) of ERISA
which is required to be reported to the PBGC.
RESTATED LOAN AGREEMENT - as defined in the preamble of this Agreement.
RESTRICTED INVESTMENT - any investment in cash or by delivery of Property
to any Person including without limitation, Embroidery and Parent, whether by
acquisition of stock, Indebtedness or other obligation or Security, or by loan,
advance or capital contribution, or otherwise, or in any Property except the
following: (a) Property to be used in the ordinary course of business; (b)
Current Assets arising from the sale of goods and services in the ordinary
course of business of Brazos and its Subsidiaries; (c) investments in direct
obligations of the United States of America, or any agency thereof or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (d)
demand deposit accounts maintained in the ordinary course of business with
federally insured financial institutions; (e) investments in certificates of
deposit issued by Boston or Bank or by any other bank or financial institution
with combined capital surplus and undivided profits of at least $100,000,000
maturing within one year from the date of acquisition; (f) investments in
commercial paper given the highest rating by a national credit rating agency and
maturing not more than 270 days from the date of creation thereof; (g)
investments by Brazos in Morning Sun and by Morning Sun in Brazos; (h)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in CLAUSE (C) above entered into with any
commercial bank meeting the requirements of CLAUSE (E) above; and (i)
investments in money market or other mutual funds substantially all the assets
of which are comprised of securities of the types referred to in CLAUSES (C),
(E) and (H) above.
REVOLVING CREDIT AVAILABILITY - means, at any particular date, the excess
of the Borrowing Base over the amount of the Revolving Credit Loans then
outstanding. For the purposes of this definition, the "Borrowing Base" shall
mean the amount calculated under PARAGRAPH (B) of the definition of "Borrowing
Base"; PARAGRAPH (A) of the definition of "Borrowing Base" shall be disregarded
in such calculation.
REVOLVING CREDIT COMMITMENT - $50,000,000.00. Fleet's maximum portion of
the Revolving Credit Commitment is $29,400,000, i.e., Fleet's Revolving Credit
Commitment is $29,400,000. Boston's maximum portion of the Revolving Credit
Commitment is $20,600,000, i.e., Boston's Revolving Credit Commitment is
$20,600,000.
18
REVOLVING CREDIT LOAN - a Loan made by a Lender as provided in SECTION
2.1(A) of this Agreement.
REVOLVING CREDIT NOTES - those certain Second Amended and Restated
Revolving Credit Notes to be executed by Borrower in favor of each Lender to
evidence Borrower's Indebtedness to such Lender for its Revolving Credit
Percentage, the Second Amended and Restated Revolving Credit Note in favor of
Fleet to be in the form of EXHIBIT A-1 attached hereto, as the same may be
amended, renewed, extended, modified or restated from time to time, the
provisions of which are in amendment and restatement of, and in replacement for,
the provisions of the Existing Fleet Revolving Credit Note and the Second
Amended and Restated Revolving Credit Note in favor of Boston to be in the form
of EXHIBIT A-2 attached hereto as the same may be amended, renewed, modified,
extended or restated from time to time, the provisions of which are in amendment
and restatement of, and in replacement for, the provisions of the Existing
Boston Revolving Credit Note.
REVOLVING CREDIT PERCENTAGE - each Lender's percentage of the Revolving
Credit Commitment, which as to Fleet is 58.80%, and which as to Boston is
41.20%.
SCHEDULE OF ACCOUNTS - as defined in SECTION 5.2 of this Agreement.
SEASONAL INVENTORY OVERADVANCE AMOUNT - during the period (BUT ONLY DURING
THE PERIOD) beginning April 1 and continuing through September 30 of each year
during the term of this Agreement, the lesser of (a) $4,500,000 or (b) 10% (or
such lesser percentage as Lenders may in their discretion determine from time to
time after the occurrence of a Default) of the value of Eligible Inventory at
such date. Beginning October 1 of each year and continuing through March 31 of
the following year, the Seasonal Inventory Overadvance Amount shall be $0.00.
SECOND RESTATED LOAN AGREEMENT - as defined in the preamble of this
Agreement.
SECURITY - shall have the same meaning as in SECTION 2(1) of the
Securities Act of 1933, as amended.
SECURITY DOCUMENTS - the Guaranty Agreements and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations, all as amended, renewed, modified, extended or restated from time
to time.
SENIOR NOTES PLACEMENT - as defined in the preamble of this Agreement.
SOLARCO - as defined in the preamble of this Agreement.
SOLVENT - as to any Person, such Person (a) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (b) is able to pay all of its
Indebtedness as such Indebtedness matures and (c) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
19
STOCK PURCHASE AGREEMENT - as defined in the preamble of this Agreement.
SUBSIDIARY - as to any Person, any corporation of which such Person owns,
directly or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
TAX EXPENSE - means for any period, the tax expense paid or accrued by a
Person during such period.
TAX SHARING AGREEMENT - the Tax Sharing Agreement entered into by Parent,
each Borrower and Embroidery, provided that Lenders and Agent have been supplied
a copy of such Tax Sharing Agreement.
TERM LOAN - as defined in the preamble of this Agreement.
TRANSACTION - as defined in the preamble of this Agreement.
UNFINANCED CAPITAL EXPENDITURES - Capital Expenditures by Borrower to the
extent NOT financed pursuant to Funded Indebtedness of Borrower (other than the
Loans) or from the cash proceeds of the sale of Borrower's fixed assets.
U.S. DOLLAR EQUIVALENTS - with respect to any monetary amount in any
currency other than Dollars, at any time, the amount of Dollars obtained by
converting such currency into Dollars at the spot rate for such transaction as
quoted by Bank on such date.
VOTING STOCK - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial statements referred to in SECTION 9.1(J), and
all financial data pursuant to the Agreement shall be prepared in accordance
with such principles.
1.3. OTHER TERMS. All other terms contained in this Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.
20
All references to any instruments or agreements, including, without limitation,
references to any of the Loan Documents, shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof.
1.5 THE TERM "BORROWER" OR "BORROWERS". Unless otherwise specifically
provided herein, all references to "Borrower" or "Borrowers" herein shall refer
to and include each Borrower separately and all representations contained herein
shall be deemed to be separately made by each of them, and each of the
covenants, agreements and obligations set forth herein shall be deemed to be the
joint and several covenants, agreements and obligations of them. Any notice,
request, consent, report or other information or agreement delivered to Agent or
a Lender by any Borrower shall be deemed to be ratified by, consented to and
also delivered by the other Borrower. Each Borrower recognizes and agrees that
each covenant and agreement of "Borrower" or "Borrowers" under this Agreement
and the other Loan Documents shall create a joint and several obligation of the
Borrowers, which may be enforced against Borrowers, jointly, or against each
Borrower separately. Without limiting the terms of this Agreement and the other
Loan Documents, security interests granted under this Agreement and other Loan
Documents in properties, interests, assets and collateral shall extend to the
properties, interests, assets and collateral of each Borrower. Similarly, the
term "Obligations" shall include, without limitation, all obligations,
liabilities and indebtedness of such corporations, or any one of them, to Agent
and to Lenders, whether such obligations, liabilities and indebtedness shall be
joint, several, joint and several or individual.
1.6 BRAZOS OBLIGATIONS. Notwithstanding any other provision of the Notes
or this Agreement to the contrary, it is hereby agreed that Morning Sun is not
assuming payment of any of the unpaid principal balance of the Obligations
incurred by Brazos prior to the date of execution of this Agreement pursuant to
this Agreement and the other Loan Documents (collectively, the "BRAZOS
OBLIGATIONS"). However, the parties hereto agree and acknowledge that the
preceding sentence shall not (i) limit any contingent liability of Morning Sun
for payment of any of the Brazos Obligations which arises pursuant to the
Morning Sun Guaranty Agreement, or (ii) limit the security interest and Liens in
favor of Lender granted by Morning Sun against the assets of Morning Sun as a
result of Morning Sun becoming an additional named "Borrower", which Liens shall
secure payment of all Obligations arising in connection with this Agreement,
whether currently existing or hereafter arising. For purposes of determining on
or after the date hereof which Obligations outstanding constitute Brazos
Obligations and how payments are applied to Brazos Obligations, (x) all payments
received by Agent or a Lender from Brazos on account of the Obligations shall be
deemed to be applied first in payment of all then due and payable Brazos
Obligations (until such time as the Brazos Obligations shall have been reduced
to zero), and thereafter to the other Obligations and unless Borrower
specifically indicates to the contrary in writing to Lender, all payments
received by Agent or a Lender through the Dominion Account shall be deemed to be
payments received by Lender from Brazos, and (y) all payments received by Lender
from Morning Sun shall be deemed to be applied on account of Obligations which
are not Brazos Obligations, and to the extent that, notwithstanding the
foregoing, for any reason any payment received by Agent or a Lender from Morning
Sun shall instead be determined to have been applied on account of any Brazos
Obligations, such payment shall be deemed to have been made by Morning Sun
pursuant to the Morning Sun Guaranty Agreement.
21
SECTION 2. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, each Lender agrees to make Revolving Credit Loans in an amount of up
to such Lender's Revolving Commitment Percentage of the Revolving Credit
Commitment available upon Borrower's request therefor, as follows:
2.1. REVOLVING CREDIT LOANS.
(A) Subject to all of the terms and conditions of this Agreement,
Lenders agree, for so long as no Default or Event of Default exists, to make
Revolving Credit Loans to Borrower from time to time, as requested by Borrower
in accordance with the terms of SECTION 2.3 hereof, up to a maximum principal
amount at any time outstanding equal to the Borrowing Base at such time, as
evidenced by the Revolving Credit Notes; PROVIDED, HOWEVER, that (i) no Lender
shall be obligated to make Advances in excess of such Lender's Revolving Credit
Percentage and (ii) each Borrowing shall be made ratably by all Lenders in
accordance with their respective Revolving Credit Percentages. It is expressly
understood and agreed that Agent may use the Borrowing Base as a maximum ceiling
on Revolving Credit Loans outstanding to Borrower at any time. If the unpaid
balance of the Revolving Credit Loans should exceed the Borrowing Base or any
other limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Obligations that are secured by the Collateral and
entitled to all the benefits thereof. In no event shall Borrower be authorized
to request a Loan at any time that there exists a Default or an Event of
Default. Notwithstanding the foregoing provisions of this SECTION 2.1(A),
Borrower and Lenders agree that for so long as no Default or Event of Default
exists, Agent shall have the right to establish and/or eliminate reserves in
such amounts, and with respect to such matters, as Agent shall in good xxxxx
xxxx necessary or appropriate, against the amount of Revolving Credit Loans
which Borrower may otherwise request under this SECTION 2.1(A), including,
without limitation, with respect to (i) price adjustments, damages, unearned
discounts, returned products or other matters for which credit memoranda are
issued in the ordinary course of Borrower's business; (ii) shrinkage, spoilage
and obsolescence of Inventory; (iii) slow moving Inventory; (iv) other sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under any
section of this Agreement; (v) tax liabilities and (vi) such other matters,
events, conditions or contingencies as to which Agent, in its credit judgment,
determines reserves should be established from time to time hereunder. In
addition to the foregoing, at any time, Lenders shall have the right to
establish and/or eliminate reserves against the amount of Revolving Credit Loans
for accrued and unpaid royalty payments based on the amount of such accrued and
unpaid payments which is shown on Borrower's financial statements at such time.
Upon the occurrence of a Default or Event of Default, no reserves shall be
eliminated by Agent without the consent of the Lenders.
(B) The Revolving Credit Loans shall be used solely for the purchase
price and other costs and expenses related to consummation of the Transaction
and for Borrower's general operating capital needs to the extent not
inconsistent with the provisions of this Agreement.
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2.2. JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION.
(A) Each Borrower states and acknowledges that: (i) pursuant to this
Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Agent and Lenders hereunder
and a desire of the Borrowers that each Borrower execute and deliver to Agent
and Lenders this Agreement; and (iv) Borrowers have requested and bargained for
the structure and terms of and security for the advances contemplated by this
Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i) agrees
that, subject to the provisions of SECTION 1.6 hereof, it is jointly and
severally liable to Agent and Lenders for the full and prompt payment of the
Obligations and the performance by each Borrower of its obligations hereunder in
accordance with the terms hereof; (ii) agrees to fully and promptly perform all
of its obligations hereunder with respect to each advance of credit hereunder as
if such advance had been made directly to it; and (iii) agrees as a primary
obligation to indemnify Agent and Lenders on demand for and against any loss
incurred by Agent or Lenders as a result of any of the obligations of any
Borrower being or becoming void, voidable, unenforceable or ineffective for any
reason whatsoever, whether or not known to Agent or any Lender or any Person,
the amount of such loss being the amount which Agent or such Lender would
otherwise have been entitled to recover from Borrower.
(C) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to challenge on
any basis. Accordingly, as of the date hereof, the liability of each Borrower
under this SECTION 2.2, together with all of its other liabilities to all
Persons as of the date hereof and as of any other date on which a transfer is
deemed to occur by virtue of this Agreement, calculated in amount sufficient to
pay its probable net liabilities on its existing Indebtedness as the same become
absolute and matured ("DATED LIABILITIES") is, and is to be, less than the
amount of the aggregate of a fair valuation of its Property as of such
corresponding date ("DATED ASSETS"). To this end, each Borrower under this
SECTION 2.2 (i) grants to and recognizes in each other Borrower, ratably, rights
of subrogation and contribution in the amount, if any, by which the Dated Assets
of such Borrower, but for the aggregate of subrogation and contribution in its
favor recognized herein, would exceed the Dated Liabilities of such Borrower or,
as the case may be, (ii) acknowledges receipt of and recognizes its right to
subrogation and contribution ratably from the other Borrower in the amount, if
any, by which the Dated Liabilities of such Borrower, but for the aggregate of
subrogation and contribution in its favor recognized herein, would exceed the
Dated Assets of such Borrower under this SECTION 2.2. In recognizing the value
of the Dated Assets and the Dated Liabilities, it is understood that Borrowers
will recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this SECTION 2.2 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by reason of any arbitrary interpretation of its joint
and several obligations hereunder.
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2.3. MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings under the
credit facility established pursuant to SECTION 2.1 hereof shall be as follows:
(A) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Agent notice
of its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date; (ii) the becoming due of
any amount required to be paid under this Agreement or the Notes as interest
shall be deemed irrevocably to be a request for a Revolving Credit Loan on the
due date in the amount required to pay such interest; (iii) the becoming due of
any amount required to be paid under the Notes as principal shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date for the
amount required to pay such principal; (iv) any payment made by Agent pursuant
to a Letter of Credit issued by Agent or pursuant to the Fleet Bank Risk
Participation Agreement or any other LC Risk Participation Agreement which is
not immediately reimbursed by Borrower (each such unreimbursed payment made by
Agent being referred to individually as an "LC PAYMENT") shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the date such LC
Payment was made; (v) any payment made by Agent pursuant to an FX Guaranty or FX
Contract which is not immediately reimbursed by Borrower (each such unreimbursed
payment made by Agent being referred to individually as a "FX PAYMENT") shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the date such
FX Payment was made; and (vi) the becoming due of any other Obligations shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due date
in the amount then so due.
(B) Borrower hereby irrevocably authorizes Agent to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested,
pursuant to this SECTION 2.3 as follows: (i) the proceeds of each Revolving
Credit Loan requested under SECTION 2.3(A)(I) shall be disbursed by Agent in
lawful money of the United States of America in immediately available funds, in
the case of the initial borrowing, in accordance with the terms of the written
disbursement letter from Borrower, and in the case of each subsequent borrowing,
by wire transfer to such bank account as may be agreed upon by Borrower and
Agent from time to time; and (ii) the proceeds of each Revolving Credit Loan
requested under SECTION 2.3(A)(II), (III) OR (IV) shall be disbursed by Agent by
way of direct payment of the relevant Obligation.
(C) SETTLEMENT. On or about 10:00 A.M. (Dallas, Texas time) on
Friday of each week during the term of this Agreement (or, if any such Friday is
not a Business Day, the next preceding Business Day), Agent shall notify each
Lender by telephone (confirmed immediately by facsimile or cable), facsimile or
cable of (i) the terms of Borrower's Borrowings at the time of such notice and
the amount of such Lender's Revolving Credit Percentage of such Borrowings, (ii)
the aggregate principal amount of all Letters of Credit issued in connection
with this Agreement and outstanding at the end of such week, the aggregate
amount of any LC Payments made by Agent, such Lender's participation therein and
the total amount of commissions paid to the Lenders with respect thereto, and
(iii) the aggregate amount of U.S. Dollar Equivalents of all FX Contracts
outstanding, the aggregate amount of any FX Payments made by Agent, Fleet's
participation therein and the total amount of commissions paid to Fleet
24
with respect thereto. Contemporaneously with the giving of such notice, Agent
shall deliver to each Lender copies of (i) any Letters of Credit which were
issued during such week, (ii) any LC Risk Participation Agreements which were
executed during such week, and (iii) any FX Contracts and FX Guaranties which
were issued during such week. Each Lender shall, before 2:00 P.M. (Dallas, Texas
time) on the day of such notice, deposit with Agent the amount of such Lender's
Revolving Credit Percentage of such Borrowings and/or LC Payments and Fleet
shall, before 2:00 P.M. (Dallas, Texas time) on the day of such notice, deposit
with Agent 100% of such FX Payments in immediately available funds. In the event
of any failure by a Lender to make an Advance required hereunder, the other
Lenders may (but shall not be required to) purchase (on a pro rata basis,
according to their respective Revolving Credit Percentages) such Lender's
Revolving Credit Percentage of such Borrowings and/or LC Payments. Upon the
failure of a Lender to make an Advance required to be made by it hereunder,
Agent shall use good faith efforts to obtain one or more banks, acceptable to
the Lenders, to replace such Lender, but neither Agent nor any other Lender
shall have any liability or obligation whatsoever as a result of the failure to
obtain a replacement for such Lender.
Lenders hereby agree with Borrower and Agent, and hereby direct Agent,
that Agent may assume (i) that each notified Lender will make such Lender's
Revolving Credit Percentage of the Borrowings and/or LC Payments, and (ii) that
Fleet will make its 100% portion of the FX Payments available to Agent in
accordance with the terms of this SECTION 2.3(C) and Agent shall, in reliance
upon such assumption, make available a corresponding amount to or on behalf of
Borrower on the requested date of each Borrowing or make the LC Payment of FX
Payment, subject to the terms and conditions of this Agreement. If and to the
extent any Lender shall not make its Revolving Credit Percentage of any
Borrowing or LC Payment or Fleet shall not make its 100% portion of the FX
Payment available to Agent, Borrower agrees to repay to Agent forthwith on
demand such corresponding amount. Each Lender shall be solely responsible for
its Revolving Credit Percentage of any Borrowing or LC Payment hereunder, and
Fleet shall be solely responsible for its 100% portion of any FX Payment
hereunder, and in no event shall Agent or any Lender (including Agent in its
capacity as a Lender) bear any financial risk for the failure of any other
Lender to make an Advance required hereunder.
2.4. ADDITIONAL PROVISIONS REGARDING EURODOLLAR LOANS.
(A) MANNER OF BORROWING A EURODOLLAR LOAN. Borrower shall give Agent
notice of its intention to either (i) borrow a Eurodollar Loan or (ii) designate
a portion of the Base Rate Loans to bear interest based upon the Eurodollar Base
Rate, in the form of EXHIBIT R attached hereto (a "EURODOLLAR BORROWING
NOTICE"), in which notice Borrower shall specify (x) the aggregate amount of
such Eurodollar Loan, (y) the requested date of such Eurodollar Loan, and (z)
the Eurodollar Interest Period applicable thereto. Borrower shall give Agent the
Eurodollar Borrowing Notice by 11:00 A.M. (Dallas, Texas time) on the date which
is at least three (3) Business Days prior to the requested date of the
Eurodollar Loan. With respect to such Eurodollar Loans, (I) each Eurodollar Loan
shall be in a principal amount of not less than One Million Dollars ($1,000,000)
and if greater than One Million Dollars ($1,000,000), in integral multiples of
Five Hundred Thousand Dollars ($500,000), (II) no more than four (4) Eurodollar
Interest Periods may be in existence at any one time, and (III) Borrower may not
request a
25
Eurodollar Loan if there exists a Default or Event of Default. Borrower shall
select Eurodollar Interest Periods with respect to Eurodollar Loans so that no
Eurodollar Interest Period expires after the end of the Original Term, or if
extended pursuant to SECTION 3.2, any Renewal Term. An outstanding Revolving
Credit Loan may be converted to a Eurodollar Loan at any time subject to the
provisions of this SECTION 2.4. Agent shall advise the Lenders of any notice
given pursuant to this SECTION 2.4(A) and of each Lender's portion of the
requested borrowing by 2:00 P.M. (Dallas, Texas time) on the date the notice was
given to Agent by Borrower.
(B) INTEREST ON EURODOLLAR LOANS. Each Eurodollar Loan shall bear
interest from and including the first day of the Eurodollar Interest Period
applicable thereto (but not including the last day of such Eurodollar Interest
Period) at the interest rate determined as applicable to such Eurodollar Loan,
but interest on such Eurodollar Loan shall be payable as provided in SECTION
3.1(A). If at the end of a Eurodollar Interest Period for an outstanding
Eurodollar Loan, Borrower has failed to deliver to Agent a new Eurodollar
Borrowing Notice with respect to such Eurodollar Loan or to pay such Eurodollar
Loan, then such Eurodollar Loan shall be converted to a Base Rate Loan, and
shall be subject to all other terms and conditions of this Agreement, applicable
to Base Rate Loans on and after the last day of such Eurodollar Interest Period
until paid or until the effective date of a new Eurodollar Borrowing Notice with
respect thereto.
(C) AVAILABILITY OF EURODOLLAR LOANS. If Agent or any Lender
determines that maintenance of any Eurodollar Loans would violate any applicable
law, rule, regulation or directive, whether or not having the force of law,
Agent shall, upon receipt of notice of such violation, suspend the availability
of Eurodollar Loans and require any Eurodollar Loans outstanding to be repaid;
or if Agent or any Lender determines that (x) deposits of a type or maturity
appropriate to match fund Eurodollar Loans are not available or (y) the
Eurodollar Base Rate does not accurately reflect the cost of making a Eurodollar
Loan, then Agent shall suspend the availability of Eurodollar Loans after the
date it receives notice of any such determination.
(D) FUNDING INDEMNIFICATION. If any payment of a Eurodollar Loan
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Loan is not made on the date specified by Borrower because Borrower
has not satisfied the conditions precedent to such Eurodollar Loan contained in
this Agreement or has otherwise breached the terms of this Agreement, Borrower
will indemnify Agent and Lenders for any loss or cost incurred by them resulting
therefrom, including without limitation any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Eurodollar Loan.
(E) LENDER STATEMENTS: SURVIVAL OF INDEMNITY. Within sixty (60) days
of the date upon which Agent suspends the availability of Eurodollar Loans under
SECTION 2.4(C) hereof or learns of any loss or cost for which Borrower has
indemnified Agent and/or a Lender under SECTION 2.4(D) hereof, Agent and/or such
Lender shall deliver a written statement as to the amount due under SECTION
2.4(C) or SECTION 2.4(D). Such written statement shall set forth in reasonable
detail the calculations upon which Agent and/or such Lender determined such
amount and shall be final, conclusive and binding on Borrower in the absence of
manifest error.
26
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though Agent and/or such Lender funded
its Eurodollar Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Eurodollar
Base Rate applicable to such Eurodollar Loan whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement shall be payable on demand after receipt by Borrower of the written
statement.
2.5. YIELD PROTECTION. If either (i) the adoption after the date hereof of
any applicable law, rule or regulation, or any change after the date hereof
therein, or any change after the date hereof in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by a Lender with any request or directive (whether or not having the force of
law) after the date hereof of any such authority, central bank or comparable
agency shall subject any Lender to any additional tax (including without
limitation any United States interest equalization or similar tax, however
named), duty or other charge with respect to any Eurodollar Loan or a Lender's
obligation to compute interest on the principal balance of any Eurodollar Loan
at a rate based upon the Eurodollar Base Rate, or shall change after the date
hereof the basis of taxation of payments to a Lender of the principal of or
interest on any Eurodollar Loan or any other amounts due under this Agreement in
respect of any Eurodollar Loan or a Lender's obligation to compute the interest
on the principal balance of any Eurodollar Loan at a rate based upon the
Eurodollar Base Rate, or (ii) any governmental authority, central bank or other
comparable authority shall at any time after the date hereof impose, modify or
deem applicable any reserve (other than the Eurodollar Reserve Requirement),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, a Lender, or shall impose on a Lender (or
its eurodollar lending office) or any relevant interbank eurodollar market any
other condition affecting any Eurodollar Loan or a Lender's obligation to
compute the interest on the principal balance of any Eurodollar Loan at a rate
based upon the Eurodollar Base Rate; and the result of any of the foregoing is
to increase the cost to a Lender of maintaining any Eurodollar Loans, or to
reduce the amount of any sum received or receivable by a Lender under this
Agreement by an amount deemed by such Lender to be material, then upon demand by
such Lender, Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such increased cost or reduction. Such Lender
will promptly notify Borrower and Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle such Lender to compensation
pursuant to this SECTION 2.5. A certificate of such Lender claiming compensation
under this SECTION 2.5 and setting forth the additional amount or amounts to be
paid to such Lender hereunder shall be conclusive in the absence of manifest
error.
2.6. LETTERS OF CREDIT, LC RISK PARTICIPATION AGREEMENTS. If requested to
do so by Borrower and subject to the terms of this Agreement and any documents
executed in connection with any Letter of Credit, the Fleet Bank Risk
Participation Agreement, or any other LC Risk Participation Agreement, Agent
shall issue its, or cause Bank to issue Letters of Credit for the account of
Borrower or, in connection with a standby Letter of Credit (but in no event in
connection with a documentary Letter of Credit) issued by another Person for the
account of Borrower, execute an LC Risk Participation Agreement, PROVIDED THAT
no Event of Default then exists. The aggregate face amount of all standby
Letters of Credit issued by Agent and Bank and
27
the aggregate face amount of all standby Letters of Credit which are covered by
an LC Risk Participation Agreement (other than the Fleet Bank Risk Participation
Agreement) at any time shall not exceed $1,000,000. The aggregate face amount of
all documentary Letters of Credit issued by Agent and Bank outstanding at any
time shall not exceed $15,000,000. No Letter of Credit issued by Agent or Bank
or covered by an LC Risk Participation Agreement may have an expiry date that is
after the last day of the Original Term, or, if this Agreement remains in effect
after the Original Term, after the last day of any Renewal Term then in effect;
PROVIDED, HOWEVER, that so long as no Default or Event of Default exists, a
Letter of Credit may have an expiry date up to one hundred eighty (180) days
after the last day of the Original Term or after the last day of the Renewal
Term then in effect IF Borrower provides to Agent, for the benefit of Lenders,
on or before the last day of the Original Term or the Renewal Term then in
effect, cash collateral equal to the face amount of such Letter of Credit.
Further, no documentary Letter of Credit issued by Agent or Bank shall have a
term exceeding 180 days, and no standby Letter of Credit issued by Agent or Bank
or standby Letter of Credit covered by an LC Risk Participation Agreement (other
than the Fleet Bank Risk Participation Agreement) shall have a term exceeding
one year. A documentary Letter of Credit may only be issued by Agent or Bank if
such documentary Letter of Credit is issued in connection with the purchase of
inventory by Borrower. By the issuance of a Letter of Credit hereunder by Agent
and without further action on the part of the Agent or the Lenders, each Lender
hereby accepts from the Agent an undivided participation (which participation
shall be nonrecourse to the Agent) in such Letter of Credit and in each LC
Payment equal to such Lender's pro rata (based on its Revolving Credit
Percentage) share of such LC Payment under such Letter of Credit, effective upon
the issuance of such Letter of Credit and, in addition, without further action
on the part of the Agent or the Lenders, each Lender agrees to purchase, and
Agent agrees to sell, an undivided participation equal to such Lender's pro rata
(based on its Revolving Credit Percentage) share, in any LC Payment made
pursuant to the Fleet Bank Risk Participation Agreement or any other LC Risk
Participation Agreement. Each Lender hereby absolutely and unconditionally
assumes, as primary obligor and not as a surety, and agrees to pay and
discharge, and to indemnify and hold the Agent harmless from liability in
respect of such Lender's pro rata share of the amount of any LC Payment. Each
Lender acknowledges and agrees that its obligation to acquire participations in
either (x) each Letter of Credit issued by Agent or (y) each LC Payment made by
Agent and its obligation to make the payments specified herein, and the right of
the Agent to receive the same, in the manner specified herein, are absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of an Event of
Default hereunder, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
2.7. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall constitute
one general obligation of Borrower, and shall be secured by Agent's security
interest, for the benefit of Lenders, in and Lien upon all of the Collateral,
and by all other security interests and Liens heretofore, now or at any time or
times hereafter granted by Borrower to Agent, for the benefit of Lenders.
2.8. LOAN ACCOUNT. Agent shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all
payments made by Borrower on the Loans and all
28
proceeds of Collateral which are finally paid to Lenders, and may record
therein, in accordance with customary accounting practice, all charges and
expenses properly chargeable to Borrower hereunder.
2.9. SHARING OF SETOFFS. Each Lender agrees that if it shall, through the
exercise of a right of banker's lien, setoff or counterclaim against the
Borrower, including, but not limited to, a secured claim under Section 506 of
Title 11 of the United States Code or other security or interest arising from,
or in lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, obtain payment
(voluntary or involuntary) in respect of any Loan made by it or in respect of a
participation held by it in a Letter of Credit or an LC Payment as a result of
which the unpaid principal portion of the Loans made by it plus the
participations held by it in Letters of Credit and LC Payments shall be
proportionately less than the unpaid principal portion of the Loans made by any
other Lender plus outstanding participations held by such other Lender in
Letters of Credit and LC Payments, it shall be deemed to have simultaneously
purchased from such other Lender a participation in the Loans made by such other
Lender and outstanding participations held by such Lender in Letters of Credit
and LC Payments, so that (a) the aggregate unpaid principal amount of the Loans
and participations in Loans made by it plus the outstanding participations held
by it in Letters of Credit and LC Payments shall be in the same proportion to
(b) the sum of the aggregate unpaid principal amount of the Loans plus the
aggregate participations held by all Lenders in Letters of Credit and LC
Payments then outstanding as (i) the sum of the principal amount of the Loans
and participations in the Loans held by it plus participations held by it in the
Letters of Credit and LC Payments prior to such exercise of banker's lien,
setoff or counterclaim was to (ii) the sum of the aggregate unpaid principal
amount of the Loans outstanding plus the aggregate participations held by all
Lenders in the Letters of Credit and LC Payments prior to such exercise of
banker's lien, setoff or counterclaim; PROVIDED, HOWEVER, that if any such
purchase or purchases or adjustments shall be made pursuant to this SECTION 2.9
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustments restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan or another Lender's participating
interest in any Letters of Credit and LC Payments deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by Borrower to such Lender
as fully as if such Lender held a Loan or direct participation in a Letter of
Credit or LC Payment in the amount of such participation.
2.10. FX CONTRACTS AND FX GUARANTIES.
(A) FX CONTRACTS. Agent agrees, for so long as no Default or Event
of Default exists and if requested by Borrower, to cause Bank to enter into FX
Contracts with Borrower, so long as the aggregate amount of all FX Contracts
entered into with Borrower does not exceed $2,000,000 in U.S. Dollar
Equivalents. Each FX Contract shall be in form and substance satisfactory to
Agent and Bank and, without limiting the generality of the foregoing, no FX
Contract shall have a settlement date that is beyond the earlier to occur of (i)
150 days from the effective date thereof or (ii) the last day of the Original
Term (or if this Agreement is renewed in
29
accordance with SECTION 3.2 of this Agreement, the last day of the Renewal
Term). Borrower shall repay all of its obligations to Bank under each FX
Contract in accordance with the terms of the confirmation of such FX Contract.
(B) FX GUARANTIES. Agent agrees, for so long as no Default or Event
of Default exists and if requested by Borrower, to execute and deliver to Bank
one or more FX Guaranties by which Agent shall guarantee the payment and
performance of Borrower's obligations to Bank under each FX Contract; provided,
that the aggregate amount of Agent's obligations under the FX Guaranties shall
not exceed $2,000,000 in U.S. Dollar Equivalents, plus costs and expenses of
Bank incurred in connection with such FX Contracts. In no event shall Agent have
any liability with respect to any FX Contract that is entered into by Borrower
and Bank after the date on which Bank and Borrower each has received notice from
Agent that a Default or Event of Default exists or would result as a consequence
of Agent's guaranteeing the payment and performance of Borrower's obligation
xxxxxx such FX Contract. Any amounts paid by Agent under any FX Guaranty,
including, without limitation, any costs or expenses incurred by Agent or Bank
due to the failure of Borrower to perform its duties under the FX Contracts,
shall be treated as Revolving Credit Loans, shall be secured by all of the
Collateral and shall bear interest and be payable at the same rate and in the
same manner as Base Rate Revolving Credit Loans. In the event that Revolving
Credit Loans are not, for any reason, promptly made to satisfy all then existing
such Obligations, Fleet hereby agrees to pay Agent, on demand, an amount equal
to such Obligations, and until so paid, such amount shall be secured by the
Collateral and shall bear interest and be payable at the same rate and in the
same manner as Base Rate Revolving Credit Loans.
(C) FLEET'S PARTICIPATION. Immediately upon the execution of each FX
Contract or FX Guaranty under this Agreement, Fleet shall be deemed to have
irrevocably and unconditionally purchased and received from Agent, without
recourse or warranty, a 100% undivided interest and participation in such FX
Contract, FX Guaranty and in each FX Payment made in respect to such FX Contract
to the extent of Fleet's 100% portion of such FX Payment. Fleet hereby
absolutely and unconditionally assumes, as primary obligor and not as a surety,
and agrees to pay and discharge, and to indemnify and hold the Agent harmless
from liability in respect of Fleet's 100% share of the amount of any FX Payment.
Fleet acknowledges and agrees that its obligation to acquire participations in
either (x) each FX Guaranty issued by Agent or (y) each FX Payment made by Agent
and its obligation to make the payments specified herein, and the right of the
Agent to receive the same, in the manner specified herein, are absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of an Event of
Default hereunder, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
(D) FX CONTRACT REQUESTS. A request for an FX Contract shall be made
in the following manner: Borrower may make a request for a telephone quote from
Bank with respect to a proposed FX Contract in a specified amount of a specified
foreign currency and with a specific settlement date. Borrower may make a
request for such FX Contract not later than 2:00 p.m. Dallas, Texas time on the
Business Day on which Borrower proposes that such FX Contract become effective;
provided, that no such request may be made at a time when there exists a
30
Default or Event of Default. Prior to, or at the time of, such request Borrower
shall have delivered to Bank corporate resolutions authorizing Borrower to enter
into such FX Contract (which authorization may be general rather than specific
to such FX Contract), an indemnity agreement with respect to electronically
transmitted instructions relating to such FX Contract (which indemnity may be
general rather than specific to such FX Contract) and such other customary
documentation as Bank shall reasonably require, all in form and substance
reasonably satisfactory to Bank. In no event shall Bank enter into an FX
Contract unless Bank has received from Agent an FX Guaranty covering such FX
Contract.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. INTEREST, FEES AND CHARGES.
(A) INTEREST. Outstanding principal on the Loans shall bear
interest, calculated daily (computed on the actual days elapsed over a year of
360 days), at the following rates per annum (individually called, as applicable,
an "APPLICABLE ANNUAL RATE"): (i) Eurodollar Revolving Credit Loans shall bear
interest at a rate per annum equal to two percent (2.00%) above the Eurodollar
Base Rate for the Eurodollar Interest Period applicable thereto, and (ii) Base
Rate Revolving Credit Loans shall bear interest at a fluctuating rate per annum
equal to one-quarter percent (0.25%) above the Base Rate. Unless the Borrower
provides a Eurodollar Borrowing Notice to the Agent in accordance with SECTION
2.4 irrevocably electing that all or a portion of the Loans are to be designated
as Eurodollar Loans, all Loans shall be considered Base Rate Loans. The
Applicable Annual Rate for all Base Rate Loans shall be increased or decreased,
as the case may be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening of business on the
day that any such change in the Base Rate becomes effective. The Base Rate in
effect on the date hereof shall be the Base Rate effective as of the opening of
business on the date hereof, but if this Agreement is executed on a day that is
not a Business Day, the Base Rate in effect on the date hereof shall be the Base
Rate effective as of the opening of business on the last Business Day
immediately preceding the date hereof. For the purpose of computing interest,
all items of payment received by Agent, for the benefit of Lenders, shall be
applied by Agent (subject to final payment of all drafts and other items
received in form other than immediately available funds) against the Obligations
on the second Business Day after receipt. The determination of when a payment is
received by Agent will be made in accordance with SECTION 3.5.
(B) DEFAULT RATE OF INTEREST. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
the Loans and other Obligations shall bear interest, calculated daily (computed
on the actual days elapsed over a year of 360 days), at 2.00% above the
Applicable Annual Rate or other applicable rate of interest (a "DEFAULT RATE").
(C) MAXIMUM RATE OF INTEREST. Notwithstanding the foregoing, (i) if
at any time the amount of interest computed as provided in the Loan Documents
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter (the "MAXIMUM LEGAL RATE"),
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the interest payable under this Agreement shall be computed upon the basis of
the Maximum Legal Rate, but any subsequent reduction in the Applicable Annual
Rate, Default Rate or other rate, as applicable, shall not reduce such interest
thereafter payable hereunder below the amount computed on the basis of the
Maximum Legal Rate until the aggregate amount of such interest accrued and
payable under this Agreement equals the total amount of interest which would
have accrued if such interest had been at all times computed solely as provided
in the Loan Documents; and (ii) unless preempted by federal law, the Applicable
Annual Rate, Default Rate or other rate, as applicable, from time to time in
effect hereunder may not exceed the "indicated ceiling rate" from time to time
in effect under Tex. Rev. Civ. Stat. Xxx. art 5069-1.04(c) (Xxxxxx 1987). If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lenders by
reason thereof shall be payable upon demand.
(D) EXCESS INTEREST. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument, document or
agreement between Borrower, Agent and/or any Lender, or default of Borrower, or
the exercise by Agent or Lenders of the right to accelerate the payment of the
maturity of principal and interest, or to exercise any option whatsoever
contained in this Agreement or any other Loan Document, or the arising of any
contingency whatsoever, shall entitle Agent or any Lender to contract for,
charge, or receive, in any event, interest exceeding the Maximum Legal Rate. In
no event shall Borrower be obligated to pay interest exceeding such Maximum
Legal Rate and all agreements, conditions or stipulations, if any, which may in
any event or contingency whatsoever operate to bind, obligate or compel Borrower
to pay a rate of interest exceeding the Maximum Legal Rate, shall be without
binding force or effect, at law or in equity, to the extent only of the excess
of interest over such Maximum Legal Rate. In the event any interest is
contracted for, charged or received in excess of the Maximum Legal Rate
("EXCESS"), Borrower acknowledges and stipulates that any such contract, charge,
or receipt shall be the result of an accident and BONA FIDE error, and that any
Excess received by Agent and/or any Lender shall be applied, first, to reduce
the principal then unpaid hereunder; second, to reduce the other Obligations;
and third, returned to Borrower, it being the intention of the parties hereto
not to enter at any time into a usurious or otherwise illegal relationship.
Borrower recognizes that, with fluctuations in the Base Rate and the Maximum
Legal Rate, such a result could inadvertently occur. By the execution of this
Agreement, Borrower covenants that the credit or return of any Excess shall
constitute the acceptance by Borrower of such Excess. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Agent and/or Lender, all interest at any time contracted for,
charged or received by Agent and/or Lender in connection with the Loan Documents
shall be amortized, prorated, allocated and spread in equal parts during the
entire term of this Agreement and the Loans.
(E) INCORPORATION BY THIS REFERENCE. The provisions of SECTIONS
3.1(C) AND 3.1(D) shall be deemed to be incorporated into every document or
communication relating to the Obligations which sets forth or prescribes any
account, right or claim or alleged account, right or
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claim of Agent and/or any Lender with respect to Borrower (or any other obligor
in respect of Obligations), whether or not any provision of SECTION 3.1 is
referred to therein. All such documents and communications and all figures set
forth therein shall, for the sole purpose of computing the extent of the
Obligations and obligations of the Borrower (or other obligor) asserted by Agent
and/or any Lender thereunder, be automatically re-computed by any Borrower or
obligor, and by any court considering the same, to give effect to the
adjustments or credits required by SECTION 3.1(D).
(F) UNUSED FACILITY FEE. From the date hereof, Borrower agrees to
pay to Agent, for the account of Lenders, in accordance with their respective
Revolving Credit Percentages, a monthly unused facility fee, equal to
one-quarter of one percent (0.25%) per annum (calculated on the basis of a year
of 360 days) of the difference between the Revolving Credit Commitment and the
sum of (i) the Average Monthly Loan Balance for the Revolving Credit Loans for
such month, PLUS (ii) the average face amount of outstanding Letters of Credit
issued by Agent, PLUS (iii) the average face amount of outstanding Letters of
Credit which are covered by an LC Risk Participation Agreement for such month
(the sum of CLAUSES (I), (II) and (III) above being referred to as the "AVERAGE
MONTHLY REVOLVING CREDIT LOANS USAGE"), payable in arrears with the first
payment being due on August 1, 1997, and continuing regularly thereafter during
the term of this Agreement, and upon the termination hereof. In no event,
however, shall any charge be payable for any month for which the Average Monthly
Revolving Credit Loans Usage was less than the Revolving Credit Commitment by
reason of any Lender's declining to extend Revolving Credit Loans to Borrower in
amounts equal to the Borrowing Base, to the extent of such refusal, for any
month for which the Average Monthly Revolving Credit Loans Usage was less than
the Revolving Credit Commitment by reason of Agent's determination to reduce
applicable advance rates under the Borrowing Base, to the extent of such
reduction, or for any month during which or after Agent or Lenders accelerate
the maturity or demands payment of the Obligations by reason of the occurrence
of any Event of Default.
(G) CAPITAL ADEQUACY CHARGE. In the event that Agent or any Lender
shall have determined that the adoption after the date hereof of any law, rule
or regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof or compliance by Agent or any Lender with
any request or directive regarding capital adequacy (whether or not having the
force of law) from any central bank or governmental authority, does or shall
have the effect of reducing the rate of return on Agent or any Lenders' capital
as a consequence of its obligations hereunder to a level below that which Agent
or such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or such Lender, in its sole
discretion, to be material, then from time to time, after submission by Agent or
such Lender to Borrower of a written demand therefor, the Borrower shall pay to
Agent or such Lender such additional amount or amounts as will compensate Agent
or such Lender for such reduction. A certificate of Agent or any Lender claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such payment, the additional amount or amounts to be paid to
Agent or such Lender, and the method by which such amounts were determined. In
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determining such amount, Agent or such Lender may use any reasonable averaging
and attribution method.
(H) LETTER OF CREDIT; LC FEES; FX GUARANTY FEES.
(I) As additional consideration for Agent's issuing its or
causing Bank to issue its Letters of Credit for Borrower's account or for
entering into LC Risk Participation Agreements at Borrower's request pursuant to
SECTION 2.6 hereof, Borrower agrees to pay Agent, for the account of Lenders in
accordance with their respective Revolving Credit Percentages, a fee equal to
one percent (1.00%) per annum of the face amount of each standby Letter of
Credit issued by Agent or Bank for the account of Borrower, and each standby
Letter of Credit issued by a Person and covered by an LC Risk Participation
Agreement which fee shall be deemed fully earned upon issuance of each such
standby Letter of Credit, and shall be due and payable upon the issuance of each
such standby Letter of Credit. Other fees and charges relevant to standby
Letters of Credit are set forth in EXHIBIT T attached hereto. The fees and
charges payable by Borrower in connection with a documentary Letter of Credit
issued for the account of Borrower by Agent or Bank or covered by an LC Risk
Participation Agreement are shown on EXHIBIT T attached hereto. No fee payable
by Borrower under this SECTION 3.1(H) or as set forth on EXHIBIT T attached
hereto shall be subject to rebate or proration upon the termination of this
Agreement for any reason.
(II) Borrower shall pay to Agent, for the account of Fleet,
for FX Guaranties and FX Contracts, a fee equal to 2.50% per annum of the FX
Amount, payable monthly in arrears on the first day of each calendar month
hereafter, which fees and charges shall be fully earned and due and payable upon
issuance of each FX Guaranty or FX Contract and shall not be subject to rebate
or proration upon the termination of this Agreement for any reason. Borrower
shall also pay to Agent, for the account of Agent or Bank, as applicable, its
respective normal and customary charges associated with the execution of FX
Guaranties and FX Contracts, payable monthly in arrears on the first day of each
calendar month hereafter.
(I) AGENCY FEE. Borrower agrees to pay to Agent an annual agency fee
in the amount of $35,000, first payable on August 9, 1997, and subsequently
payable on each anniversary thereafter during the term of this Agreement. Each
such fee shall be deemed fully earned and nonrefundable as of its due date, and
no fee payable under this SECTION 3.1(I) shall be subject to rebate or proration
upon the termination of this Agreement for any reason. Upon demand therefor by
Agent, Borrower shall promptly reimburse Agent for all out-of-pocket costs
incurred by Agent in connection with any and all collateral monitoring functions
deemed necessary or appropriate by Agent, in its sole discretion.
(J) RESTRUCTURING FEE. Borrower agrees to pay to Agent on the
Closing Date, for the account of Lenders, an amount equal to $150,000.00 which
fee shall be deemed fully earned and non-refundable as of the Closing Date.
Agent shall then pay to Boston $61,800.00 of such fee.
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3.2. TERM OF AGREEMENT. Subject to Lenders' right to cease making Loans to
Borrower at any time upon or after the occurrence of a Default or Event of
Default, this Agreement shall be in effect for the period of time from the date
hereof, through and including the date which is three (3) years after the
Closing Date (the "ORIGINAL TERM") and, unless any party hereto elects to
terminate this Agreement by giving notice of such election not less than ninety
(90) days before the end of the Original Term, this Agreement shall
automatically be extended for an additional one-year period (the "RENEWAL
TERM"), through and including the date which is four years after the Closing
Date, whereupon the maturity of each of the Notes shall be extended for an
additional one-year period upon the same terms as are in existence on the date
of such renewal.
3.3. EARLY TERMINATION BY BORROWER.
(A) Upon at least forty-five (45) days prior written notice to
Agent, Borrower may, at its option, terminate this Agreement; PROVIDED, HOWEVER,
no such termination shall be effective until (i) Borrower has paid all of the
Obligations in immediately available funds, (ii) all Letters of Credit have
expired or been confirmed by another Person satisfactory to Lenders, in their
credit judgment, and (iii) all FX Contracts and FX Guaranties have settled or
been terminated by the parties thereto.
(B) At the effective date of any such termination by Borrower,
Borrower shall pay to Agent, for the benefit of Lenders, in accordance with
their respective Revolving Credit Percentage (in addition to the then
outstanding principal, accrued interest and other charges owing under the terms
of this Agreement and any of the other Loan Documents), as liquidated damages
for the loss of the bargain and not as a penalty, an amount equal to one-half of
one percent (0.5%) of the Average Daily Loan Balance for the one year period
preceding the date of termination if the termination occurs during the period
from the Closing Date to and including the day immediately prior to the first
anniversary of the Closing Date. No prepayment fee shall be payable if the
termination occurs during the period on or after the first anniversary of the
Closing Date.
(C) All of the Obligations shall be forthwith due and payable upon
any termination of this Agreement. Except as otherwise expressly provided for in
this Agreement or the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement or any of the other Loan
Documents shall in any way affect or impair the rights, powers or privileges of
Agent and/or any Lender or the obligations, duties or liabilities of Borrower or
Agent and/or any Lender in any way relating to (i) any transaction or event
occurring prior to such termination or cancellation or (ii) any of the
undertakings, agreements, covenants, warranties or representations of Borrower
contained in this Agreement or any of the other Loan Documents. All such
undertakings, agreements, covenants, warranties and representations of Borrower
shall survive such termination or cancellation and Agent, for the benefit of
Lenders, shall retain its Liens in the Collateral and all of its rights and
remedies under this Agreement and the other Loan Documents notwithstanding such
termination or cancellation until all of the Obligations have been paid in full,
in immediately available funds.
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3.4. PAYMENTS. Except where evidenced by notes or other instruments issued
or made by Borrower to Agent or any Lender specifically containing payment
provisions which are in conflict with this SECTION 3.4 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
(A) Principal payable on account of Revolving Credit Loans made by
Lenders to Borrower pursuant to SECTION 2.1 of this Agreement shall be payable
by Borrower to Agent, for the account of Lenders, immediately upon the earliest
of (i) the receipt by Agent or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which Agent or Lenders elect to accelerate the
maturity and payment of such Loans, or (iii) termination of this Agreement
pursuant to SECTION 3.3 hereof; PROVIDED, HOWEVER, that if the principal balance
of Revolving Credit Loans outstanding at any time shall exceed the Borrowing
Base at such time, Borrower shall, on demand, repay the Revolving Credit Loans
in an amount sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess.
(B) Interest accrued on the Revolving Credit Loans shall be due and
payable to Agent, for the account of Lenders, on the earliest of (i) the first
day of each month (for the immediately preceding month), computed through the
last calendar day of the preceding month, (ii) the occurrence of an Event of
Default in consequence of which Agent or Lenders elect to accelerate the
maturity and payment of the Obligations or (iii) termination of this Agreement
pursuant to SECTION 3.3 hereof; PROVIDED, HOWEVER, that Borrower hereby
irrevocably authorizes Agent, in Agent's sole discretion, to advance to
Borrower, and to charge to Borrower's Loan Account hereunder as a Revolving
Credit Loan, a sum sufficient each month to pay all interest accrued on the
Obligations during the immediately preceding month.
(C) Costs, fees and expenses payable pursuant to this Agreement
shall be payable by Borrower, on demand by Agent, to Agent, for its benefit and
the benefit of Lenders, or to any other Person designated by Lenders in writing.
Agent will promptly provide Borrower with written notice detailing any such
costs, fees and expenses payable by Borrower.
(D) The balance of the Obligations requiring the payment of money,
if any, shall be payable by Borrower to Agent and/or to Lenders as and when
provided in the Loan Documents, or, if no provision is made in the Loan
Documents for payment of any such Obligations, such Obligations shall be payable
on demand.
3.5. APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower irrevocably waives
the right to direct the application of any and all payments and collections at
any time or times hereafter received by Agent or any Lender from or on behalf of
Borrower, provided such payments and collections are first applied to the
portion of the Obligations then due. Except as provided in the preceding
sentence, Borrower does hereby irrevocably agree that Agent shall have the
continuing exclusive right to apply and reapply any and all such payments and
collections received at any time or times hereafter by Agent or its agent
against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Agent upon any of its books and records, so long as
such payments and collections are first applied to the portion of the
Obligations then due.
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If as the result of collections of Accounts as authorized by SECTION 5.4 hereof
a credit balance exists in the Loan Account, such credit balance shall not
accrue interest in favor of Borrower, but shall be available to Borrower at any
time or times for so long as no Default or Event of Default exists.
Notwithstanding the foregoing, Agent may offset such credit balance against the
Obligations upon or after the occurrence of an Event of Default. Payments and
collections received by Agent, for the benefit of Lenders, from the Dominion
Account or otherwise in Chicago, Illinois (a) before 2:00 p.m. (Dallas, Texas
time) on a Business Day shall be deemed received on such Business Day, and (b)
after 2:00 p.m. (Dallas, Texas time) on a Business Day shall be deemed received
on the next succeeding Business Day, in each case for purposes of determining
the amount of Revolving Credit Loans available for borrowing hereunder and for
purposes of computing interest on the Loans (subject in each case to final
payment of all items and collections received in form other than immediately
available funds).
3.6. STATEMENTS OF ACCOUNT. Agent will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent absent manifest error shall be deemed final,
binding and conclusive upon Borrower unless Agent is notified by Borrower in
writing to the contrary within sixty (60) days after the date each account is
mailed to Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lenders of the Obligations, Borrower hereby grants to Agent, for
the benefit of Lenders, a continuing security interest in and Lien upon all of
the Property of Borrower described below, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(A) Accounts;
(B) Inventory;
(C) all accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A) and (B) above, including, without
limitation, proceeds of and unearned premiums with respect to insurance policies
insuring any of the Collateral; and
(D) all books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer materials
and records) of Borrower pertaining to any of (A), (B), or (C) above.
The security interests in the Collateral are given in renewal, extension
and modification of the security interests previously granted in the Collateral
to Agent, for the benefit of Lenders, by Borrower (including, without
limitation, the security interests granted pursuant to the Second Restated Loan
Agreement); such existing security interests in the Collateral described above
are not extinguished hereby; and the making, perfection and priority of such
existing security interests in the Collateral described above shall continue in
full force and effect.
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4.2. REPRESENTATIONS, WARRANTIES AND COVENANTS -- COLLATERAL. To induce
Agent and Lenders to enter into this Agreement, Borrower represents, warrants,
and covenants to Agent and Lenders:
(A) The Collateral is now and, so long as any of the Obligations are
outstanding, will continue to be owned solely by Borrower. No other Person has
or will have any right, title, interest, claim, or Lien therein, thereon or
thereto other than a Permitted Lien.
(B) Except for Liens permitted by SECTION 9.2(H) hereof and as
otherwise specifically consented to in writing by Lenders, the Liens granted to
Agent, for the benefit of Lenders, shall be first and prior on the Collateral
and as to the Accounts and proceeds, including insurance proceeds, resulting
from the sale, disposition, or loss thereof. No further action need be taken to
perfect the Liens granted to Agent, for the benefit of Lenders, other than the
filing of continuation statements under the Code or other applicable law.
4.3. LIEN PERFECTION. Borrower agrees to execute the UCC-1 financing
statements provided for by the Code or otherwise together with any and all other
instruments, assignments or documents and shall take such other action as may be
required to perfect or to continue the perfection of Agent's security interest,
for the benefit of Lenders, in the Collateral. Unless prohibited by applicable
law, Borrower hereby authorizes Agent to execute and file any such financing
statement on Borrower's behalf. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof.
4.4. LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit, will at all times be kept by Borrower at one or more of the business
locations set forth in EXHIBIT B or other locations permitted pursuant to
SECTION 9.2(M) hereof and shall not, without the prior written approval of
Agent, be moved therefrom except, prior to an Event of Default, for (A) sales of
Inventory in the ordinary course of business; (B) the storage of Inventory at
locations within the continental United States other than those shown on EXHIBIT
B if (i) Borrower gives Agent written notice of the new storage location prior
to storing Inventory at such location, (ii) Agent's security interest, for the
benefit of Lenders, in such Inventory is and continues to be a duly perfected,
first priority Lien thereon, (iii) neither Borrower's nor Agent's nor any
Lender's right of entry upon the premises where such Inventory is stored, or its
right to remove the Inventory therefrom, is in any way restricted, (iv) the
owner of such premises agrees with Agent and/or Lenders not to assert any
landlord's, bailee's or other Lien in respect of the Inventory for unpaid rent
or storage charges, and (v) all negotiable documents and receipts in respect of
any Collateral maintained at such premises are promptly delivered to Agent; and
(C) temporary transfers of Inventory from a location set forth on EXHIBIT B to
another location if done for the limited purpose of additional processing to
such Inventory in the ordinary course of Borrower's business.
4.5. INSURANCE OF COLLATERAL. Borrower agrees to maintain and pay for
insurance upon all Collateral wherever located, in storage or in transit in
vehicles, including goods evidenced by documents, covering casualty, hazard,
public liability and such other risks and in such amounts
38
and with a Permitted Insurer to insure Agent's and Lenders' interest in the
Collateral. Borrower shall deliver the originals or certified copies of such
policies to Lender with satisfactory endorsements naming Agent, for the benefit
of Lenders, as loss payee and as mortgagee pursuant to a standard mortgagee
clause. Each policy of insurance or endorsement shall contain a clause requiring
the insurer to give not less than 30 days prior written notice to Agent in the
event of cancellation of the policy for any reason whatsoever and a clause that
the interest of Agent and Lenders shall not be impaired or invalidated by any
act or neglect of Borrower or owner of the Property nor by the occupation of the
premises for purposes more hazardous than are permitted by said policy. If
Borrower fails to provide and pay for such insurance, Agent may, at Borrower's
expense, procure the same, but shall not be required to do so. Borrower agrees
to deliver to Agent, promptly as rendered, true copies of all reports made in
any reporting forms to insurance companies. Borrower will maintain, with
Permitted Insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including public
liability, product liability, larceny, embezzlement, or other criminal
misappropriation insurance) and in such amounts as is customary in the business
or as otherwise reasonably required by Agent.
4.6. PROTECTION OF COLLATERAL. All insurance expenses and all expenses of
protecting, storing, warehousing, insuring, handling, maintaining and shipping
the Collateral, any and all excise, property, sales, and use taxes imposed by
any state, federal, or local authority on any of the Collateral or in respect of
the sale thereof shall be borne and paid by Borrower. If Borrower fails to
promptly pay any portion thereof when due, Agent may, at its option, but shall
not be required to, pay the same and charge the Loan Account therefor. Borrower
agrees to reimburse Agent promptly for any amounts not charged to the Loan
Account with interest accruing thereon daily at the Default Rate. All sums so
paid or incurred by Agent for any of the foregoing and all costs and expenses
(including reasonable attorneys' fees, legal expenses, and court costs) which
Agent may incur in enforcing or protecting its Lien on or rights and interest in
the Collateral or any of its rights or remedies under any Loan Document or in
respect of any of the transactions to be had hereunto, together with interest at
the Default Rate, shall be considered Obligations hereunder secured by all
Collateral. Neither Agent nor any Lender shall be liable or responsible in any
way for the safekeeping of any of the Collateral or for any loss or damage
thereto (except for reasonable care in the custody thereof while any Collateral
is in Agent's or any Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but the same shall be at
Borrower's sole risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to all
Accounts, Borrower represents and warrants to Agent and Lenders that Agent and
Lenders may rely, in determining which Accounts are Eligible Accounts, on all
statements and representations made by Borrower with respect to any Account or
Accounts, and, unless otherwise indicated in writing to Agent, that with respect
to each Account which is represented by Borrower to be an Eligible Account:
39
(A) it is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(B) it arises out of a completed, BONA FIDE sale and delivery of
goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the contract
between Borrower and the Account Debtor;
(C) it is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Agent;
(D) such Account, and Agent's security interest, for the benefit of
Lenders, therein, is not, and will not be in the future, subject to any offset,
Lien, deduction, defense, dispute, counterclaim or any other adverse condition
except for disputes resulting in returned goods where the amount in controversy
is deemed by Agent to be immaterial, and each such Account is absolutely owing
to Borrower and is not contingent in any respect or for any reason;
(E) Borrower has made no agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business for prompt payment
and which are reflected in the calculation of the net amount of each respective
invoice related thereto;
(F) there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements delivered
to Agent with respect thereto;
(G) to the best of Borrower's knowledge, the Account Debtor
thereunder (i) is Solvent and (ii) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed; and
(H) Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectability of the Account, and to the best of
Borrower's knowledge there are no proceedings or actions which are threatened or
pending against any Account Debtor thereunder which might result in any material
adverse change in such Account Debtor's financial condition or the
collectability of such Account.
5.2. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. If so requested by
Agent, Borrower shall execute and deliver to Agent formal written assignments of
all of its Accounts monthly, or, if requested by Agent, weekly or daily, which
shall include all Accounts that have been created since the date of the last
assignment, together with copies of invoices or invoice registers related
thereto. Borrower shall keep accurate and complete records of its Accounts and
all payments and collections thereon and, if requested by Agent, shall submit to
Agent on a daily basis a sales and collections report for the preceding day, in
form satisfactory to Agent. On or before the fifteenth day of each month from
and after the date hereof, Borrower shall deliver to
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Agent, in form satisfactory to Agent, a detailed aged trial balance of all
Accounts existing as of the last day of the preceding month, specifying the
names, addresses, face value, dates of invoices and due dates for each Account
Debtor obligated on an Account so listed ("SCHEDULE OF ACCOUNTS"), and, upon
Agent's request therefor, copies of proof of delivery and the original copy of
all documents, including, without limitation, repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Agent shall
reasonably request.
5.3. ADMINISTRATION OF ACCOUNTS.
(A) Upon the granting of any discounts, allowances or credits by
Borrower that are not shown on the face of the invoice for the Account involved,
Borrower shall promptly report such discounts, allowances or credits, as the
case may be, to Agent and in no event later than the time of its submission to
Agent of the next Schedule of Accounts as provided in SECTION 5.2. Upon and
after the occurrence of an Event of Default, Agent shall have the right to
settle or adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Agent may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including reasonable attorney's fees,
to Borrower.
(B) If an Account includes a charge for any tax payable to any
governmental taxing authority, Agent is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge the Loan Account therefor. Borrower shall notify Agent if
any Account includes any tax due to any governmental taxing authority and, in
the absence of such notice, Agent, for the benefit of Lenders, shall have the
right to retain the full proceeds of the Account and shall not be liable for any
taxes to any governmental taxing authority that may be due by Borrower by reason
of the sale and delivery creating the Account.
(C) Whether or not a Default or an Event of Default has occurred,
any of Agent's officers, employees or agents shall have the right, at any time
or times hereafter, in the name of Agent, any designee of Agent or Borrower, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Agent in an effort to facilitate and promptly conclude any such verification
process.
5.4. COLLECTION OF ACCOUNTS.
(A) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Agent and Lenders. All
remittances received by Borrower on account of Accounts shall be held as
Lenders' property by Borrower as trustee of an express trust for Lenders'
benefit and Borrower shall immediately deposit or cause to be deposited same in
the Dominion Account. Agent shall have the right at any time after the
occurrence of a Default or an Event of Default to notify Account Debtors that
Accounts have been assigned to Agent and Lenders and to collect Accounts
directly in its own and Lenders' name and to charge the
41
collection costs and expenses, including reasonable attorneys' fees, to
Borrower. Neither Agent nor any Lender has any duty to protect, insure, collect
or realize upon the Accounts or preserve rights in them.
(B) Borrower shall deposit all proceeds of the Collateral or cause
the same to be deposited in kind in a Dominion Account pursuant to a lockbox
arrangement with such banks as may be selected by Borrower and be acceptable to
Agent. Borrower shall issue to any such banks, an irrevocable letter of
instruction directing such banks to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application on account of
the Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lenders and Borrower shall obtain the agreement by such
banks to waive any offset rights against the funds so deposited. Neither Agent
nor any Lender assumes any responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
SECTION 6. PROVISIONS RELATING TO INVENTORY
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to Inventory,
Borrower represents and warrants to Agent and Lenders that Agent and Lenders may
rely, in determining which items of Inventory constitute Eligible Inventory, on
all statements and representations made by Borrower with respect to any
Inventory and that:
(A) all Inventory is presently and will continue to be located at
Borrower's places of business listed on EXHIBIT B and will not be removed
therefrom except as authorized by SECTION 4.4 of this Agreement or in connection
with changes in business locations permitted under SECTION 9.2(M) of this
Agreement;
(B) no Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party without
Agent's prior written consent and, if Agent gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Agent, in form and substance acceptable to Agent, warehouse
receipts therefor in Agent's name, for the benefit of Lenders;
(C) no Inventory is or will be consigned to any Person without
Agent's prior written consent, and, if such consent is given, Borrower shall,
prior to the delivery of any Inventory on consignment, (i) provide Agent with
all consignment agreements to be used in connection with such consignment, all
of which shall be acceptable to Agent, (ii) prepare, execute and file
appropriate financing statements with respect to any consigned Inventory,
showing Agent, for the benefit of Lenders, as assignee, (iii) conduct a search
of all filings made against the consignee in all jurisdictions in which any
consigned Inventory is to be located and deliver to Agent copies of the results
of all such searches, and (iv) notify, in writing, all the creditors of the
consignee which are or may be holders of Liens in the Inventory to be consigned
that Borrower expects to deliver certain Inventory to the consignee, all of
which Inventory shall be described in such notice by item or type;
42
(D) to the best of Borrower's knowledge, no Inventory is or will be
produced by Borrower in violation of the Fair Labor Standards Act or in
violation of any international law prohibiting child labor; and
(E) to the best of Borrower's knowledge, all Inventory is presently
and will continue to be produced in conformity with the terms of all applicable
licenses of Borrower.
6.2. INVENTORY REPORTS. Subject to SECTION 9.1(K) of this Agreement,
Borrower agrees to furnish Agent with Inventory reports at such times as Agent
may request, but at least once each month. Such reports shall be in form and
detail satisfactory to Agent. Borrower shall conduct a physical count of
Inventory no less frequently than semi-annually and shall provide to Agent a
report based on each such physical count of Inventory promptly thereafter,
together with such supporting information as Agent shall in its discretion
request.
6.3. RETURNS OF INVENTORY. If at any time or times hereafter any Account
Debtor returns any Inventory to Borrower the shipment of which generated an
Account on which such Account Debtor is obligated in excess of $250,000,
Borrower shall notify Agent of the same immediately, specifying the reason for
such return and the location and condition of the returned Inventory. After the
occurrence of an Event of Default, Borrower shall hold all returned Inventory in
trust for each Lender, shall segregate all returned Inventory from all other
Property owned by Borrower or in its possession and shall conspicuously label
such Inventory as the Property of Agent and each Lender.
SECTION 7. [THIS SECTION IS INTENTIONALLY OMITTED.]
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders
to enter into this Agreement and to induce Lenders to make advances hereunder,
Borrower warrants, represents and covenants to Agent and Lenders as follows:
(A) ORGANIZATION AND QUALIFICATION. Brazos is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Morning Sun is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington. Each Borrower has duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in each state or jurisdiction listed on EXHIBIT C attached hereto
and made a part hereof and in all other states and jurisdictions where the
character of its Properties or the nature of its activities make such
qualification necessary.
(B) CORPORATE NAMES. During the preceding seven years, Borrower has
not been known as or used any corporate, fictitious or trade names except as
disclosed on EXHIBIT D attached hereto and made a part hereof. Except as set
forth on EXHIBIT D, Borrower has not, during the preceding seven years, been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person.
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(C) CORPORATE POWER AND AUTHORITY. Borrower has the right and power
and is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary corporate action on the
part of Borrower and do not and will not (i) require any consent or approval of
the shareholders of Borrower that has not been obtained; (ii) contravene
Borrower's charter, articles of incorporation or by-laws; (iii) violate, or
cause Borrower to be in default under, any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award in
effect having applicability to Borrower; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Borrower is a party or by which it
or its Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the Properties now owned or hereafter acquired by Borrower.
(D) SUBSIDIARIES. Brazos has no Subsidiaries except for (i) Morning
Sun, (ii) Stadium Apparel, Inc., a Texas corporation, which is a dormant
Subsidiary with no assets or operations, and (iii) Japanese Subsidiary. Morning
Sun has no Subsidiaries.
(E) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of Borrower and each other Person party thereto,
enforceable against them in accordance with their respective terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally or by
principles of equity pertaining to the availability of equitable remedies.
(F) USE OF PROCEEDS. Borrower's uses of the proceeds of any Loans
pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses, duly authorized by its Board of Directors, and such uses will
not violate any applicable laws, including, without limitation, the Foreign
Assets Control Regulations, the Foreign Funds Control Regulations and the
Transaction Control Regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended).
(G) MARGIN STOCK. Borrower is not engaged principally, or as one of
its important activities, in the business of purchasing or carrying "margin
stock" (within the meaning of Regulation G or U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loans to Borrower
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock or be used for any
purpose which violates or is inconsistent with the provisions of Regulation G,
T, U or X of said Board of Governors.
(H) GOVERNMENTAL CONSENTS. Borrower has, and is in good standing
with respect to, all governmental consents, approvals, authorizations, permits,
certificates, inspections,
44
and franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Properties as
now owned or leased by it.
(I) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Borrower owns or
possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without any known conflict with the rights of others. All such patents,
trademarks, service marks, trade names, copyrights, licenses and other similar
rights owned or possessed as of the date of this Agreement are listed on EXHIBIT
E attached hereto and made a part hereof.
(J) CAPITAL STRUCTURE. EXHIBIT F attached hereto and made a part
hereof states (i) the correct name of each of the Subsidiaries of each Borrower,
the jurisdiction of incorporation and the percentage of its Voting Stock owned
by such Borrower, (ii) the name of each of each Borrower's corporate or joint
venture Affiliates and the nature of the affiliation, (iii) the number, nature
and holder of all outstanding Securities of each Borrower and each Subsidiary of
such Borrower, and (iv) the number of authorized, issued and treasury shares of
such Borrower and each Subsidiary of such Borrower. Each Borrower has good title
to all of the shares it purports to own of the stock of each Subsidiary of such
Borrower, free and clear in each case of any Lien other than Permitted Liens.
All such shares have been duly issued and are fully paid and nonassessable.
Except as set forth on EXHIBIT F attached hereto, there are not outstanding any
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any Borrower. There are not outstanding any agreements or instruments
binding upon any of any Borrower's shareholders relating to the ownership of its
shares of capital stock.
(K) SOLVENT FINANCIAL CONDITION. Each Borrower is now and, after
giving effect to initial Loans to be made hereunder, will be, Solvent.
(L) RESTRICTIONS. No Borrower is a party or subject to any contract,
agreement, or charter or other corporate restriction, which materially and
adversely affects its business or the use or ownership of any of its Properties.
No Borrower is a party or subject to any contract or agreement which restricts
its right or ability to incur Indebtedness, other than as set forth on EXHIBIT G
attached hereto, none of which prohibit the execution of or compliance with this
Agreement by such Borrower. Neither any Borrower nor any of such Borrower's
Subsidiaries has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its Property, whether now owned
or hereafter acquired, to be subject to a Lien that is not a Permitted Lien.
(M) LITIGATION. Except as set forth on EXHIBIT H attached hereto or
otherwise disclosed in writing and made a part hereof, there are no actions,
suits, proceedings or investigations pending, or to the knowledge of any
Borrower, threatened, against or affecting such Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of such Borrower or any of its Subsidiaries, in any court or before
any governmental authority or arbitration board or tribunal which involves the
possibility of
45
materially and adversely affecting the Properties, business, prospects, profits
or financial condition of any Borrower or the ability of any Borrower to perform
this Agreement. Neither any Borrower nor any of its Subsidiaries is in default
with respect to any order, writ, injunction, judgment, decree or rule of any
court, governmental authority or arbitration board or tribunal.
(N) TITLE TO PROPERTIES. Each Borrower and its Subsidiaries each has
good, indefeasible title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its real Property, and good title to all of its
other Property, in each case, free and clear of all Liens except Permitted
Liens.
(O) FINANCIAL STATEMENTS; FISCAL YEAR. The Consolidated and
consolidating balance sheets of Brazos and such other Persons described therein
as of May 3, 1997, and the related statements of operations, stockholder's
equity and cash flows for the period ended on such date, have been prepared in
accordance with GAAP (except for changes in application in which Brazos'
independent certified public accountants concur), and present fairly, in all
material respects, the financial positions of Brazos and its Subsidiaries at
such dates and the results of the operations of Brazos and its Subsidiaries for
such periods. Since May 3, 1997, there has been no material adverse change in
the condition, financial or otherwise, of Brazos or Brazos' Subsidiaries and
such other Persons as shown on the Consolidated balance sheet as of such date
and no change in the aggregate value of Equipment and real Property owned by
Brazos or Brazos' Subsidiaries or such other Persons, except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse. The fiscal year of Brazos and each of its Subsidiaries
ends on the last Saturday in December of each year.
(P) FULL DISCLOSURE. The financial statements referred to in SECTION
8.1(O) above, do not, nor does this Agreement or any other written statement of
any Borrower to Agent and/or any Lender, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact which any Borrower has failed
to disclose to Agent or any Lender in writing which materially affects adversely
or, so far as such Borrower can now foresee, will materially affect adversely
the Properties, business, prospects, profits, or condition (financial or
otherwise) of any Borrower or any of its Subsidiaries or the ability of any
Borrower or its Subsidiaries to perform this Agreement.
(Q) PENSION PLANS. Except as disclosed on EXHIBIT I attached hereto
and made a part hereof, no Borrower nor any of its Subsidiaries has any Plan. No
Borrower nor any of its Subsidiaries has received any notice to the effect that
it is not in full compliance with any of the requirements of ERISA and the
regulations promulgated thereunder. No fact or situation that could result in a
material adverse change in the financial condition of any Borrower (including,
but not limited to, any Reportable Event or Prohibited Transaction) exists in
connection with any Plan. Neither any Borrower nor any of its Subsidiaries has
any withdrawal liability in connection with a Multi-Employer Plan.
(R) TAXES. Brazos' federal tax identification number is 00-0000000.
Morning Sun's federal tax identification number is 00-0000000 Each Borrower and
its Subsidiaries each
46
has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid, or made provision for the payment of, all
taxes, assessments, fees and other governmental charges that are due and
payable. The provision for taxes on the books of each Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current fiscal year. EXHIBIT P contains an accurate list of all taxing
authorities to which each Borrower and its Subsidiaries and their respective
Properties are subject. No Properties of any Borrower or its Subsidiaries are or
could become subject to any Lien in favor of any such taxing authorities for
nonpayment of taxes, except for inchoate liens for taxes not yet due and payable
and as specified on EXHIBIT P.
(S) LABOR RELATIONS. Except as described on EXHIBIT J attached
hereto and made a part hereof, neither any Borrower nor any of its Subsidiaries
is a party to any collective bargaining agreement, and there are no material
grievances, disputes or controversies with any union or any other organization
of any Borrower's employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
(T) COMPLIANCE WITH LAWS. Each Borrower has duly complied in all
material respects with, and its Properties, business operations and leaseholds
are in compliance in all material respects with, the provisions of all federal,
state and local laws, rules and regulations applicable to such Borrower, its
Properties or the conduct of its business, including, without limitation, OSHA
and all Environmental Laws, and there have been no citations, notices or orders
of noncompliance issued to any Borrower or any of its Subsidiaries under any
such law, rule or regulation.
(U) SURETY OBLIGATIONS. Borrower is not obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into any agreement to assure payment, performance or completion of performance
of any undertaking or obligation of any Person.
(V) NO DEFAULTS. No event has occurred and no condition exists which
would, upon the execution and delivery of this Agreement or any Borrower's
performance hereunder, constitute a Default or an Event of Default. None of any
Borrower nor any of any Borrower's Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute, a default in the payment
of any Indebtedness to any Person for Money Borrowed.
(W) BROKERS. Except as provided in the Offering Memorandum, there
are no claims for brokerage commissions, finder's fees or investment banking
fees in connection with the transactions contemplated by this Agreement, for
which Borrower is responsible.
(X) MANAGEMENT FEES. Except as permitted pursuant to SECTION 9.2(J)
hereof, Borrower is not now required and will not in the future be required to
pay any management fees to Equus or to any other Person.
47
(Y) BUSINESS LOCATIONS; AGENT FOR PROCESS. During the preceding
seven year period, Borrower has had no office, place of business or agent for
service of process located in any state or county other than as shown on EXHIBIT
B.
(Z) TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between any Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of such Borrower, or with any material supplier, and there exists no
present condition or state of facts or circumstances which would materially
affect adversely any Borrower or prevent any Borrower from conducting such
business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
(AA) LEASES. EXHIBIT K attached hereto is a complete listing of all
capitalized leases of Borrower and EXHIBIT L attached hereto is a complete
listing of all operating leases of Borrower (excluding any operating leases for
copiers and other office equipment).
(BB) INVESTMENT COMPANY ACT. Borrower is not an "investment
company" and is not "controlled" by any "investment company", (within the
meaning of the Investment Company Act of 1940, as amended) except Equus,
which is a "business development company."
8.2. REAFFIRMATION. Each request for a Loan made by Borrower pursuant to
this Agreement or any of the other Loan Documents shall constitute (i) an
automatic representation and warranty by Borrower to Agent and Lenders that
there does not then exist any Default or Event of Default and (ii) a
reaffirmation as of the date of said request that all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
are true in all material respects except for any changes in the nature of
Borrower's business or operations that would render the information contained in
any exhibit (other than EXHIBIT H) attached hereto either inaccurate or
incomplete, so long as Lenders have consented to such changes or such changes
are not restricted or prohibited by this Agreement.
8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower covenants,
warrants and represents to Agent and Lenders that all representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall be true at the time of Borrower's execution of this Agreement
and the other Loan Documents, and shall survive the execution, delivery and
acceptance thereof by Agent, Lenders and the parties thereto and the closing of
the transactions described therein or related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Agent or to any Lender,
each Borrower covenants that, unless otherwise consented to by Lenders in
writing, it shall:
48
(A) TAXES AND LIENS. Pay and discharge, and cause each Subsidiary to
pay and discharge, all taxes, assessments and governmental charges upon it, its
income and Properties as and when such taxes, assessments and charges are due
and payable (and, if requested by any Lender, provide Agent and each Lender with
proof that such Borrower or such Subsidiary has done so), except and to the
extent only that such taxes, assessments and charges are being actively
contested in good faith and by appropriate proceedings, Borrower maintains
adequate reserves on its books therefor and the nonpayment of such taxes,
assessments and charges does not result in a Lien upon any Properties or
Borrower other than a Permitted Lien. Borrower shall also pay and discharge any
lawful claims which, if unpaid, might become a Lien against any of Borrower's
Properties except for Permitted Liens.
(B) TAX RETURNS. File, and cause each Subsidiary to file, all
federal, state and local tax returns and other reports such Borrower or such
Subsidiary is required by law to file and maintain adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed upon
it, its income, or its profits, or upon any Property belonging to it.
(C) PAYMENT OF BANK CHARGES. Pay to Agent and/or Lenders, on demand,
any and all fees, costs or expenses which Agent or any Lender pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to such Borrower or any other Person on behalf of such Borrower
proceeds of loans made by any Lender to such Borrower pursuant to this Agreement
and (ii) the depositing for collection, by any Lender, of any check or item of
payment received or delivered to Agent or any Lender on account of the
Obligations.
(D) BUSINESS AND EXISTENCE. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its separate corporate existence and all
rights, privileges, and franchises in connection therewith, and maintain, and
cause each Subsidiary to maintain, its qualification and good standing in all
states in which such qualification is necessary.
(E) MAINTAIN PROPERTIES. Maintain, and cause each Subsidiary to
maintain, its Properties in good condition and make, and cause each Subsidiary
to make, all necessary renewals, repairs, replacements, additions and
improvements thereto, reasonable wear and tear excepted.
(F) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, with all laws, ordinances, governmental rules and regulations to which
it is subject, including, without limitation, all OSHA and Environmental Laws,
and obtain and keep in force any and all licenses, permits, franchises, or other
governmental authorizations necessary to the ownership of its Properties or to
the conduct of its business, which violation or failure to obtain might
materially and adversely affect the business, prospects, profits, Properties, or
financial condition of Borrower.
(G) ERISA COMPLIANCE. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to each Plan; (ii) promptly after the filing thereof, furnish to
Agent copies of any annual report required to be filed pursuant to ERISA in
connection with each Plan and any other employee
49
benefit plan of it and its Affiliates subject to said Section; (iii) notify
Agent as soon as practicable of any Reportable Event and of any additional act
or condition arising in connection with any Plan which Borrower believes might
constitute grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States district
court of a trustee to administer the Plan; and (iv) furnish to Agent, promptly
upon Agent's request therefor, such additional information concerning any Plan
or any other such employee benefit plan as may be reasonably requested.
(H) BUSINESS RECORDS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions.
(I) VISITS AND INSPECTIONS. Permit representatives of Agent and
Lenders, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower,
inspect and make extracts from its books and records, and discuss with its
officers, its employees and its independent accountants, Borrower's business,
assets, liabilities, financial condition, business prospects and results of
operations.
(J) FINANCIAL STATEMENTS. Cause to be prepared and furnished to
Agent and each Lender the following (all to be kept and prepared in accordance
with GAAP applied on a consistent basis, unless Borrower's certified public
accountants concur in any change therein and such change is disclosed to Agent
and each Lender and is consistent with GAAP):
(i) as soon as possible, but not later than one hundred twenty (120)
days after the close of each fiscal year of Borrower, audited Consolidated
financial statements of Parent and its Consolidated Subsidiaries as of the end
of such year consisting of a Consolidated balance sheet, income statement and
statement of cash flows, accompanied by the unmodified report of independent
certified public accountants of recognized national standing or otherwise
acceptable to Agent (except for a modification for a change in accounting
principles with which the independent public accountants concur), together with
consolidating financial statements of Parent and its Consolidated Subsidiaries
as of the end of such year, consisting of balance sheets, income statements and
statements of cash flows, certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting in all
material respects the Consolidated financial position and results of operations
of Parent and its Consolidated Subsidiaries for such period (except for any
change in accounting principles with which the independent public accountants
concur);
(ii) as soon as possible, but not later than forty-five (45) days
after the end of each month hereafter (including the calendar month ending on
the last day of the fiscal year), unaudited interim Consolidated financial
statements of Parent and its Consolidated Subsidiaries, consisting of a
Consolidated balance sheet, income statement and statement of cash flows,
together with consolidating financial statements of Parent and its Consolidated
Subsidiaries as of the end of such month and of the portion of Parent's fiscal
year then elapsed, consisting of balance sheets, income statements and
statements of cash flows, certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting in all
50
material respects the Consolidated financial position and results of operations
of Parent and its Consolidated Subsidiaries for such month and period subject
only to changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower files
with the Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange; and
(iv) such other data and information (financial and otherwise) as
Agent and Lenders, from time to time, may reasonably request, bearing upon or
related to the Collateral, such Borrower's financial condition or results of
operations, including, without limitation, federal income tax returns of such
Borrower, accounts payable ledgers, and bank statements.
Concurrently with the delivery of the financial statements described in CLAUSE
(I) of this SECTION 9.1(J), Borrower shall forward or cause to be forwarded to
Agent and each Lender a copy of the accountant's letter to Borrower's management
that is prepared in connection with such financial statements. Concurrently with
the delivery of the financial statements described in CLAUSES (I) AND (II) of
this SECTION 9.1(J), Borrower shall cause to be prepared and furnished to Agent
and each Lender a certificate from the principal financial officer of Borrower
certifying to Agent and each Lender that, to the best of his knowledge, Borrower
has kept, observed, performed and fulfilled each and every covenant, obligation
and agreement binding upon Borrower in this Agreement and the other Loan
Documents and that no Default or Event of Default has occurred, or, if such
Default or Event of Default has occurred, specifying the nature thereof.
(K) NOTICES TO AGENT AND LENDERS. Notify Agent and each Lender in
writing: (i) promptly after Borrower's learning thereof, of the commencement of
any litigation affecting Borrower or any of its Properties, whether or not the
claim is considered by Borrower to be covered by insurance, and of the
institution of any administrative proceeding which may materially and adversely
affect Borrower's operations, financial condition, Properties or business or
Agent's Lien, for the benefit of Lenders, upon any of the Collateral; (ii) at
least sixty (60) days prior thereto, of Borrower's opening of any new office or
place of business or Borrower's closing of any existing office or place of
business; (iii) promptly after Borrower's learning thereof, of any material
labor dispute to which Borrower may become a party, any material strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which it is a party or by which it is bound; (iv)
promptly after Borrower's learning thereof, of any material default by Borrower
under any note, indenture, loan agreement, mortgage, lease, deed, guaranty or
other similar agreement relating to any Indebtedness of Borrower exceeding
$500,000; (v) promptly after the occurrence thereof, of any Default or Event of
Default; (vi) promptly after the occurrence thereof, of any default by any
obligor under any note or other evidence of Indebtedness payable to Borrower in
excess of $500,000; (vii) promptly after the rendition thereof, of any judgment
in an amount in excess of $500,000 rendered against any Borrower or any of its
Subsidiaries; and (viii) promptly after Borrower's learning thereof, the
occurrence of any default or event of default under or pursuant to the
provisions of the Parent
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Senior Notes, the Indenture or any other document executed in connection with
the Parent Senior Notes.
(L) LANDLORD AND STORAGE AGREEMENTS. Provide Agent with copies of
all agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Inventory or other Collateral may, from time to time, be
kept.
(M) SUBORDINATIONS. Provide Agent and each Lender with a debt
subordination agreement in form and substance satisfactory to Lenders, executed
by Borrower and any Person who is an officer, director or Affiliate of Borrower
to whom Borrower is or hereafter becomes indebted for Money Borrowed,
subordinating in right of payment and claim all of such Indebtedness and any
future advances thereon to the full and final payment and performance of the
Obligations.
(N) FURTHER ASSURANCES. At Agent's request, promptly execute or
cause to be executed and deliver to Agent any and all documents, instruments and
agreements deemed necessary by Agent to give effect to or carry out the terms or
intent of this Agreement or any of the other Loan Documents. Without limiting
the generality of the foregoing, if any of the Accounts, the aggregate face
value of which exceeds $250,000, arises out of a contract with the United States
of America, or any department, agency, subdivision or instrumentality thereof,
Borrower shall promptly notify Agent thereof in writing and shall execute any
instruments and take any other action required or requested by Agent to comply
with the provisions of the Federal Assignment of Claims Act.
(O) COMPLIANCE CERTIFICATE. As soon as possible, but not later than
forty-five (45) days after the end of each month, or more frequently if
requested by Agent, cause the principal financial officer of Borrower to prepare
and deliver to Agent and Lenders a Compliance Certificate in the form of EXHIBIT
N attached hereto, with appropriate insertions and accompanied by detail showing
the required calculations.
(P) PROJECTIONS. As soon as available, and in any event no later
than (i) thirty (30) days prior to the end of each fiscal year of Borrower,
deliver to Agent and Lenders preliminary three-year Projections of Borrower and
(ii) January 15 of each fiscal year of Borrower, deliver to Agent and Lenders
final board approved three-year Projections of Borrower, each of which shall be
in form and substance satisfactory to Lenders and which for the current fiscal
year shall be month by month, and for the following two years shall be year by
year.
(Q) TAX CERTIFICATE. Within ninety (90) days after the end of each
fiscal year of Borrower, or more frequently if requested by Agent, cause the
chief financial officer of Borrower to prepare and deliver to Agent a
certificate in the form of EXHIBIT Q attached hereto, with appropriate
insertions.
(R) BORROWING BASE REPORT. As soon as possible, but not later than
twenty (20) days after the end of each month, or more frequently if requested by
Agent, cause the principal financial officer of Borrower to prepare and deliver
to Agent a Borrowing Base Report
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in the form of EXHIBIT U attached hereto ("BORROWING BASE REPORT"), with
appropriate insertions and accompanied by the relevant supporting materials.
9.2. NEGATIVE COVENANTS. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Agent or any Lender, each Borrower
covenants that, unless Lenders have first consented thereto in writing, it will
not:
(A) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate, or
permit any Subsidiary to merge or consolidate, with any Person, except a
consolidation or merger involving only Borrower and one or more wholly owned
Subsidiaries; nor acquire all or any substantial part of the Properties of any
Person.
(B) LOANS. Make, or permit any Subsidiary to make, any loans or
other advances of money to any Person, including, without limitation, any of
Borrower's Affiliates, officers or employees, other than salary, travel
advances, advances against commissions and other similar advances in the
ordinary course of business; PROVIDED, HOWEVER, (i) Borrower may make loans or
similar advances of money to its officers or employees in an aggregate amount,
when combined with the outstanding principal amount of all indebtedness of
Borrower's officers and employees guaranteed at that time by Borrower or a
Subsidiary of Borrower, not to exceed $1,000,000 at any particular date, and
(ii) Borrower and each Subsidiary may make loans or other advances of money to
the extent such loans or other advances of money are permitted pursuant to the
provisions of SECTION 9.2(C)(III) hereof.
(C) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to exist,
or permit any Subsidiary to create incur or suffer to exist, any Indebtedness,
except: (i) Obligations owing to Agent or any Lender; (ii) Borrower Subordinated
Debt; (iii) Indebtedness of Morning Sun to Brazos and of Brazos to Morning Sun,
and, if consented to by Lenders, Indebtedness of any other Subsidiary to
Borrower; (iv) unsecured accounts payable to trade creditors which are not aged
more than one hundred eighty (180) days from billing date and current operating
expenses (other than for Money Borrowed) which are not more than sixty (60) days
past due, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are actively being contested in good
faith and by appropriate and lawful proceedings and Borrower shall have set
aside such reserves, if any, with respect thereto as are required by generally
accepted accounting principles and deemed adequate by Borrower and its
independent public accountants; (v) Capitalized Lease Obligations or purchase
money Indebtedness incurred to finance Capital Expenditures permitted by SECTION
9.2(L); (vi) Obligations to pay Rentals permitted by SECTION 9.2(X); (vii)
contingent liabilities arising out of endorsements of checks and other
negotiable instruments for deposit or collection in the ordinary course of
business; (viii) accruals (including interest accruals) in accordance with GAAP
in the normal course of Borrower's business; (ix) guarantees of the Parent
Senior Notes; (x) guarantees of Indebtedness otherwise permitted pursuant to the
provisions of this SECTION 9.2(C); and (xi) Indebtedness not included in CLAUSES
(I) THROUGH (X) above which does not exceed at any time, in the aggregate, the
sum of $500,000.
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(D) AFFILIATE TRANSACTIONS. Enter into, or be a party to, or permit
any Subsidiary to enter into or be a party to, any transaction with any
Affiliate or stockholder, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's or such Subsidiary's business and upon
fair and reasonable terms which are fully disclosed to Agent and each Lender and
are no less favorable to Borrower than would obtain in a comparable arm's length
transaction with a Person not an Affiliate or stockholder of Borrower or such
Subsidiary.
(E) PARTNERSHIPS OR JOINT VENTURES. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
(F) ADVERSE TRANSACTIONS. Enter into any transaction, or permit any
Subsidiary to enter into any transaction, which materially and adversely affects
or may materially and adversely affect the Collateral or Borrower's ability to
repay the Obligations or permit or agree to any material extension, compromise
or settlement or make any change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto, other than
discounts, compromises, settlements and allowances in the ordinary course of
business, all of which shall be reflected in the Schedules of Accounts submitted
to Agent pursuant to SECTION 5.2 of this Agreement.
(G) GUARANTIES. Guarantee, assume, endorse or otherwise, in any way,
become directly or contingently liable with respect to the Indebtedness of any
Person (other than a Borrower) except (i) by endorsement of instruments or items
of payment for deposit or collection, or (ii) guaranty agreements executed by
each Borrower of payment of the Parent Senior Notes, provided each such guaranty
agreement is unsecured.
(H) LIMITATION ON LIENS. Create or suffer to exist, or permit any
Subsidiary to create or suffer to exist, any Lien upon any of its Property,
income or profits, whether now owned or hereafter acquired, except: (i) Liens at
any time granted in favor of Agent or any Lender; (ii) Liens for taxes
(excluding any Lien imposed pursuant to any of the provisions of ERISA) not yet
due or being contested as permitted by SECTION 9.1(A) hereof, but only if in
Agent's judgment such Lien does not affect adversely Lenders' rights or the
priority of Agent's Lien, for the benefit of Lenders, in the Collateral; (iii)
Liens securing the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons for labor, materials, supplies or
rentals incurred in the ordinary course of Borrower's business, but only if the
payment thereof is not at the time required or is being actively contested in
good faith and by appropriate proceedings (with adequate reserves maintained on
Borrower's books to cover the amount of such payment) and only if such Liens are
junior to the Liens in favor of Agent, for the benefit of Lenders, on terms
satisfactory to Lenders; (iv) Liens resulting from deposits made in the ordinary
course of business in connection with workmen's compensation, unemployment
insurance, social security and other like laws; (v) attachment, judgment and
other similar non-tax Liens arising in connection with court proceedings, but
only if and for so long as the execution or other enforcement of such Liens is
and continues to be effectively stayed and bonded on appeal in a manner
satisfactory to Lenders for the full amount thereof, the validity and amount of
the claims secured thereby are being actively contested in good faith and by
appropriate lawful proceedings and such Liens do not, in the aggregate,
materially detract, in the judgment of
54
Agent, from the value of the Property of such Borrower or materially impair the
use thereof in the operation of such Borrower's business; (vi) reservations,
exceptions, easements, rights of way, and other similar encumbrances affecting
real Property, provided that, in Agent's judgment, they do not in the aggregate
materially detract from the value of said Properties or materially interfere
with their use in the ordinary conduct of Borrower's business; (vii) Liens
securing Indebtedness of a Subsidiary to Borrower or another Subsidiary; (viii)
such other Liens as appear on EXHIBIT M attached hereto; (ix) Capital Lease
Obligations or purchase money Liens securing Indebtedness incurred to finance
Capital Expenditures permitted by SECTION 9.2(L); and (x) such other Liens as
Lenders may hereafter approve in writing.
(I) SUBORDINATED DEBT. Make, or permit any Subsidiary to make, any
prepayment of any part or all of any Borrower Subordinated Debt, or otherwise
repurchase, redeem or retire any instrument evidencing any such Borrower
Subordinated Debt prior to maturity; or enter into any agreement (oral or
written) which could in any way be construed to amend, modify, alter or
terminate any one or more instruments or agreements evidencing or relating to
any Borrower Subordinated Debt.
(J) DISTRIBUTIONS. Declare or make, or permit any Subsidiary to
declare or make any Distributions; PROVIDED, HOWEVER, that notwithstanding the
foregoing, Borrower may make the following described Distributions, provided
that no Default or Event of Default shall exist hereunder, either before or
after giving effect to such Distributions: (i) Borrower may make Distributions
to Parent pursuant to the Tax Sharing Agreement, but only insofar as such
Distributions do not exceed the income tax liability for which Borrower would
otherwise have been responsible for as if it were not a member of the
consolidated group for federal income tax purposes of Parent, Embroidery and
Borrower, (ii) Borrower may make Distributions to Parent up to an aggregate
amount of $300,000 per fiscal year to cover the aggregate amount of management
fees of Parent and the annual operating expenses of Parent incurred in the
normal course of Parent's business; and (iii) Borrower may make Distributions to
Parent equal in amount to regularly scheduled interest payments at such time
required to be paid by Parent pursuant to the Parent Senior Notes and
Distributions to Parent equal in amount to the Liquidated Damages (as such term
is defined in the Offering Memorandum), if any, at such time required to be paid
by Parent pursuant to the Parent Senior Notes.
(K) SUBSIDIARIES. Hereafter create any Subsidiary or divest itself
of any material assets by transferring them to any Subsidiary to whose existence
Lenders have consented.
(L) CAPITAL EXPENDITURES. Make Capital Expenditures which, in the
aggregate, as to Brazos and its Subsidiaries, exceed $3,000,000 during any
fiscal year of Borrower.
(M) BUSINESS LOCATIONS. Transfer its principal place of business or
chief executive office, or open new manufacturing plants, or transfer existing
manufacturing plants, or maintain warehouses or records with respect to Accounts
or Inventory, to or at any locations other than those at which the same are
presently kept or maintained, as set forth on EXHIBIT B hereto (which shall be
updated quarterly so long as no Default or Event of Default exists and,
55
during the existence of a Default or Event of Default, as frequently as shall be
requested by Lenders), except upon at least 30 days prior written notice to
Agent and at least 30 days after the delivery to Agent of financing statements,
if required by Agent, in form satisfactory to Agent to perfect or continue the
perfection of Agent's Lien, for the benefit of Lenders, and security interest
hereunder.
(N) CHANGE OF BUSINESS. Enter into any new business or make any
material change in any of any Borrower's business objectives, purposes and
operations.
(O) DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of any
of its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of Borrower's business for so long as no Event
of Default exists hereunder, (ii) transfers of monies from Borrower's operating
account in the ordinary course of Borrower's business for so long as no Event of
Default exists hereunder, (iii) a transfer of Property to Brazos by a
Subsidiary, (iv) as long as no Default or Event of Default exists, (a)
dispositions of equipment which, in the aggregate, during any consecutive
twelve-month period have a fair market value or book value, whichever is less,
of $500,000 or less or (b) replacements of equipment that is substantially worn,
damaged or obsolete with equipment of like kind, function and value, provided
that the replacement equipment is free of Liens other than Permitted Liens, (v)
sale of the "Red Fox" division of Brazos, or (vi) dispositions expressly
authorized by this Agreement.
(P) NAME OF BORROWER. Use any corporate name (other than its own) or
any fictitious name, tradestyle or "d/b/a" except for the names disclosed on
EXHIBIT D attached hereto, unless Borrower shall have given Agent and each
Lender sixty days prior written notice of such new corporate name, fictitious
name, tradestyle or d/b/a.
(Q) XXXX-AND-HOLD SALES, ETC. Make a sale to any customer on a
xxxx-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
(R) USE OF AGENT'S OR A LENDER'S NAME. Without the prior written
consent of Agent or such Lender, use the name of Agent or such Lender or the
name of any Affiliates of Lender in connection with any of Borrower's business
or activities, except in connection with internal business matters, as required
in dealings with governmental agencies and financial institutions and to trade
creditors of Borrower solely for credit reference purposes.
(S) MARGIN SECURITIES. Own, purchase or acquire (or enter into any
contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Agent shall have received an opinion of counsel
satisfactory to Agent to the effect that such purchase or acquisition will not
cause this Agreement to violate Regulations G, T, U or X or any other regulation
of the Federal Reserve Board then in effect.
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(T) RESTRICTED INVESTMENT. Make or have, or permit any Subsidiary to
make or have, any Restricted Investment.
(U) FISCAL YEAR. Change, or permit any Subsidiary to change, its
fiscal year, or permit any Subsidiary to have a fiscal year different from that
of Brazos.
(V) STOCK OF SUBSIDIARY, ETC. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary of such Borrower, except in connection
with a transaction permitted under SECTION 9.2(A), or permit any Subsidiary to
issue any additional shares of its capital stock except director's qualifying
shares.
(W) LEASES. Become a lessee under any operating lease (other than a
lease under which any Borrower is lessor) of Property if the aggregate Rentals
payable during any current or future period of twelve consecutive months under
the lease in question and all other leases under which such Borrower is then
lessee would exceed $6,000,000.00 The term "RENTALS" means, as of the date of
determination, all payments which the lessee is required to make by the terms of
any lease.
(X) TAX CONSOLIDATION. File or consent to the filing of any
consolidated income tax return with any Person other than its Subsidiaries;
PROVIDED; HOWEVER; that notwithstanding the foregoing, Agent and Lenders hereby
agree that each Borrower has with Embroidery and Parent become a member of a
consolidated group of corporations (consisting of each Borrower, Embroidery and
Parent) for accounting and federal income tax purposes, and that in connection
therewith, each Borrower has entered into the Tax Sharing Agreement under which
such Borrower will be responsible to pay to Parent no more than such Borrower's
proportionate share of the consolidated federal income tax liability that it
would otherwise have been required to pay as if such Borrower was not a member
of such consolidated group of corporations.
9.3. SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any obligations to Agent and/or any Lender,
Borrower covenants that, unless otherwise consented to by Lenders in writing, it
shall:
(A) INDEBTEDNESS TO NET WORTH RATIO. As of the end of each fiscal
quarter of Borrower, starting with the fiscal quarter ending September 30, 1997,
maintain a ratio of Borrower's Consolidated Indebtedness to Borrower's
Consolidated Net Worth of no more than 1.00 to 1.00. For the purposes of this
ratio, the term "Indebtedness" (i) shall include at any relevant calculation
date the aggregate undrawn amount of all then outstanding Letters of Credit, and
(ii) shall NOT include any guarantee by Borrower of the Parent Senior Notes.
(B) FIXED CHARGE RATIO. As of the end of each fiscal month of
Borrower ending closest to the date indicated below, maintain a Fixed Charge
Ratio of not less than the ratio indicated below for the time period indicated
below:
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RELEVANT TIME PERIOD RATIO
(i) Three-month period ending September 27, (i) 1.25 to 1.00
1997
(ii) Six-month period ending December 27, (ii) 1.25 to 1.00
1997
(iii) Nine-month period ending Xxxxx 00, 0000 (xxx) 1.25 to 1.00
(iv) Twelve-month period ending June 27, 1998 (iv) 1.25 to 1.00
Twelve-month period ending on the last
(v) day of each thereafter occurring fiscal (v) 1.25 to 1.00
quarter
(C) ADJUSTED NET EARNINGS FROM OPERATIONS. Achieve during each fiscal year
of Borrower, beginning with the fiscal year ending on December 27, 1997,
Adjusted Net Earnings From Operations of at least
$1,000,000, as determined on a Consolidated basis.
SECTION 10. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Agent and
Lenders under the other Sections of this Agreement, it is understood and agreed
that Lenders will not make any Loan under SECTION 2 of this Agreement unless and
until each of the following conditions has been and continues to be satisfied or
waived, all in form and substance satisfactory to Agent and its counsel:
10.1. DOCUMENTATION. Agent shall have received the following documents
and materials, each to be in form and substance satisfactory to Agent and its
counsel:
(A) This Agreement, duly executed by Borrower;
(B) (i) Revolving Credit Note in favor of Fleet, duly executed by
Borrower, in the form of EXHIBIT A-1 attached hereto, and (ii) Revolving Credit
Note in favor of Boston, duly executed by Borrower, in the form of EXHIBIT A-2
attached hereto;
(C) The Guaranty Agreements, respectively duly executed by Parent
and by Morning Sun;
(D) copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Agent, for the benefit of Lenders, in the Collateral
(including the assets acquired in the Transaction) and evidence to Agent and
Lenders that such Liens constitute valid and perfected security interests and
Liens, having the Lien priority specified in SECTION 4.2(B) hereof;
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(E) landlord consent letters from such of the landlords as shall be
required by Agent, in form and substance satisfactory to Lenders, as to each new
location of Borrower resulting from the Transaction;
(F) good standing certificates for each Borrower, issued within
fifteen (15) days before the Closing Date by the Secretary of State or other
appropriate official of such Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of such Borrower's business activities or the
ownership of its Properties necessitates qualification;
(G) a closing certificate signed by the President and Chief
Financial Officer of each Borrower dated as of the Closing Date, stating that
(i) the representations and warranties set forth in SECTION 8 hereof are true
and correct on and as of such date, (ii) each Borrower is on such date in
compliance with all the terms and provisions set forth in this Agreement, and
(iii) on such date no Default or Event of Default has occurred or is continuing;
(H) evidence satisfactory to Agent of the satisfaction (or waiver by
Brazos and Parent) of all conditions precedent to the Asset Purchase Agreement,
and a copy thereof, duly executed by the parties thereto, and evidence that the
Premier Asset Acquisition has been consummated in accordance with the provisions
of the Asset Purchase Agreement;
(I) evidence satisfactory to Agent of the satisfaction (or waiver by
Parent) of all conditions precedent to the Stock Purchase Agreement, and a copy
thereof, duly executed by the parties thereto, and evidence that the Morning Sun
Stock Acquisition has been consummated in accordance with the provisions of the
Stock Purchase Agreement;
(J) evidence satisfactory to Agent of the Morning Sun Merger;
(K) evidence satisfactory to Agent of the consummation by Parent to
Brazos of the Morning Sun Contribution;
(L) evidence satisfactory to Agent of the consummation of the Senior
Notes Placement, including without limitation, evidence that the proceeds
received by Parent from the Senior Notes Placement have been used, at least in
part, to:
(i) pay the cash portion of the purchase price for the Morning
Sun Stock Acquisition and pay in full the Indebtedness for Money
Borrowed of SolarCo and Old Morning Sun and any indebtedness for
Money Borrowed assumed by Borrower or Parent in connection with the
Morning Sun Stock Acquisition;
(ii) pay the cash portion of the purchase price for the
Premier Asset Acquisition and pay off in full any Indebtedness for
Money Borrowed (other than the Contingent Amount and the Convertible
Note) assumed by Borrower or Parent in connection with the Premier
Asset Acquisition;
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(iii) pay off existing Indebtedness for Money Borrowed of
Parent;
(iv) pay off in full all subordinated debt of Parent and
Brazos existing prior to the consummation of the Transaction;
(v) pay off in full the Term Loan; and
(vi) pay off existing Indebtedness for Money Borrowed of
Brazos.
(M) certifications, documentation and such other evidence and
materials satisfactory to Agent of the consummation of the Transaction;
(N) the written opinion of Xxxxxx & Xxxxxx, L.L.P., counsel to
Borrower, regarding Borrower, and the execution of this Agreement and the Other
Agreements executed in connection with this Agreement, and the transactions
contemplated hereby, to be in form and substance satisfactory to Lenders, in
their sole discretion;
(O) written instructions from Borrower directing the application of
proceeds of the initial Loans to be made hereunder;
(P) certified copies of Borrower's casualty insurance policies,
together with endorsements naming Agent, for the benefit of Lenders, as loss
payee and as mortgagee pursuant to a standard mortgagee clause, and certified
copies of Borrower's liability insurance policies, together with endorsements
naming Agent, for the benefit of Lenders, as a co-insured;
(Q) agreements in form and substance satisfactory to Lenders and
duly executed by Borrower, giving Agent, on behalf of Lenders, the right and
license to use the equipment of Borrower to finish out the Inventory of Borrower
and the right and license to use such software, trademarks and other
intellectual property of Borrower as Lenders shall determine will facilitate the
sale of Borrower's Inventory and the billing and collection of Borrower's
Accounts, each such right and license to be on terms and conditions acceptable
to Lenders; and
(R) such other documents, instruments and agreements as Lenders or
their legal counsel shall reasonably request.
10.2. OTHER CONDITIONS. The following conditions have been and shall
continue to be satisfied:
(A) No Default or Event of Default shall have occurred and be
continuing unless such Default or Event of Default shall have been specifically
waived in writing by Lenders;
(B) The representations and warranties contained herein and the Loan
Documents shall be true and correct as of the date hereof, as if made on the
date hereof;
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(C) Borrower shall have paid to Agent, for its account and the
account of Lenders, in immediately available funds, the restructuring fee set
forth in SECTION 3.1(J), which closing fee is non-refundable and shall be deemed
fully earned as of the date of execution of this Agreement;
(D) On the date of the funding to Borrower of the initial Loans
hereunder, the amount of the Borrowing Base after giving effect to the Loans
made on such date, shall exceed the aggregate amount of the outstanding
Revolving Credit Loans by at least $20,000,000, and Borrower shall have provided
Agent with a Borrowing Base Certificate to the foregoing effect;
(E) To the extent proceeds from the Senior Notes Placement are
transferred from Parent to either or both Borrowers or from one Borrower to the
other Borrower, each such transfer shall be in the form of contributions to
capital rather than debt;
(F) The financial covenants in the Parent Senior Notes, the
Indenture and in all other documents executed in connection with the Parent
Senior Notes shall be consistent with those contained in the Offering Memorandum
or shall otherwise have been reviewed and approved by Lenders;
(G) Borrower shall have delivered to Lenders (i) a debt
subordination agreement, in form and substance satisfactory to Lenders, executed
by Brazos and Premier, subordinating in right of payment and claim the
Contingent Amount, and (ii) a debt subordination agreement in form and substance
satisfactory to Lenders, executed by Parent and Seller, subordinating in right
of payment and claim the Convertible Note, in accordance with the terms thereof;
and
(H) All corporate proceedings taken in connection with the
transactions contemplated by this Agreement and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lenders and their
legal counsel.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) PAYMENT OF NOTES. Borrower shall fail to pay any installment of
principal, interest or premium, if any, owing on any Note on the due date of
such installment.
(B) PAYMENT OF OTHER OBLIGATIONS. Borrower shall fail to pay any of
the Obligations that are not evidenced by the Notes on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise).
(C) MISREPRESENTATIONS. Any warranty, representation, or other
statement made or furnished to Agent and/or Lenders by or on behalf of Borrower
or Guarantor or in any
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instrument, certificate or financial statement furnished in compliance with or
in reference to this Agreement or any of the other Loan Documents proves to have
been false or misleading in any material respect when made or furnished.
(D) BREACH OF COVENANTS. Borrower shall fail or neglect to perform,
keep or observe (i) any covenant contained in SECTIONS 4.3, 4.4, 4.5, 5.4(B),
9.1(F), 9.2 (other than 9.2(H)) or 9.3 of this Agreement, or (ii) any covenant
contained in SECTIONS 5.2, 9.1(A), 9.1(J), 9.1(O), 9.1(P) or 9.2(H) and the
breach of such covenant is not cured to Lenders' satisfaction within 10 days
after the sooner to occur of Borrower's receipt of notice of such breach from
Agent or the date on which such failure or neglect becomes known to any
executive officer of Borrower, or (iii) any other covenant contained in this
Agreement (other than a covenant a default in the performance or observance of
which is dealt with specifically elsewhere in this SECTION 11.1) and the breach
of such other covenant is not cured to Lenders' satisfaction within 15 days
after the sooner to occur of Borrower's receipt of notice of such breach from
Agent or the date on which such failure or neglect becomes known to any
executive officer of Borrower.
(E) DEFAULT UNDER OTHER AGREEMENTS. Any event of default shall occur
under, or Borrower shall default in the performance or observance of any term,
covenant, condition or agreement contained in, any of the Other Agreements and
such default shall continue beyond any applicable period of grace.
(F) DEFAULT UNDER SECURITY DOCUMENTS. Any event of default shall
occur under, or Borrower or any other Person party thereto shall default in the
performance or observance of any term, covenant, condition or agreement
contained in, any of the Security Documents and such default shall continue
beyond any applicable period of grace.
(G) OTHER DEFAULTS. (i) There shall occur any default or event of
default on the part of any Borrower (including specifically, but without
limitation, due to nonpayment) under any agreement, document or instrument to
which such Borrower is a party or by which such Borrower or any of its
respective Property is bound, creating or relating to any Indebtedness (other
than the Obligations) in excess of $250,000 if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of default or demand
for payment of such Indebtedness is made, or (ii) the occurrence of an "Event of
Default", as such term is defined in the Indenture.
(H) UNINSURED LOSSES; UNAUTHORIZED DISPOSITIONS. Any material loss,
theft, damage or destruction not fully covered by insurance (as required by this
Agreement and subject to reasonable deductibles), or sale, lease or encumbrance
of any of the Collateral or the making of any levy, seizure, or attachment
thereof or thereon except in all cases as may be specifically permitted by other
provisions of this Agreement.
(I) ADVERSE CHANGES. There shall occur any material adverse change
in the financial condition or business prospects of Borrower.
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(J) INSOLVENCY, ETC. Any Borrower or Guarantor shall cease to be
Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against any Borrower
or Guarantor under the Bankruptcy Code (if against a Borrower or Guarantor, the
continuation of such proceeding for more than 30 days), or any Borrower or
Guarantor shall make any offer of settlement, extension or composition to their
respective unsecured creditors generally.
(K) BUSINESS DISRUPTION; CONDEMNATION. There shall occur a cessation
of a substantial part of the business of any Borrower for a period which
significantly affects such Borrower's capacity to continue its business, on a
profitable basis; or any Borrower shall suffer the loss or revocation of any
material license or permit now held or hereafter acquired by such Borrower which
is necessary to the continued or lawful operation of its business; or any
Borrower shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of
its business affairs; or any material lease or agreement pursuant to which any
Borrower leases, uses or occupies any Property shall be canceled or terminated
prior to the expiration of its stated term; or any part of the Collateral shall
be taken through condemnation or the value of such Property shall be impaired
through condemnation.
(L) ERISA. A Reportable Event shall occur which Lenders shall
determine in good faith constitutes grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed, or
if any Borrower is in "default" (as defined in SECTION 4219(C)(5) of ERISA) with
respect to payments to a Multi-Employer Plan resulting from Borrower's complete
or partial withdrawal from such Plan.
(M) LITIGATION. Any Borrower or any Affiliate of any Borrower, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Agent, for the benefit of Lenders.
(N) JUDGMENTS. Any money judgment, writ of attachment or similar
process is entered or filed against any Borrower or any of its Property and
results in the creation or imposition of any Lien that is not a Permitted Lien
or any money judgment or writ of attachment or similar process of greater than
$500,000 is filed against any Borrower or any of its Property and remains
undischarged or unstayed for more than thirty (30) days.
(O) SUBORDINATED DEBT. Borrower shall make any payment on account of
Borrower Subordinated Debt other than a Permitted Payment or Parent shall make
any payment on the Convertible Note not specifically permitted by the provisions
of the subordination agreement among Premier, Parent and Lenders.
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(P) CHANGE IN CONTROL. (i) A Change in Control shall occur, or (ii)
the occurrence of a "Change of Control", as defined in the Indenture.
(Q) DEFAULT UNDER SUBORDINATED DEBT DOCUMENTS. Any event of default
shall occur under, or any Person shall default in the performance or observance
of any term, covenant, condition or agreement contained in any instrument or
document evidencing or executed in connection with any Borrower Subordinated
Debt, including, without limitation, any subordination agreement.
(R) REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. Guarantor
shall revoke or attempt to revoke the Guaranty Agreement to which it is a party
or shall repudiate its liability thereunder or shall be in default under the
terms thereof.
(S) REVOCATION OF DISNEY LICENSES. Xxxx Disney Company and/or its
affiliates shall revoke all or substantially all of the licenses granted to any
Borrower by such entity.
(T) MANDATORY REDEMPTION OF PARENT SENIOR NOTES. The occurrence of
any event which triggers or gives any holder of any of the Parent Senior Notes
the right to require a mandatory redemption of all or any portion of the Parent
Senior Notes owned by or on behalf of such holder.
11.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Agent and/or Lenders to demand payment of any portion of the
Obligations payable on demand in accordance with SECTION 3.4 hereof, upon or at
any time after the occurrence of an Event of Default as above provided, all or
any portion of the Obligations due or to become due from Borrower to Agent
and/or any Lender (whether under this Agreement, or any of the other Loan
Documents or otherwise) shall, at Lenders' option, become at once due and
payable without presentment, demand, protest, notice of dishonor, notice of
default, notice of intent to accelerate, notice of acceleration, or any other
notice whatsoever, and Borrower shall forthwith pay to Agent, for the account of
Lenders, in addition to any and all sums and charges due, the entire principal
of and interest accrued on the Obligations.
11.3. REMEDIES. Upon and after the occurrence of an Event of Default,
Agent, with the prior consent of Lenders and on behalf of Lenders, shall have
and may exercise from time to time the following rights and remedies:
(A) All of the rights and remedies of a secured party under the Code
or under other applicable law, and all other legal and equitable rights to which
Agent or any Lender may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, and shall be in addition to
any other rights or remedies contained in this Agreement or any of the other
Loan Documents.
(B) The right to take immediate possession of the Collateral, and
(i) to require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Agent at a
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place designated by Agent which is reasonably convenient to both parties, and
(ii) to enter any of the premises of Borrower or wherever any of the Collateral
shall be located, and to keep and store the same on said premises until sold
(and if said premises be the Property of Borrower, Borrower agrees not to charge
Lender for storage thereof).
(C) The right to sell or otherwise dispose of all or any Inventory
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Agent, in its discretion, may
deem advisable. Borrower agrees that ten days written notice to Borrower of any
public or private sale or other disposition of such Collateral shall be
reasonable notice thereof, and such sale shall be at such locations as Lender
may designate in said notice. Agent shall have the right to conduct such sales
on Borrower's premises, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Agent shall have the right
to sell, lease or otherwise dispose of such Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent or any Lender may purchase
all or any part of such Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations.
(D) Agent, for the benefit of Lenders, is hereby granted a license
and a right to use, without charge, (i) Borrower's equipment, and all other
Property of Borrower deemed useful by Agent, in finishing out and preparing for
sale and selling any Collateral and (ii) Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, licenses and
advertising matter, or any Property of a similar nature, as it pertains to the
Collateral, in advertising for sale and selling any Collateral and in collecting
any of the Accounts, and Borrower's rights under all licenses and all franchise
agreements shall inure to Agent's and Lenders' benefit. Such rights and licenses
hereunder of Agent shall continue until the earlier to occur of (x) disposition
of all the Collateral and collection of all the Accounts or (y) payment in full
of all Obligations and termination of all obligations under this Agreement of
Agent and Lenders. As to licenses held by Borrower for the manufacture of
trademarked goods (such as from Xxxx Disney Company and Warner Bros.), Agent and
Lenders acknowledge that the foregoing sentences shall not entitle Agent or
Lender to manufacture or finish-out inventory in violation of the provisions of
such licenses. In addition to and not in limitation of the foregoing provisions,
Borrower agrees that if it can not legally grant to Agent, for the benefit of
Lenders, any of the licenses or rights described above, Borrower will use its
best efforts to obtain for Agent and Lenders substantially the same rights,
benefits and protections Agent and Lenders otherwise would have received from
the grant of such right or license.
(E) The proceeds realized from the sale of any Collateral may be
applied, after allowing two Business Days for collection, first to the costs,
expenses and reasonable attorneys' fees incurred by Agent in collecting the
Obligations, in enforcing the rights of Agent and Lenders under the Loan
Documents and in collecting, retaking, completing, protecting, removing,
storing, advertising for sale, selling and delivery any of the Collateral;
secondly, to interest due upon any of the Obligations; and thirdly, to the
principal of the Obligations and fourthly, at the option of Agent, to the
establishment of a cash collateral fund to be held as a reserve to fund future
65
drawings made under Letters of Credit issued by Agent or Bank and future LC
Payments. If any deficiency shall arise, Borrower shall remain liable to Agent
and Lenders therefor.
11.4. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Agent and/or any Lender or contained in any other
agreement between Agent or any Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Agent or any Lender to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such Liens, rights, powers and remedies, but
all such Liens, rights, powers, and remedies shall continue in full force and
effect until all Loans and all other Obligations owing or to become owing from
Borrower to Agent and/or any Lender shall have been fully satisfied, and all
Liens, rights, powers, and remedies herein provided for are cumulative and none
are exclusive.
SECTION 12. THE AGENT
12.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under the Loan Documents as are delegated to Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. With
respect to its Revolving Credit Commitment, the Advances made by it, and the
Note issued to it, Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include the Agent, in its capacity as a Lender. The Agent and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, Borrower and
its Affiliates, and any Person which may do business with Borrower or its
Affiliates, all as if Agent were not Agent hereunder and without any duty to
account therefor to Lenders.
12.2. NOTE HOLDERS. Agent may treat the payee of any Note as the holder
thereof until written notice of transfer shall have been filed with it signed by
such payee and in form satisfactory to Agent.
12.3. CONSULTATION WITH COUNSEL. Lenders agree that Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
12.4. DOCUMENTS. Agent shall not be under a duty to examine or pass upon
the validity, effectiveness, enforceability, genuineness or value of any of the
Loan Documents or any other instrument or document furnished pursuant thereto or
in connection therewith, and Agent shall be entitled to assume that the same are
valid, effective, enforceable and genuine and what they purport to be.
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12.5. RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving written notice thereof to Lenders and Borrower and the Agent may
be removed at any time with or without cause by any number of Lenders whose
aggregate Revolving Commitment Percentages total at least 51%. Upon any such
resignation or removal, Lenders shall have the right to appoint a successor
Agent reasonably acceptable to Borrower. If no successor Agent shall have been
so appointed by Lenders and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or Lenders' removal
of the retiring Agent, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent reasonably acceptable to Borrower. Upon the acceptance
by any Person of any appointment as successor Agent hereunder, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this SECTION 12
shall continue in effect for its benefit with respect to any actions taken or
omitted to be taken by it while it was acting as Agent.
12.6. RESPONSIBILITY OF AGENT. It is expressly understood and agreed that
the obligations of Agent under the Loan Documents are only those expressly set
forth in the Loan Documents and that Agent shall be entitled to assume that no
Default or Event of Default has occurred and is continuing, unless Agent has
actual knowledge of such fact or has received notice from Borrower or a Lender
that a Default or an Event of Default has occurred and is continuing and
specifying the nature thereof. Neither Agent nor any of its directors, officers
or employees shall be liable for any action taken or omitted to be taken by it
under or in connection with the Loan Documents, except for its own gross
negligence or willful misconduct. Agent shall incur no liability under or in
respect of any of the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties, or with respect to
anything which it may do or refrain from doing in the reasonable exercise of its
judgment or discretion, or which may seem to it to be necessary or desirable in
the premises.
Agent shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any Lender
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any document referred to or
provided for herein or for any failure by Borrower to perform any of its
obligations hereunder. Agent may employ agents and attorneys-in-fact and shall
not be answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
The relationship between Agent and each of the Lenders is only that of
agent and principal and has no fiduciary aspects. Nothing in this Agreement or
elsewhere contained shall be construed to impose on Agent any duties or
responsibilities other than those for which express provision is herein made. In
performing its duties and functions hereunder, Agent does not assume and shall
not be deemed to have assumed, and hereby expressly disclaims, any obligation or
responsibility
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toward or any relationship of agency or trust with or for Borrower. As to any
matters not expressly provided for by this Agreement, Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of Lenders and such instructions
shall be binding upon all Lenders; PROVIDED, HOWEVER, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or applicable law.
12.7. NOTICES OF EVENT OF DEFAULT. In the event that Agent shall have
acquired actual knowledge of any Event of Default or of an event which, with the
giving of notice or the lapse of time, or both, would constitute an Event of
Default, Agent shall promptly give notice thereof to the Lenders.
12.8. REQUESTS FOR INFORMATION. In the event that Agent shall have
received any information, notices, or documents of any kind which are not
required to be provided to Lenders pursuant to the terms of this Agreement,
Agent shall, upon any Lender's request, use its best efforts to provide copies
of the same to such Lender. In addition, contemporaneously with the giving of
the settlement notice pursuant to SECTION 2.3(C) hereof, Agent shall deliver to
each Lender an analysis of Borrower's Borrowing Base and availability as of the
preceding Business Day, detailed to show Collateral categories and ineligibles.
12.9. INDEPENDENT INVESTIGATION. Each of the Lenders severally represents
and warrants to Agent that it has made its own independent investigation and
assessment of the financial condition and affairs of the Borrower in connection
with the making and continuation of its participation in the Loans hereunder and
has not relied exclusively on any information provided to such Lender by Agent
in connection herewith, and each Lender represents, warrants and undertakes to
Agent that it shall continue to make its own independent appraisal of the
creditworthiness of Borrower while the Loans are outstanding or its Revolving
Credit Commitment hereunder is in force.
12.10. INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower), ratably according to their respective Revolving
Commitment Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by Agent under the Loan Documents,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's gross negligence or willful
misconduct.
12.11. BENEFIT OF SECTION 12. The agreements contained in SECTION 12
hereof are solely for the benefit of Agent and Lenders, and are not for the
benefit of, or to be relied upon by, Borrower, or any third party.
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SECTION 13. MISCELLANEOUS
13.1. POWER OF ATTORNEY. Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
agent, may, without notice to Borrower and in either Borrower's or Agent's name,
but at the cost and expense of Borrower:
(A) At such time or times hereafter as Agent or said agent may
determine, endorse Borrower's name on any checks, notes, acceptances, drafts,
money orders or any other evidence of payment or proceeds of the Collateral
which come into the possession of Agent or any Lender or under Agent's or any
Lender's control; and
(B) At such time or times upon or after the occurrence of an Event
of Default as Agent or its agent may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of Borrower's rights and
remedies with respect to the collection of the Accounts; (ii) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or any
legal proceedings brought to collect any of the Accounts or other Collateral;
(iii) sell or assign any of the Accounts and other Collateral upon such terms,
for such amounts and at such time or times as Agent deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lenders on account of the Obligations;
(viii) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral; (ix) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, and any other Collateral and
to which Borrower has access; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Agent's
determination, to fulfill Borrower's obligations under this Agreement.
13.2. INDEMNITY. BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND SHALL
DEFEND AGENT, LENDERS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS, COUNSEL
AND EMPLOYEES ("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES,
LIABILITIES, DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS EVER
SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF SUCH INDEMNIFIED PERSON, BUT
NOT
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INCLUDING ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE THE AGENT, LENDERS AND
EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN CONNECTION WITH THE
INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL OR THREATENED CLAIM,
ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH COSTS OF RESPONDING
TO DISCOVERY REQUESTS OR SUBPOENAS, REGARDLESS OF WHETHER AGENT, SUCH LENDER OR
SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO). WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS ASSERTED
AGAINST AGENT, ANY LENDER OR ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER
ANY ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S OR ANY OTHER
PERSON'S FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID OR HAZARDOUS WASTE
MATERIALS OR OTHER TOXIC SUBSTANCES. EACH INDEMNIFIED PERSON MAY SELECT ITS OWN
COUNSEL WITH RESPECT TO ANY LOSSES, IN ADDITION TO BORROWER'S COUNSEL, AND SHALL
BE INDEMNIFIED THEREFOR HEREUNDER. NOTWITHSTANDING ANY CONTRARY PROVISION OF
THIS AGREEMENT, THE OBLIGATION OF BORROWER UNDER THIS SECTION 13.2 SHALL SURVIVE
THE PAYMENT IN FULL OF THE LOANS AND THE TERMINATION OF THIS AGREEMENT.
13.3. MODIFICATION OF AGREEMENT. All modifications, consents, amendments
or waivers of any provision of any Loan Document, or consent to any departure by
Borrower therefrom, shall be effective only if the same shall be in writing and
concurred in by Lenders, and then shall be effective only in the specific
instance and for the purpose for which given.
13.4. REIMBURSEMENT OF EXPENSES. Without limiting Borrower's obligations
for payment of expenses as provided elsewhere in this Agreement or in any other
Loan Document, if, at any time or times prior or subsequent to the date hereof,
regardless of whether or not an Event of Default then exists or any of the
transactions contemplated hereunder are concluded, Agent or any Lender employs
counsel for advice or other representation, or incurs legal expenses or other
costs or out-of-pocket expenses in connection with: (A) the negotiation and
preparation of this Agreement or any of the other Loan Documents or any
amendment of or modification of this Agreement or any of the other Loan
Documents; or (B) the administration of this Agreement or any of the other Loan
Documents and the transactions contemplated hereby and thereby; (C) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents, or Borrower's
affairs (but excluding any litigation by Borrower against Agent, any Lender in
which Borrower is the prevailing party); (D) any attempt to enforce any rights
of Agent or any Lender against Borrower or any other Person which may be
obligated to Agent or any Lender by virtue of this Agreement or any of the other
Loan Documents, including, without limitation, the Account Debtors; (E) the
exercise or enforcement of any rights, remedies or privileges of Agent or any
Lender under the Loan Documents or applicable law; (F) the analysis of
information received in connection with any Loan Documents;
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(G) the audit of any Collateral or Borrower's books and records; (H) the
granting of any consents or waivers requested in connection with the Loan
Documents; (I) the collection of any Obligation; or (J) any attempt to inspect,
verify, protect, preserve, restore, collect, sell, liquidate or otherwise
dispose of or realize upon the Collateral; then, in any such event, the
reasonable attorneys' fees arising from such services and all expenses, costs,
charges and other fees of such counsel or of Agent or any Lender or relating to
any of the events or actions described in this SECTION 13.4 shall be payable, on
demand and upon presentation of an itemized statement, by Borrower to Agent or
such Lender, as the case may be, and shall be additional Obligations hereunder
secured by the Collateral. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include appraisal fees; audit fees;
accountants' fees, costs and expenses; court costs and expenses; photocopying
and duplicating expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram charges; secretarial overtime
charges; consulting fees, costs and expenses; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other services, and Agent or such Lender shall not be obligated to give Borrower
any notice prior to incurring any such expenses. Additionally, if any taxes
(excluding taxes imposed upon or measured by the net income of Agent or any
Lender) shall be payable on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the other
Loan Documents, or the creation of any of the Obligations hereunder, by reason
of any existing or hereafter enacted federal or state statute, Borrower will pay
all such taxes, including, but not limited to, any interest and penalties
thereon, and will indemnify and hold Agent or such Lender harmless from and
against liability in connection therewith.
13.5. INDULGENCES NOT WAIVERS. Agent's and/or Lenders' failure, at any
time or times hereafter, to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Agent or any Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Agent or any Lender of an Event of
Default under this Agreement or any of the other Loan Documents shall not
suspend, waive or affect any other Event of Default under this Agreement or any
of the other Loan Documents, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations contained in this
Agreement or any of the other Loan Documents and no Event of Default under this
Agreement or any of the other Loan Documents shall be deemed to have been
suspended or waived by Agent and/or Lenders, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is signed
by a duly authorized representative of Agent and directed to Borrower.
13.6. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
13.7. SUCCESSORS AND ASSIGNS; PARTICIPATIONS BY LENDER. This Agreement and
the other Loan Documents shall be binding upon and inure to the benefit of the
successors and assigns of
71
Borrower, Agent and Lenders; PROVIDED, HOWEVER, that Borrower may not sell,
assign or transfer any interest in this Agreement or any other Loan Document, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers and duties hereunder or thereunder. Any purported
assignment by Borrower in violation of this SECTION 13.7 shall be void, without
Lenders' prior written consent. Borrower hereby consents to Agent's and/or any
Lender's participation, sale, assignment, transfer or of the disposition, at any
time or times hereafter, of this Agreement, any other Loan Document, or any
other Obligations, or of any portion hereof or thereof, including, without
limitation, Agent's and Lenders' rights, title, interests, remedies, powers, and
duties hereunder or thereunder. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would have if it were the original "Agent" or "Lender" (as the
case may be) hereunder, Agent or Lender (as the case may be) shall be relieved
of all obligations hereunder upon any such assignment. In the case of a
participation, (i) each participating lender shall be entitled to receive all
information received by Agent regarding the creditworthiness of Borrower,
including, without limitation, information required to be disclosed to a
participant pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by
the Comptroller of the Currency (whether such participating lender is subject to
the circular or not), (ii) Borrower shall execute new Notes in favor of each
Lender and (iii) each Lender's pro rata share of the Loans shall be adjusted
accordingly.
13.8. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in SECTION 3.4 of
this Agreement and except as otherwise provided in any of the other Loan
Documents by specific reference to the applicable provision of this Agreement,
if any provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
13.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
13.10. NOTICE. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto shall be in writing and shall be sent by
certified or registered mail return receipt requested, by personal delivery
against receipt, or by telegraph or telex and, unless otherwise expressly
provided herein, shall be deemed to have been validly served, given or delivered
when delivered against receipt or one Business Day after deposit in the U.S.
mail postage prepaid, or, in the case of telegraphic notice, when delivered to
the telegraph company, or, in the case of telex notice, when sent, answerback
received, addressed as follows:
(A) If to Agent: Fleet Capital Corporation
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Loan Administration Manager
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with a courtesy
copy to: Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
(B) If to Borrower: Brazos, Inc.
Morning Sun, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: President
with a courtesy
copy to: Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
(C) If to Lenders: Fleet Capital Corporation
0000 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Loan Administration Manager
BankBoston, N.A.
000 Xxxxxxxxx Xxxxxx Xxxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Xxxxxxx X. XxXxxxx
with a courtesy
copy to: Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
or to such other address as each party may designate for itself by like notice
given in accordance with this SECTION 13.10; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Agent or any Lender pursuant to SECTIONS 2.3 or 3.3
shall not be effective until received by Agent or such Lender. Any written
notice that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party.
13.11. AGENT'S OR LENDERS' CONSENT. Whenever Agent's or Lenders' consent
is required to be obtained under this Agreement, any of the Other Agreements or
any of the Security Documents as a condition to any action, inaction, condition
or event, Agent or Lenders shall be authorized to give or withhold such consent
in its sole and absolute discretion (unless otherwise
73
specifically provided herein) and to condition its consent upon the giving of
additional collateral security for the Obligations, the payment of money or any
other matter.
13.12. DEMAND OBLIGATIONS. Nothing in this Agreement shall affect or
abrogate the demand nature of any portion of the Obligations expressly made
payable on demand by this Agreement or by any instrument evidencing or securing
same, and the occurrence of an Event of Default shall not be a prerequisite for
Agent's and/or Lenders' requiring payment of such Obligations.
13.13. TIME OF ESSENCE. Time is of the essence of the Loan
Documents.
13.14. ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
13.15. INTERPRETATION. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured, drafted or
dictated such provision.
13.16. NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ. Borrower
and Lenders hereby agree that, except for SECTION 15.10(B) thereof, the
provisions of Tex. Rev. Civ. Stat. Xxx. art. 5069-15.01 ET SEQ. (Xxxxxx 1987)
(regulating certain revolving credit loans and revolving tri-party accounts)
shall not apply to this Agreement or any of the other Loan Documents.
13.17. NO PRESERVATION OR MARSHALING. Borrower agrees that neither Agent
nor any Lender shall have any obligation to preserve rights to the Collateral
against prior parties or to marshal any Collateral for the benefit of any
Person.
13.18. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF AGENT'S LIEN, FOR THE BENEFIT OF LENDERS, UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF AGENT'S OR ANY LENDER'S OTHER REMEDIES IN RESPECT OF SUCH
COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM
OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW
VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL
PLACE OF BUSINESS OF
74
BORROWER OR AGENT OR ANY LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE
DISTRICT COURT OF DALLAS COUNTY, TEXAS, OR, AT AGENT'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS,
DALLAS DIVISION, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND AGENT OR ANY LENDER PERTAINING TO THIS
AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY AGENT OR ANY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORM OR JURISDICTION.
13.19. WAIVERS BY BORROWER. BORROWER WAIVES (A) THE RIGHT TO TRIAL BY JURY
(WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (B) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE,
ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT AND LENDERS ON WHICH
BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER
AGENT OR ANY LENDER MAY DO IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION
OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY
ANY COURT PRIOR TO ALLOWING AGENT OR ANY LENDER TO EXERCISE ANY OF AGENT'S OR
ANY LENDER'S REMEDIES; (D) THE BENEFIT OF ALL
75
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (E) ANY RIGHT BORROWER MAY HAVE UPON
PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE AGENT AND/OR ANY LENDER TO
TERMINATE ITS SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF
BORROWER UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS AND
THE EXECUTION BY BORROWER, AND BY ANY PERSON WHOSE LOANS TO BORROWER IS USED IN
WHOLE OR IN PART TO SATISFY THE OBLIGATIONS, OF AN AGREEMENT INDEMNIFYING AGENT
AND LENDERS FROM ANY LOSS OR DAMAGE AGENT AND EACH LENDER MAY INCUR AS THE
RESULT OF DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY AGENT OR ANY
LENDER FROM BORROWER OR ANY ACCOUNT DEBTOR AND APPLIED TO THE OBLIGATIONS; AND
(F) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S ENTERING INTO
THIS AGREEMENT AND THAT AGENT AND EACH LENDER ARE RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
13.20. RELEASE. BORROWER HEREBY AGREES AND ACKNOWLEDGES THAT (A) IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR
NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF
ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR
DAMAGES OF ANY KIND OR NATURE FROM AGENT OR ANY LENDER, OR (B) IF IT HAS ANY
SUCH DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND, IN
CONSIDERATION OF AGENT'S AND LENDERS' EXECUTION AND DELIVERY OF THIS AGREEMENT
AND THE LOANS MADE IN CONNECTION WITH THE ACQUISITION, BORROWER HEREBY
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND EACH LENDER,
EACH OF THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES,
AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AGREEMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST AGENT, ANY
LENDER, EACH OF THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF
ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT,
VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING
76
FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AGREEMENT.
13.21. WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ITS RIGHTS UNDER
THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ.,
BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWER'S OWN SELECTION,
BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. BORROWER EXPRESSLY WARRANTS AND
REPRESENTS THAT BORROWER (A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO AGENT AND/OR LENDERS, AND (B) HAS BEEN REPRESENTED BY LEGAL
COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
BORROWER HAS READ AND UNDERSTANDS SECTION 13.21: ______(INITIALS)
13.22. ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE
SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
13.23. RELEASE. Upon the funding of the initial Loans hereunder, Agent, on
behalf of Lenders, hereby releases all the existing security interests of Agent,
for the benefit of Lenders, in all the "Collateral", as defined in the Second
Restated Loan Agreement, OTHER THAN in the Property and interests in Property
described in SECTION 4 hereof. Agent and Lenders agree to execute, at the
expense of Borrower, such UCC-3 amendments and other documents as shall be
reasonably requested by Borrowers to evidence such release.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed and effective as
of the day and year specified at the beginning hereof.
"BORROWER"
BRAZOS, INC.
By: ....................................
Name: ....................................
Title:....................................
MORNING SUN, INC.
By: ....................................
Name: ....................................
Title:....................................
"AGENT"
FLEET CAPITAL CORPORATION
as Agent
By: ....................................
Name: ....................................
Title:....................................
"LENDERS"
FLEET CAPITAL CORPORATION,
in its individual capacity
By: ....................................
Name: ....................................
Title:....................................
78
BANKBOSTON, N.A.
By: ....................................
Name: ....................................
Title:....................................
79
