0000950144-01-507120.txt : 20011009
0000950144-01-507120.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950144-01-507120
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20010624
FILED AS OF DATE: 20010921
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: UNIFI INC
CENTRAL INDEX KEY: 0000100726
STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200]
IRS NUMBER: 112165495
STATE OF INCORPORATION: NY
FISCAL YEAR END: 0627
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10542
FILM NUMBER: 1742018
BUSINESS ADDRESS:
STREET 1: 7201 WEST FRIENDLY RD
STREET 2: P O BOX 19109
CITY: GREENSBORO
STATE: NC
ZIP: 27419-9109
BUSINESS PHONE: 9192944410
MAIL ADDRESS:
STREET 1: P O BOX 19109
CITY: GREENSBORO
STATE: NC
ZIP: 24719-9109
FORMER COMPANY:
FORMER CONFORMED NAME: AUTOMATED ENVIRONMENTAL SYSTEMS INC
DATE OF NAME CHANGE: 19720906
10-K
1
g71711e10-k.txt
UNIFI, INC.
1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 24, 2001 -- COMMISSION FILE NUMBER 1-10542
---------------------
UNIFI, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2165495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7201 WEST FRIENDLY AVENUE
GREENSBORO, NORTH CAROLINA 27410
(Address of principal executive offices) (Zip code)
(Registrant's telephone no., including area code): (336) 294-4410
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.10 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliated of the
registrant as of September 4, 2001 based on a closing price of $9.98 per share:
$495,884,783.
Number of shares outstanding as of September 4, 2001: 53,811,533
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Annual Meeting of the
Shareholders of Unifi, Inc., to be held on October 25, 2001, are incorporated by
reference into Part III.
Exhibits, Financial Statement Schedules and Reports on Form 8-K index is
located on pages 42 through 44.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
PART I
ITEM 1. BUSINESS
Unifi, Inc., a New York corporation formed in 1969, together with its
subsidiaries, hereinafter set forth, (the "Company" or "Unifi"), is one of the
largest and most diversified producers and processors of textile yarns in the
world. The Company is primarily engaged in the processing of synthetic yarns in
two primary business segments, polyester and nylon. The polyester segment is
comprised of textured, dyed, twisted and beamed yarns with sales to knitters and
weavers that produce fabrics for the apparel, automotive and furniture
upholstery, home furnishings, industrial and other end use markets. The nylon
segment is comprised of textured nylon and covered spandex products with sales
to knitters and weavers that produce fabrics for the apparel, hosiery, sock and
other end use markets. See the Consolidated Financial Statements Footnote 2
("Acquisitions, Alliances and Divestures") on pages 26 and 27 and Consolidated
Financial Statements Footnote 11 ("Investment in Unconsolidated Affiliates") on
pages 35 and 36 of this Report for information concerning recent mergers,
acquisitions, alliances and consolidations of the Company's business, which is
incorporated herein by reference.
Texturing polyester and nylon filament fiber involves the processing of
partially oriented yarn ("POY"), which is either raw polyester or nylon filament
fiber purchased from chemical manufacturers or produced internally, to give it
greater bulk, strength, stretch, consistent dyeability and a softer feel,
thereby making it suitable for use in knitting and weaving of fabrics. The
texturing process involves the use of high-speed machines to draw, heat and
twist the POY to produce yarn having various physical characteristics, depending
on its ultimate end use.
SOURCES AND AVAILABILITY OF RAW MATERIALS
Effective June 1, 2000, Unifi and E. I. DuPont de Nemours and Company
("DuPont"), began operating their America's manufacturing alliance (the
"Alliance") to produce polyester filament yarn. The objective of the Alliance is
to reduce operating costs through collectively planning and operating both
companies' POY facilities as a single production unit, although Unifi and DuPont
continue to own their respective manufacturing facilities. Unifi's manufacturing
facility is located in Yadkinville, North Carolina and DuPont's remaining
facility is in Kinston, North Carolina. The resulting asset optimization, along
with the sharing of manufacturing technologies, are intended to result in
significant quality and yield improvements and product innovations. See the
Consolidated Financial Statements Footnote 2 ("Acquisitions, Alliances and
Divestures") on pages 26 and 27 for further information.
The primary third party suppliers of POY to the Company's polyester segment
are DuPont, Nanya Plastics Corp. of America ("Nanya"), Kosa (formerly Hoechst
Celanese Corporation), Wellman Industries, Reliance Industries, Ltd. and
Korteks. The majority of the Company POY for domestic use is produced by the
Alliance. In addition, the Company has a polyester POY manufacturing facility in
Ireland. The production of POY is comprised of two primary processes,
polymerisation (performed in Ireland only) and spinning (performed in both
Ireland and Yadkinville). The polymerisation process is the production of
polymer by a chemical reaction involving terephthalic acid and ethylene glycol,
which are combined to form chip. The spinning process involves the extrusion and
melting of chip to form molten polymer. The molten polymer is then extruded
through spinnerettes to form continuous multi-filament raw yarn (POY).
Substantially all of the raw materials for POY manufactured in Yadkinville are
supplied by Nanya for domestic production and by DuPont and Bayer AG for our
Irish operation.
On September 27, 2000, Unifi and Nilit Ltd., located in Israel formed a
50/50 joint venture called U.N.F. Industries Ltd. (U.N.F.). The joint venture
will produce approximately 25.0 million pounds of nylon POY at Nilit's
manufacturing facility in Migdal Ha - Emek, Israel. Production and shipping of
POY from this facility began in March 2001. The nylon POY will be utilized in
the Company's nylon texturing and covering operations. The primary suppliers of
POY to the Company's nylon segment are DuPont, Universal Premier Fibers LLC
(formerly Cookson Fibers, Inc.), Nilit, Ltd., and U.N.F. Industries with the
majority of the Company's nylon POY being supplied by DuPont and U.N.F.
Industries.
2
3
Although the Company is heavily dependent upon a limited number of
suppliers, the Company has not had and does not anticipate any significant
difficulty in obtaining its raw POY or raw materials used to manufacture
polyester or nylon POY.
Patents and Licenses: The Company currently has several patents and
registered trademarks, none of which it considers material to its business as a
whole.
Customers: The Company, in fiscal year ended June 24, 2001, sold its
polyester yarns to approximately 1,350 customers and its nylon yarns to
approximately 190 customers, one customer's purchases comprised approximately
11% of net sales for the polyester segment during said period, while another
customer comprised approximately 16% of net sales for the nylon segment for this
time period. The Company does not believe that the loss of any one customer
would have a materially adverse effect on either the polyester or nylon segment.
Backlog: The Company, other than in connection with certain foreign sales
and for textured yarns that are package dyed according to customers'
specifications, does not manufacture to order. The Company's products can be
used in many ways and can be thought of in terms of a commodity subject to the
laws of supply and demand and, therefore, does not have what is considered a
backlog of orders. In addition, the Company does not consider its products to be
seasonal ones.
Competitive Conditions: The textile industry in which the Company
currently operates is keenly competitive. The Company processes and sells
high-volume commodity products, pricing is highly competitive with innovation,
product quality and customer service being essential for differentiating the
competitors within the industry. Product innovation gives our customers
competitive advantages, while product quality insures manufacturing
efficiencies. The Company's polyester and nylon yarns compete in a worldwide
market with a number of other foreign and domestic producers of such yarns. In
the sale of polyester filament yarns, major domestic competitors are Dillon Yarn
Company, Inc., Spectrum Dyed Yarns, Inc. and Milliken & Company and in the sale
of nylon yarns major domestic competitors are Jefferson Mills, Inc. and
Worldtex, Inc. Additionally, there are numerous foreign competitors that sell
polyester and nylon yarns in the United States.
Research and Development: The estimated amount spent during each of the
last three fiscal years on Company-sponsored and customer-sponsored research and
development activities is considered immaterial.
Compliance with Certain Government Regulations: Management of the Company
believes that the operation of the Company's production facilities and the
disposal of waste materials are substantially in compliance with applicable laws
and regulations.
Employees: The number of full-time active employees of the Company is
approximately 5,400.
Financial Information About Segments: See the Consolidated Financial
Statements Footnote 9 ("Business Segments, Foreign Operations and Concentrations
of Credit Risk") on pages 31 through 34 of this Report for the Financial
Information About Segments required by Item 101 of Regulation S-K.
ITEM 2. PROPERTIES
The Company currently maintains a total of 18 manufacturing and warehousing
facilities, one central distribution center and one recycling center in North
Carolina; one manufacturing and related warehousing facility in Staunton,
Virginia; one central distribution center in Fort Payne, Alabama; four
manufacturing operations in Letterkenny, County of Donegal, Republic of Ireland;
two warehousing locations in Carrickfergus, Ireland; one manufacturing, one
warehousing and one office building in Brazil and one manufacturing and
administration building in Manchester, England. All of these facilities, which
contain approximately 8.1 million square feet of floor space are owned in fee
simple, with the exception of two United States plants, one of which is leased
from Bank of America Leasing and Capital LLC pursuant to a Sales-leaseback
Agreement entered on May 20, 1997, as amended, the second of which is leased
pursuant to a lease agreement entered into with Glen Raven, two warehouses in
Carrickfergus, Ireland, the office in Brazil and the plant and office location
in Manchester, England; and management believes they are in good condition, well
maintained, and are suitable and adequate for present utilization.
3
4
The polyester segment of the Company's business uses 17 manufacturing, six
warehousing and one dedicated office totaling 5.4 million square feet. The nylon
segment of the Company's business utilizes four manufacturing and four
warehousing facilities aggregating 2.7 million square feet.
Unifi Technology Group, LLC. ("UTG") leases 5 office locations in three
states from which it conducts business utilizing approximately 35,000 square
feet.
The Company leases sales offices and/or apartments in New York; Coleshill,
England; Oberkotzau, Germany; Lyon, France and Desenzano, Italy.
The Company also leases its corporate headquarters building at 7201 West
Friendly Avenue, Greensboro, North Carolina, which consists of a building
containing approximately 121,125 square feet located on a tract of land
containing approximately 8.99 acres. This property is leased from Merrill Lynch
Trust Company of North Carolina, Trustee under the Unifi, Inc. Profit Sharing
Plan and Trust, and Wachovia Bank & Trust Company, N.A., Independent. See the
related information included in the Consolidated Financial Statements Footnote 8
("Leases and Commitments") on page 31 of this Report. The Company also leases
two manufacturing facilities to others, one of which is affiliated with the
Company as a joint venture.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation which is considered
material, as that term is used in Item 103 of Regulation S-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter for the fiscal year ended June 24, 2001.
4
5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed for trading on the New York Stock
Exchange. The following table sets forth the range of high and low closing
prices of Unifi's Common Stock as reported on the NYSE Composite Tape.
Effective July 16, 1998, the Board of Directors of the Company terminated
the previously established policy of paying cash dividends equal to
approximately 30% of the Company's after tax earnings of the previous fiscal
year.
As of September 4, 2001, there were 712 holders of record of the Company's
common stock.
HIGH LOW
------ ------
Fiscal year 1999:
First quarter ended September 27, 1998.................... $34.25 $17.13
Second quarter ended December 27, 1998.................... $20.06 $11.94
Third quarter ended March 28, 1999........................ $19.56 $10.69
Fourth quarter ended June 27, 1999........................ $18.56 $11.56
Fiscal year 2000:
First quarter ended September 26, 1999.................... $21.25 $11.00
Second quarter ended December 26, 1999.................... $13.50 $10.69
Third quarter ended March 26, 2000........................ $12.81 $ 7.88
Fourth quarter ended June 25, 2000........................ $14.94 $ 8.44
Fiscal year 2001:
First quarter ended September 24, 2000.................... $13.38 $10.31
Second quarter ended December 24, 2000.................... $10.38 $ 7.13
Third quarter ended March 25, 2001........................ $ 9.31 $ 6.25
Fourth quarter ended June 24, 2001........................ $ 8.33 $ 5.65
5
6
ITEM 6. SELECTED FINANCIAL DATA
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999 JUNE 28, 1998 JUNE 29, 1997
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
------------- ------------- ------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Summary of Operations:
Net sales............................ $1,131,157 $1,291,435 $1,262,278 $1,390,497 $1,716,215
Cost of sales........................ 1,034,044 1,127,864 1,087,728 1,162,726 1,484,956
---------- ---------- ---------- ---------- ----------
Gross profit......................... 97,113 163,571 174,550 227,771 231,259
Selling, general and administrative
expense............................ 62,786 58,063 55,338 43,277 46,229
Provision for bad debts.............. 8,697 8,694 1,129 724 750
Interest expense..................... 30,123 30,294 27,459 16,598 11,749
Interest income...................... (2,549) (2,772) (2,399) (1,869) (2,219)
Other (income) expense............... 7,582 1,052 440 (335) 69
Equity in (earnings) losses of
unconsolidated affiliates.......... (2,930) 2,989 (4,214) (23,030) 399
Minority interest.................... 2,590 9,543 9,401 723 --
Alliance plant closure costs......... 15,000 -- -- -- --
Asset impairments and write downs.... 24,541 -- -- -- --
Employee severance and related
charges............................ 7,545 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income taxes and
cumulative effect of accounting
change............................. (56,272) 55,708 87,396 191,683 174,282
Provision (benefit) for income
taxes.............................. (11,598) 17,675 28,369 62,782 58,617
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative
effect of accounting change........ (44,674) 38,033 59,027 128,901 115,665
Cumulative effect of accounting
change, net of tax................. -- -- 2,768 4,636 --
---------- ---------- ---------- ---------- ----------
Net income (loss)............. $ (44,674) $ 38,033 $ 56,259 $ 124,265 $ 115,665
========== ========== ========== ========== ==========
Per Share of Common Stock:
Income (loss) before cumulative
effect of accounting change
(diluted).......................... $ (.83) $ .65 $ .97 $ 2.08 $ 1.81
Cumulative effect of accounting
change (diluted)................... -- -- (.04) (.07) --
---------- ---------- ---------- ---------- ----------
Net income (loss) (diluted)... $ (.83) $ .65 $ .93 $ 2.01 $ 1.81
========== ========== ========== ========== ==========
Cash Dividends......................... $ -- $ -- $ -- $ .56 $ .44
Financial Data:
Working capital...................... $ 63,708 $ 15,604 $ 216,897 $ 209,878 $ 216,145
Gross property, plant and
equipment.......................... 1,209,927 1,250,470 1,231,013 1,145,622 1,147,148
Total assets......................... 1,137,319 1,354,764 1,365,840 1,333,814 1,018,703
Long-term debt and other
obligations........................ 259,188 261,830 478,898 458,977 255,799
Shareholders' equity................. 540,543 622,438 646,138 636,197 548,531
Fiscal year 1997 amounts include the spun cotton yarn operations that were
contributed to Parkdale America, LLC on June 30, 1997. The operating results of
our 34% ownership in Parkdale are accounted for as equity in (earnings) losses
of unconsolidated affiliates for fiscal years presented thereafter.
Fiscal years 1997 through 2000 net sales and cost of sales have been
restated to reflect the reclassification of freight expense from net sales to
cost of sales to conform with the current year presentation.
The working capital and long-term debt and other liabilities line items at
June 25, 2000, reflect the classification of the outstanding balance under the
revolving line of credit of $211.5 million as a current liability as this
facility was scheduled to mature in April 2001. This line of credit was
subsequently refinanced in December 2000.
The working capital and long-term debt and other liabilities line items at
June 24, 2001, reflect the classification of the outstanding balance under the
revolving line of credit of $6.5 million and the accounts receivables
securitization of $70.1 million as current liabilities, pending renegotiation or
refinancing of these obligations, which is expected to occur by October 31,
2001.
6
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL 2001
Following is a summary of operating income by segment for fiscal years 2001
and 2000, as reported regularly to the Company's management:
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)
Fiscal 2001
Net sales.................................. $791,232 $315,114 $33,270 $1,139,616
Cost of sales.............................. 725,351 293,090 21,767 1,040,208
Selling, general and administrative........ 37,451 14,632 13,362 65,445
-------- -------- ------- ----------
Segment operating income (loss)............ $ 28,430 $ 7,392 $(1,859) $ 33,963
======== ======== ======= ==========
Fiscal 2000
Net sales.................................. $861,865 $409,841 $31,917 $1,303,623
Cost of sales.............................. 757,580 353,739 21,024 1,132,343
Selling, general and administrative........ 37,713 15,103 9,952 62,768
-------- -------- ------- ----------
Segment operating income................... $ 66,572 $ 40,999 $ 941 $ 108,512
======== ======== ======= ==========
As described in Consolidated Financial Statements Footnote 9 ("Business
Segments, Foreign Operations and Concentrations of Credit Risk"), the
adjustments to revenues and expenses required to reconcile the operating
segments to consolidated results are comprised primarily of intersegment sales
and cost of sales eliminations, the provision for bad debts and various expenses
reported internally at a consolidated level. The fiscal year 2000 net sales and
cost of sales have been reclassified to conform with the current year
presentation. See Consolidated Financial Statements Footnote 1 ("Recent
Accounting Pronouncements") for further discussion.
Polyester Operations
In fiscal 2001, polyester net sales decreased $70.6 million, or 8.2%
compared to fiscal 2000. The decrease from fiscal year 2000 is primarily
attributable to reduced volumes both in the United States and internationally.
The importation of fabric and apparel has eroded our customers' business and the
slowing economy has prompted our customers to reduce inventories in response to
lower retail orders. Unit prices, based on product mix, were favorable to the
prior year. However, volumes were down approximately 10% from fiscal 2000 to
fiscal 2001. Sales volume for all of our international polyester operations was
down in fiscal 2001 compared to fiscal 2000, with the exception of our European
dyeing operation acquired in the fourth quarter of the prior year. The currency
exchange rate change from the prior year to the current year adversely effected
sales translated to U.S. dollars for our Irish and Brazilian operations.
Gross profit on sales for our polyester operations declined $38.4 million
over fiscal year 2000. Gross margin (gross profit as a percentage of net sales)
declined from 12.1% in fiscal year 2000 to 8.3% in fiscal year 2001. Gross
margin in fiscal 2001 declined primarily as a function of higher per unit raw
material prices and fixed manufacturing costs relative to a lower sales base.
Selling, general and administrative expenses for this segment declined $0.3
million from 2000 to 2001. This decrease was accomplished mainly due to the cost
cutting initiatives implemented at the end of the third quarter and were
achieved despite having only three months of selling, general and administrative
expenses for our European dye-house in the prior year.
Nylon Operations
Nylon net sales decreased $94.7 million, or 23.1% in fiscal 2001 compared
to fiscal 2000. Unit volumes for fiscal 2001 decreased by 15.2%, while average
sales prices, based on product mix, decreased 9.2%. The
7
8
reductions in sales volume and price are primarily attributable to the
continuing softness of the ladies hosiery market, a slow down in seamless
apparel and the sluggishness of the economy in general.
Nylon gross profit decreased $34.1 million and gross margin decreased from
13.7% in 2000 to 7.0% in 2001. This was primarily attributable to the lower
sales volumes and prices and higher per unit fixed manufacturing costs, offset,
in part, by lower average fiber prices per pound.
Selling, general and administrative expense for the nylon segment decreased
$0.5 million in fiscal 2001. This reduction is due mainly to the cost cutting
initiatives implemented at the end of the third fiscal quarter.
All Other
The "All Other" segment primarily reflects the Company's majority owned
subsidiary, UTG established in May 1999. UTG is a domestic automation solutions
provider. This entity was in place for effectively the entire 2001 fiscal year,
however the consulting portion of this business was sold at the end of the
reporting period. The higher selling, general and administrative expenses in the
current year reflect additional costs incurred in early terminating certain
office leases in the second fiscal quarter. The remaining UTG operations are now
conducting business under the name Cimtec Automation, Inc. and involve the sale
and repair of certain computer hardware.
Consolidated Operations
For the year ended June 24, 2001, the Company recorded an $8.7 million
provision for bad debts in response to continued difficult industry conditions.
This amount is consistent with that recorded in the prior year.
Interest expense decreased slightly from $30.3 million in fiscal 2000 to
$30.1 million in fiscal 2001. The weighted average interest rate of our debt
outstanding at June 24, 2001 was 6.6%. Interest income remained consistent
between 2001 and 2000.
Other expense increased from $1.1 million in 2000 to $7.6 million in 2001.
This loss for 2001 includes $9.5 million in losses for foreign currency related
transactions including a loss of $4.7 million on foreign currency derivative
contracts denominated in Euro for which hedge accounting was terminated upon the
cancellation of the proposed project. These losses were offset, in part, by
amounts recovered for an insurance claim, a government grant program associated
with a start-up operation and a duty-drawback claim associated with prior
periods.
Earnings (losses) from our equity affiliates, Parkdale America, LLC. (the
"LLC"), Micell Technologies, Inc. ("Micell"), UNIFI-SANS Technical Fibers, LLC
("UNIFI-SANS") and U.N.F. Industries, Ltd. ("U.N.F.") totaled $2.9 million in
fiscal 2001 compared with $(3.0) million in fiscal 2000. The increase in
earnings is primarily attributable to improved earnings of the LLC and the
recognition of reduced losses for Micell.
Minority interest expense for fiscal 2001 was $2.6 million compared to $9.5
million in the prior year. This charge primarily relates to the minority
interest share of the earnings of Unifi Textured Polyester, LLC ("UTP") formed
with Burlington Industries on May 29, 1998. Unifi, Inc. has an 85.42% ownership
interest in this entity and Burlington has a 14.58% interest. However, for the
first five years, Burlington is entitled to receive the first $9.4 million of
earnings and the first $12.0 million in excess cash flows generated by this
business. After the first five years, earnings and cash flows of UTP will be
allocated based on ownership percentages.
In the fourth quarter of the current fiscal year, the Company recorded its
share of the anticipated costs of closing DuPont's Cape Fear, North Carolina
facility, one of DuPont's facilities involved in the manufacturing alliance (the
"Alliance") between DuPont and Unifi. The Alliance was formed to integrate each
company's polyester partially oriented yarn (POY) manufacturing facilities into
a single production unit and is expected to enable each company to match
production with the best assets available, significantly improving product
quality and yields. On April 4, 2001, DuPont shut its Cape Fear POY facility
allowing for the acceleration of
8
9
the benefits of the Alliance by shutting down older filament manufacturing
operations and transferring production to lower cost, more modern and flexible
assets. As a result of DuPont shutting down the Cape Fear facility, the Company
recognized a $15.0 million charge for its 50% share of the severance and costs
to dismantle the facility. Unifi's share of the cost to close this facility will
be paid over the eighteen-month period commencing July 2001 and ending December
2002. Subsequent to the shut down, the Company will receive from DuPont cash
distributions for its 50% share of the cash fixed costs eliminated as a result
of the Cape Fear shut down. Additionally, it is expected that the Company will
begin realizing other costs savings and synergies from the Alliance.
In the current year, the Company recorded charges of $7.6 million for
severance and employee related costs and $24.5 million for asset impairments and
write-downs. The majority of these charges relate to U.S. and European
operations and include plant closings and consolidations, the reorganization of
administrative functions and the write down of assets for certain operations
determined to be impaired as well as certain non-core businesses that are being
held for sale. The plant closing and consolidations of the manufacturing and
distribution systems are aimed at improving the overall efficiency and
effectiveness of our operations and reducing our fixed cost structure in
response to decreased sales volumes.
The severance and other employee related costs provide for the termination
of approximately 750 people who were terminated as a result of these worldwide
initiatives and included management, production workers and administrative
support located in Ireland, England and in the United States. Notice of the
termination was made to all employees prior to March 24, 2001 and substantially
all affected personnel were terminated by the end of April 2001. Severance will
be paid in accordance with various plan terms, which vary from lump sum to a
payout over a maximum of 21 months ending December 2002. Additionally, this
charge includes costs associated with medical and dental benefits for former
employees no longer providing services to the Company and provisions for certain
consultant agreements for which no future benefit is anticipated.
The charge for impairment and other write-down of assets includes $18.6
million for the write down of duplicate or less efficient property, plant and
equipment to their fair value less disposal cost and the write down of certain
non-core assets which are held for sale. It is anticipated that the remaining
non-core assets and business will be sold prior to the end of calendar 2001.
Additionally, an impairment charge of $5.9 million was recorded for the write
down to fair value of assets, primarily goodwill, associated with the European
polyester dyed yarn operation and Colombian nylon covering operation as the
undiscounted cash flows of the business were not sufficient to cover the
carrying value of these assets. These reviews were prompted by ongoing excess
manufacturing capacity issues and lack of competitiveness of these businesses.
The Company recognized a tax benefit in the current year at a 20.6%
effective tax rate compared to an effective tax rate on the consolidated
provision recorded in fiscal 2000 at 31.7%. The difference between the statutory
and effective tax rate in fiscal 2001 is primarily due to the fact that
substantially no tax benefit has been recognized on losses sustained by foreign
subsidiaries, as the recoverability of such tax benefits through loss
carryforward or carryback is not assured.
As a result of the above, the Company realized during the current year a
net loss of $44.7 million, or $(.83) per diluted share, compared to net income
in fiscal year 2000 of $38.0 million, or $.65 per diluted share.
Effective June 26, 2000, the Company began accounting for derivative
contracts and hedging activities under Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which requires all derivatives to be recorded on the balance sheet
at fair value. There was no cumulative effect adjustment of adopting this
accounting standard. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposure that arises from foreign
exchange rate movements between the dates that foreign currency transactions are
recorded (export sales and purchases commitments) and the dates they are
9
10
consummated (cash receipts and cash disbursements in foreign currencies). The
Company utilizes some natural hedging to mitigate these transaction exposures.
The Company also enters into foreign currency forward contracts for the purchase
and sale of European, Canadian and other currencies to hedge balance sheet and
income statement currency exposures. These contracts are principally entered
into for the purchase of inventory and equipment and the sale of Company
products into export markets. Counter-parties for these instruments are major
financial institutions. The Company does not enter into derivative financial
instruments for trading purposes.
The Company has a risk management policy that authorizes certain designated
individuals to enter into derivative contracts to mitigate economic and
accounting risk associated with currency and interest rate exposures in the
ordinary course of business. This policy permits the use of forward currency
purchase or sales contracts associated with the anticipated collection of
accounts receivable on foreign denominated sales and the purchase or sale of
assets in foreign currencies. This policy also allows the use of those
derivative instruments that hedge the Company's interest rate exposures
associated with fixed or floating rate debt. Any derivative contract authorized
by this risk management policy with notional amounts in excess of $1 million
requires the specific approval of the Chief Financial Officer. In no
circumstances does the policy permit entering into derivative contracts for
speculative purposes.
Currency forward contracts are entered to hedge exposure for sales in
foreign currencies based on specific sales orders with customers or for
anticipated sales activity for a future time period. Generally, 60-80% of the
sales value of these orders are covered by forward contracts. Maturity dates of
the forward contracts attempt to match anticipated receivable collections. The
Company marks the outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are recorded
as other income and expense. The Company also enters currency forward contracts
for committed or anticipated equipment and inventory purchases. Generally 50-75%
of the asset cost is covered by forward contracts although 100% of the asset
cost may be covered by contracts in certain instances. Forward contracts are
matched with the anticipated date of delivery of the assets and gains and losses
are recorded as a component of the asset cost for purchase transactions the
Company is firmly committed. For anticipated purchase transactions, gains or
losses on hedge contracts are accumulated in Other Comprehensive Income (Loss)
and periodically evaluated to assess hedge effectiveness. In the current year,
the Company recorded and subsequently wrote off approximately $4.7 million of
accumulated losses on hedge contracts associated with the anticipated purchase
of machinery that was later canceled. The contracts outstanding for anticipated
purchase commitments that were subsequently canceled were unwound by entering
into sales contracts with identical remaining maturities and contract values.
These purchase and sales contracts continue to be marked to market with
offsetting gain and losses. The latest maturity for all outstanding purchase and
sales foreign currency forward contracts are October 15, 2001 and March 21,
2002, respectively.
In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
140). SFAS 140 replaces Statement of Financial Accounting Standards No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities (SFAS 125). SFAS 140 revises the standards for accounting and for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but carries over most of SFAS 125's provisions.
SFAS 140 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on a
financial-components approach that focuses on control. This standard is applied
prospectively and was effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. The adoption
of this standard did not have any effect on the Company's results of operation
or financial position.
In September 2000, the Emerging Issues Task Force (EITF) issued EITF
Abstract 00-10 "Accounting for Shipping and Handling Fees and Costs." EITF 00-10
requires that any amounts billed to a customer for a sales transaction related
to shipping or handling should be classified as revenues. Costs associated with
providing this service is an accounting policy disclosure and a company may
adopt a policy of including such costs in their cost of sales line item. The
Company was required to adopt EITF 00-10 in the fourth quarter of fiscal year
2001. The Company historically has included revenues earned for shipping and
handling in the net
10
11
sales line item in the Consolidated Results of Operations. Costs to provide this
service were either historically included in net sales, for shipping costs, or
in cost of sales, for handling expenses. Upon the adoption of EITF 00-10 the
Company has reclassified the presentation of shipping costs from net sales to
cost of sales and has restated all prior periods to conform with the current
year format. Adopting EITF 00-10 had no impact on the Company's results of
operations or financial position.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," (SFAS 141) and
No. 142 "Goodwill and Other Intangible Assets (SFAS 142)." SFAS 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method is
prohibited after this date. SFAS 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets acquired in
a business combination completed after June 30, 2001.
SFAS 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually, or more frequently under certain conditions, for impairment in
accordance with this standard. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of (SFAS 121)." The amortization of goodwill included in
investments in equity investees will also no longer be recorded upon adoption of
the new rules. Intangible assets that do not have indefinite lives will continue
to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS 121. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company anticipates that it will apply the
new accounting rules beginning June 25, 2001. The Company is currently assessing
the financial impact SFAS 141 and 142 will have on the consolidated financial
statements. In fiscal 2001, the amortization expense associated with remaining
goodwill approximated $3.3 million.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" (SFAS 143). This standard applies to all entities and addresses
legal obligations associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development or normal operation
of a long-lived asset. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. Additionally, any
associated asset retirement costs are to be capitalized as part of the carrying
amount of the long-lived asset and expensed over the life of the asset. SFAS 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. The Company has not yet assessed the financial impact that
adopting SFAS 143 will have on the consolidated financial statements.
11
12
FISCAL 2000
Following is a summary of operating income by segment for fiscal years 2000
and 1999, as reported regularly to the Company's management. Note that polyester
and nylon segment net sales and cost of sales amounts and certain associated
dollar and percent changes between fiscal years have been restated to conform
with current year presentation.
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)
Fiscal 2000
Net sales.......................................... $861,865 $409,841 $31,917 $1,303,623
Cost of sales...................................... 757,580 353,739 21,024 1,132,343
Selling, general and administrative................ 37,713 15,103 9,952 62,768
-------- -------- ------- ----------
Segment operating income........................... $ 66,572 $ 40,999 $ 941 $ 108,512
======== ======== ======= ==========
Fiscal 1999
Net sales.......................................... $832,642 $450,248 $ 1,561 $1,284,451
Cost of sales...................................... 729,414 386,011 1,090 1,116,515
Selling, general and administrative................ 38,518 16,271 533 55,322
-------- -------- ------- ----------
Segment operating income (loss).................... $ 64,710 $ 47,966 $ (62) $ 112,614
======== ======== ======= ==========
As described in Consolidated Financial Statements Footnote 9 ("Business
Segments, Foreign Operations and Concentrations of Credit Risk"), the
adjustments to revenues and expenses required to reconcile the operating
segments to consolidated results are comprised primarily of intersegment sales
and cost of sales eliminations, the provision for bad debts and various expenses
reported internally at a consolidated level.
Polyester Operations
In fiscal 2000, polyester net sales increased $29.2 million, or 3.5%
compared to fiscal 1999. The increase over fiscal year 1999 is primarily
attributable to the acquisition of our Brazilian operation in the fourth fiscal
quarter of 1999 and the acquisition of our dyed yarn operation in England at the
end of our fiscal third quarter. Net domestic sales increased slightly over
fiscal 1999 due to strength in our dyeing and twisting operations, offset
slightly by pricing pressures in our natural textured business. Internationally,
sales in local currency of our Irish Operation declined 5.4% for the year due to
lower average selling prices. Volume for our Irish operations increased
approximately 2.1% for the year. The currency exchange rate change from the
prior year to the current year adversely effected sales translated to U.S.
dollars for this operation by $13.0 million.
As described in the Consolidated Financial Statements Footnote 10
("Derivative Financial Instruments and Fair Value of Financial Instruments"),
the Company utilizes foreign currency forward contracts to hedge exposure for
sales in foreign currencies based on anticipated sales orders. Also, the
purchases and borrowings in those foreign currencies in which the Company has
exchange rate exposure provide a natural hedge and mitigate the effect of
adverse fluctuations in exchange rates.
Gross profit on sales for our polyester operations increased $1.0 million
over fiscal year 1999. Gross margin (gross profit as a percentage of net sales)
declined from 12.4% in fiscal year 1999 to 12.1% in fiscal year 2000. In the
prior year, gross margin for this segment was adversely impacted by a $4.0
million charge for an early retirement package offered to employees. Gross
margin in fiscal 2000 declined primarily as a function of higher raw material
prices. Offsetting the effects of higher raw material prices were lower
manufacturing costs and increased sales for this segment.
Selling, general and administrative expenses for this segment declined $0.8
million from 1999 to 2000. In the prior year, this segment was allocated $5.7
million in selling, general and administrative expenses for the above mentioned
early retirement package. Absent this charge, the current year selling, general
and administrative expenses for this segment would have increased $4.9 million.
This increase is primarily attributable to the start-up of our Brazilian
operation, which was only in operation two months of the prior
12
13
year as well as the increase in this segment's share of increased expenses
incurred by our majority-owned subsidiary, UTG. This subsidiary was formed in
May 1999 and is a domestic automation solutions provider.
Nylon Operations
In fiscal 2000, nylon net sales decreased $40.4 million, or 9.0% compared
to fiscal 1999. Unit volumes for fiscal 2000 decreased by 5.3%, while average
sales prices, based on product mix, decreased 3.9%. The reductions in sales
volume and price are primarily attributable to the continuing softness of the
ladies hosiery market.
Nylon gross profit decreased $8.1 million and gross margin decreased from
14.3% in 1999 to 13.7% in 2000. This segment's share of the prior year early
retirement plan costs impacting gross profit was $2.6 million. Before the effect
of the prior year early retirement expense, gross profit from 1999 to 2000
declined $10.7 million. This was primarily attributable to lower sales volume
and the shift in product mix caused by softness in the hosiery market.
Selling, general and administrative expense allocated to the nylon segment
decreased $1.2 million in fiscal 2000. The nylon segment selling, general and
administrative expenses in fiscal 1999 included a charge of $2.5 million for the
aforementioned early retirement plan. Before the effect of this charge, selling
general and administrative expenses for this segment would have increased $1.3
million. This increase is primarily attributable to this segment's share of
increased selling, general and administrative expenses generated by UTG.
All Other
The "All Other" segment primarily reflects the Company's majority owned
subsidiary, UTG established in May 1999. UTG is a domestic automation solutions
provider.
Consolidated Operations
In fiscal year 2000, the Company recorded an $8.0 million provision for bad
debts resulting from the general decline of industry conditions.
Interest expense increased $2.8 million, from $27.5 million in fiscal 1999
to $30.3 million in fiscal 2000. The increase in interest expense reflects
higher levels of interest-bearing debt outstanding at higher average interest
rates during fiscal 2000 and a $1.4 million reduction in capitalized interest
for major construction projects. The weighted average interest rate of our debt
outstanding at June 25, 2000 was 6.6%.
Interest income improved by $373 thousand from 1999 to 2000 primarily as a
result of higher levels of invested funds generated by our Irish operation.
Other expense increased from $440 thousand to $1.1 million from 1999 to 2000.
Other income and expense was negatively impacted in fiscal year 2000 by a $2.6
million write-off related to the abandonment of certain equipment associated
with domestic plant consolidations and $1.7 million in currency losses. These
amounts were offset, in part, by a $1.1 million gain recognized for insurance
proceeds recovered for a claim filed for property damage sustained by a tornado
and a $0.6 million gain recognized on the sale of an investment.
Earnings (losses) from our equity affiliates, Parkdale America, LLC. (the
"LLC") and Micell Technologies, Inc. ("Micell"), net of related amortization,
totaled $(3.0) million in fiscal 2000 compared with $4.2 million in fiscal 1999.
The decline in earnings is primarily attributable to the reduced earnings of the
LLC and higher start-up expenses at Micell.
Minority interest expense for fiscal 2000 was $9.5 million compared to $9.4
million in the prior year. This charge primarily relates to the minority
interest share of the earnings of Unifi Textured Polyester LLC ("UTP) formed
with Burlington Industries on May 29, 1998. Unifi, Inc. has an 85.42% ownership
interest in this entity and Burlington has a 14.58% interest. However, for the
first five years, Burlington is entitled to receive the first $9.4 million in
earnings and the first $12.0 in excess cash flows generated by the business.
After the first five years, earnings and cash flows of UTP will be allocated
based on ownership percentages.
13
14
The effective tax rate decreased from 32.5% in 1999 to 31.7% in 2000. The
difference between the statutory and effective tax rate in fiscal 2000 is
primarily due to a reduction of income taxes achieved through the reversal of
previously established reserves due to resolution of outstanding issues with
taxing authorities.
In the first quarter of fiscal 1999, the Company recognized a cumulative
effect of an accounting change of $4.5 million ($2.8 million after tax) or $.04
per diluted share as a result of changing its accounting policy regarding
start-up costs. Pursuant to the AICPA issued SOP 98-5, "Reporting on the Costs
of Start-Up Activities," any previously capitalized start-up costs were required
to be written-off as a cumulative effect of an accounting change. Accordingly,
the Company has written-off the unamortized balance of the previously
capitalized start-up costs.
As a result of the above, the Company realized during fiscal year 2000 net
income of $38.0 million, or $0.65 per diluted share, compared to $56.3 million,
or $.93 per diluted share for the prior fiscal year period. Before the
previously described cumulative effect of an accounting change in the prior
year, earnings would have been $59.0 million or $0.97 per diluted share.
On March 8, 2000, the Company acquired Intex Yarns Limited (Intex) located
in Manchester, England for approximately $8.0 million plus assumed debt. This
acquisition adds high quality, package-dyeing capabilities in Europe and
compliments the Company's yarn production facility in Letterkenny, Ireland. The
acquisition, which is not considered significant to the Company's consolidated
net assets or results of operations, was accounted for by the purchase method of
accounting.
Effective June 1, 2000, the Company and E.I. DuPont De Nemours and Company
(DuPont) initiated a manufacturing alliance to produce polyester filament yarn.
The alliance is expected to optimize Unifi's and DuPont's partially oriented
yarn (POY) manufacturing facilities, increase manufacturing efficiency and
improve product quality. Under its terms, DuPont and Unifi will cooperatively
run their polyester filament manufacturing facilities as a single operating
unit. This consolidation will shift commodity yarns from our Yadkinville
facility to DuPont's Kinston plant, and bring high-end specialty production to
Yadkinville from Kinston and Cape Fear. The companies will split equally the
costs to complete the necessary plant consolidation and the benefits gained
through asset optimization. Additionally, the companies will collectively
attempt to increase profitability through the development of new products.
Likewise, the costs incurred and benefits derived from the product innovations
will be split equally. DuPont and Unifi will continue to own and operate their
respective sites and employees will remain with their respective employers.
DuPont will continue to provide POY to the marketplace and will use DuPont
technology to expand the specialty product range at each company's sites. Unifi
will continue to provide textured yarn to the marketplace.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations continues to be a primary source of funds to
finance operating needs and long-term investment requirements, including capital
expenditures. Cash generated from operations was $151.6 million for fiscal 2001,
compared to $126.5 million for fiscal 2000. The primary sources of cash from
operations were reduced receivables and inventories of $14.2 million and $17.2
million, respectively, increased payables and accruals of $3.3 million and
non-cash adjustments aggregating $148.6 million. Depreciation and amortization
of $90.1 million, the provision for doubtful accounts of $15.0 million, and the
non-cash portion of non-recurring charges of $43.5 million were the primary
components of the non-cash adjustments. The current year cash from operations
was positively impacted by distributions from unconsolidated equity affiliates
of current and prior year earnings of $26.1 million which exceeded the Company's
equity in earnings of unconsolidated subsidiaries by $23.2 million. Offsetting
these sources were the net loss for fiscal year 2001 of $44.7 million as well as
a decrease of income taxes payable of $10.0 million and a reduction of the
deferred tax liability by $1.6 million. Working capital changes have been
adjusted to exclude the effects of acquisitions and currency translation.
Working capital at June 24, 2001, of $63.7 million reflect the classification of
the outstanding balance under the revolving line of credit of $6.5 million and
the accounts receivable securitization of $70.1 million as current liabilities,
pending renegotiation or refinancing of these obligations, which is expected to
occur by October 31, 2001, as further discussed in the sixth and seventh
following paragraphs.
14
15
The Company utilized $222 thousand for net investing activities and $166.4
million for net financing activities during fiscal 2001. Significant
expenditures during this period included $42.3 million for capacity expansions
and upgrading of facilities, $15.5 million for investments in unconsolidated
equity affiliates (including U.N.F. and UNIFI-SANS) and $2.2 million for
acquisitions. A significant component of capital expenditures included the
remaining construction costs for the Company's Unifi Technical Fabrics nonwoven
operation, which was then sold in June 2001. Additionally, $16.6 million was
expended for the purchase and retirement of Company common stock, $12.0 million
for distributions and advances to minority interest shareholders and $137.4
million for net retirements of long-term debt. The Company obtained $41.7
million from the sale of capital assets, including $39.4 million for its
non-wovens business and the consulting portion of Unifi Technology Group.
At June 24, 2001, the Company has committed approximately $20.0 million for
capital expenditures during fiscal 2002.
During the March quarter of 2001 Parkdale America LLC (the"LLC"), an
unconsolidated equity affiliate of the Company, completed the recapitalization
of its balance sheet. Following the completion of this recapitalization, the LLC
distributed cash to the Company and Parkdale Mills, Inc. ("Mills") in the amount
of $49.2 million and $95.5 million, respectively. Of the $49.2 million remitted
to the Company, $23.5 million represents a distribution of current and prior
period earnings and $25.7 million represents a return of capital. Unifi retained
its 34% ownership position and Mills retained its 66% ownership in the LLC
following this distribution.
The Company periodically evaluates the carrying value of long-lived assets,
including property, plant and equipment and intangibles to determine if
impairment exists. If the sum of expected future undiscounted cash flows is less
than the carrying amount of the asset, additional analysis is performed to
determine the amount of loss to be recognized. The Company continues to evaluate
for impairment the carrying value of its polyester natural textured operations
and its nylon texturing and covering operations as the importation of fiber,
fabric and apparel continues to impair sales volumes and margins for these
operations and has negatively impacted the U.S. textile and apparel industry in
general.
Effective July 26, 2000, the Board of Directors increased the Company's
remaining authorization to repurchase up to 10.0 million shares of the Company's
common stock. The Company purchased 1.4 million shares in fiscal year 2001 for a
total of $16.6 million. The Company will continue to operate its stock buy-back
program from time to time as it deems appropriate and financially prudent.
However, it is anticipated that the Company will not repurchase significant
shares in fiscal year 2002 but instead will continue to focus its efforts on the
repayment of long-term debt.
Effective December 20, 2000, the Company refinanced their $400 million
credit facility with a new unsecured three year $250 million revolving bank
credit facility. Additionally, the Company entered into a $100 million trade
receivables financing agreement (the "Receivables Agreement") that is secured by
its domestic and certain foreign accounts receivable. The Receivables Agreement
does not have a stated maturity but is terminable at the option of the Company
with a five-day written notice. The Company has classified the $70.1 million
outstanding at June 24, 2001, as a current maturity of long-term debt, pending
renegotiation of the revolving credit facility discussed in the following
paragraph, despite the intent of the Company to continue the Receivables
Agreement on a long-term basis. Loans under the new credit facility initially
bear interest at LIBOR plus .825% and advances under the receivables financing
agreement bear interest at the applicable commercial paper rate plus .30%. The
weighted average interest rates for the borrowings made from the revolver and
the accounts receivable securitization from December 20, 2000 through June 24,
2001 were 6.60% and 5.92%, respectively. As of June 24, 2001, the Company had
unused capacity of approximately $243.5 million under the terms of the new
revolving credit facility.
The loans under the new revolving credit facility include financial
covenants that required, at June 24, 2001, tangible net worth of $396.1 million,
a maximum leverage ratio of 3.25 and a minimum interest coverage ratio of 2.50.
The Company was in default of the interest coverage covenant of the new
revolving credit facility at June 24, 2001. As a result, the Company has
obtained a waiver through October 31, 2001, which reduced the facility from $250
million to $150 million and raised the effective interest rate approximately
2.0%. The
15
16
Company is currently in discussions with the lending group and others to secure
a more flexible long-term borrowing arrangement. The outstanding balance of the
revolving credit facility of $6.5 million at June 24, 2001 has been classified
as a current maturity of long-term debt. The Company believes that its current
financial position as well as its cash flow from operations and available
collateral will allow it to refinance the revolving credit facility on
acceptable terms.
The current business climate for U.S. based textile manufactures in
extremely challenging due to disparate worldwide production capacity and demand.
This situation does not appear that it will reverse in the foreseeable future.
This highly competitive environment has resulted in a declining market for the
Company, domestically and abroad. Consequently, management took certain
consolidation and cost reduction actions during the year to align our capacity
with current market demands. Management feels confident that a long-term, stable
financing arrangement will be negotiated which will continue to enable the
Company, in combination with its current financial position, the ability to meet
working capital and long-term investment needs and pursue strategic business
opportunities.
EURO CONVERSION
The Company conducts business in multiple currencies, including the
currencies of various European countries in the European Union which began
participating in the single European currency by adopting the Euro as their
common currency as of January 1, 1999. Additionally, the functional currency of
our Irish operation and several sales office locations will change before
January 1, 2002, from their historical currencies to the Euro. During the period
January 1, 1999, to January 1, 2002, the existing currencies of the member
countries will remain legal tender and customers and vendors of the Company may
continue to use these currencies when conducting business. Currency rates during
this period, however, will no longer be computed from one legacy currency to
another but instead will first be converted into the Euro. The Company continues
to evaluate the Euro conversion and the impact on its business, both
strategically and operationally. At this time, the conversion to the Euro has
not had, nor is expected to have, a material adverse effect on the financial
condition or results of operations of the Company.
FORWARD-LOOKING STATEMENTS
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this annual
report contain forward-looking statements within the meaning of federal security
laws about the Company's financial condition and results of operations that are
based on management's current expectations, estimates and projections about the
markets in which the Company operates, management's beliefs and assumptions made
by management. Words such as "expects," "anticipates," "believes," "estimates,"
variations of such words and other similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions which are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in, or implied by, such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's judgment only as of
the date hereof. The Company undertakes no obligation to update publicly any of
these forward-looking statements to reflect new information, future events or
otherwise. Factors that may cause actual outcome and results to differ
materially from those expressed in, or implied by, these forward-looking
statements include, but are not necessarily limited to, availability, sourcing
and pricing of raw materials, pressures on sales prices and volumes due to
competition and economic conditions, reliance on and financial viability of
significant customers, technological advancements, employee relations, changes
in capital expenditures and long-term investments (including those related to
unforeseen acquisition opportunities), continued availability of financial
resources through financing arrangements and operations, negotiations of new or
modifications of existing contracts for asset management regulations governing
tax laws, other governmental and authoritative bodies' policies and legislation,
the continuation and magnitude of the Company's common stock repurchase program
and proceeds received from the sale of assets held for disposal. In addition to
these representative factors, forward-looking statements could be impacted by
general domestic and international economic and industry conditions in the
markets where the Company competes, such as
16
17
changes in currency exchange rates, interest and inflation rates, recession and
other economic and political factors over which the Company has no control.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See the information included in the Consolidated Financial Statements
Footnote 10 ("Derivative Financial Instruments and Fair Value of Financial
Instruments") on pages 34 and 35 of this Report.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's report of independent auditors and consolidated financial
statements and related notes follow on subsequent pages of this Report.
17
18
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Unifi, Inc.
We have audited the accompanying consolidated balance sheets of Unifi, Inc.
as of June 24, 2001, and June 25, 2000, and the related consolidated statements
of operations, changes in shareholders' equity and comprehensive income, and
cash flows for each of the three years in the period ended June 24, 2001. Our
audits also include the financial statement schedule listed in the index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Unifi, Inc. at
June 24, 2001 and June 25, 2000, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended June 24,
2001, in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Greensboro, North Carolina
July 19, 2001
18
19
CONSOLIDATED BALANCE SHEETS
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,634 $ 18,778
Receivables............................................... 171,744 214,001
Inventories............................................... 124,434 147,640
Other current assets...................................... 6,882 2,958
---------- ----------
Total current assets.............................. 309,694 383,377
---------- ----------
Property, plant and equipment:
Land...................................................... 5,712 5,560
Buildings and air conditioning............................ 237,767 239,245
Machinery and equipment................................... 821,100 853,553
Other..................................................... 145,348 152,112
---------- ----------
1,209,927 1,250,470
Less accumulated depreciation............................... 647,614 592,083
---------- ----------
562,313 658,387
Investment in unconsolidated affiliates..................... 173,502 208,918
Other noncurrent assets..................................... 91,810 104,082
---------- ----------
$1,137,319 $1,354,764
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 100,086 $ 97,875
Accrued expenses.......................................... 59,866 50,160
Income taxes payable...................................... 72 2,430
Current maturities of long-term debt and other current
liabilities............................................ 85,962 217,308
---------- ----------
Total current liabilities......................... 245,986 367,773
---------- ----------
Long-term debt and other liabilities........................ 259,188 261,830
---------- ----------
Deferred income taxes....................................... 80,307 86,046
---------- ----------
Minority interests.......................................... 11,295 16,677
---------- ----------
Shareholders' equity:
Common stock.............................................. 5,382 5,516
Capital in excess of par value............................ -- --
Retained earnings......................................... 589,360 649,444
Unearned compensation..................................... (1,203) (1,260)
Accumulated other comprehensive loss...................... (52,996) (31,262)
---------- ----------
540,543 622,438
---------- ----------
$1,137,319 $1,354,764
========== ==========
The accompanying notes are an integral part of the financial statements.
19
20
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.............................................. $1,131,157 $1,291,435 $1,262,278
---------- ---------- ----------
Cost of sales.......................................... 1,034,044 1,127,864 1,087,728
Selling, general and administrative expense............ 62,786 58,063 55,338
Provision for bad debts................................ 8,697 8,694 1,129
Interest expense....................................... 30,123 30,294 27,459
Interest income........................................ (2,549) (2,772) (2,399)
Other (income) expense................................. 7,582 1,052 440
Equity in (earnings) losses of unconsolidated
affiliates........................................... (2,930) 2,989 (4,214)
Minority interest...................................... 2,590 9,543 9,401
Alliance plant closure costs........................... 15,000 -- --
Asset impairments and write downs...................... 24,541 -- --
Employee severance and related charges................. 7,545 -- --
---------- ---------- ----------
Income (loss) before income taxes and cumulative effect
of accounting change................................. (56,272) 55,708 87,396
Provision (benefit) for income taxes................... (11,598) 17,675 28,369
---------- ---------- ----------
Income (loss) before cumulative effect of accounting
change............................................... (44,674) 38,033 59,027
Cumulative effect of accounting change (net of
applicable income taxes of $1,696 for June 27,
1999)................................................ -- -- 2,768
---------- ---------- ----------
Net income (loss)............................ $ (44,674) $ 38,033 $ 56,259
========== ========== ==========
Earnings (losses) per common share:
Income (loss) before cumulative effect of accounting
change............................................ $ (.83) $ .65 $ .97
Cumulative effect of accounting change............... -- -- (.04)
---------- ---------- ----------
Net income (loss) per common share........... $ (.83) $ .65 $ .93
========== ========== ==========
Earnings (losses) per common share -- assuming
dilution:
Income (loss) before cumulative effect of accounting
change............................................ $ (.83) $ .65 $ .97
Cumulative effect of accounting change............... -- -- (.04)
---------- ---------- ----------
Net income (loss) per common share........... $ (.83) $ .65 $ .93
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
20
21
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
CAPITAL IN OTHER
SHARES COMMON EXCESS OF RETAINED UNEARNED COMPREHENSIVE
OUTSTANDING STOCK PAR VALUE EARNINGS COMPENSATION INCOME (LOSS)
----------- -------- ---------- --------- ------------ -------------
(AMOUNTS IN THOUSANDS,
Balance June 28,
1998................. 61,634 $6,163 $ 22,454 $618,128 $ -- $(10,548)
====== ====== ======== ======== ======= ========
Purchase of stock.... (2,112) (211) (23,092) (16,034) -- --
Options exercised.... 26 3 651 -- -- --
Currency translation
adjustments........ -- -- -- -- -- (7,635)
Net income........... -- -- -- 56,259 -- --
------ ------ -------- -------- ------- --------
Balance June 27,
1999................. 59,548 5,955 13 658,353 -- (18,183)
====== ====== ======== ======== ======= ========
Purchase of stock.... (4,462) (446) (840) (47,623) -- --
Options exercised.... 1 -- 14 -- -- --
Grantor's trust tax
benefit............ -- -- -- 681 -- --
Stock forfeited to
satisfy income tax
withholding........ (53) (5) (630) -- -- --
Issuance of
restricted stock... 129 12 1,443 -- (1,455) --
Amortization of
restricted stock... -- -- -- -- 195 --
Currency translation
adjustments........ -- -- -- -- -- (13,079)
Net income........... -- -- -- 38,033 -- --
------ ------ -------- -------- ------- --------
Balance June 25,
2000................. 55,163 5,516 -- 649,444 (1,260) (31,262)
====== ====== ======== ======== ======= ========
Purchase of stock.... (1,436) (144) (1,020) (15,410) -- --
Issuance of
restricted stock... 104 10 1,020 -- (1,030) --
Amortization of
restricted stock... -- -- -- -- 1,087 --
Currency translation
adjustments........ -- -- -- -- -- (21,734)
Net income (loss).... -- -- -- (44,674) -- --
------ ------ -------- -------- ------- --------
Balance June 24,
2001................. 53,831 $5,382 $ -- $589,360 $(1,203) $(52,996)
====== ====== ======== ======== ======= ========
TOTAL COMPREHENSIVE
SHAREHOLDERS' INCOME(LOSS)
EQUITY NOTE 1
------------- -------------
(AMOUNTS IN THOUSANDS,
Balance June 28,
1998................. $636,197 $116,406
======== ========
Purchase of stock.... (39,337) --
Options exercised.... 654 --
Currency translation
adjustments........ (7,635) (7,635)
Net income........... 56,259 56,259
-------- --------
Balance June 27,
1999................. 646,138 48,624
======== ========
Purchase of stock.... (48,909) --
Options exercised.... 14 --
Grantor's trust tax
benefit............ 681 --
Stock forfeited to
satisfy income tax
withholding........ (635) --
Issuance of
restricted stock... -- --
Amortization of
restricted stock... 195 --
Currency translation
adjustments........ (13,079) (13,079)
Net income........... 38,033 38,033
-------- --------
Balance June 25,
2000................. 622,438 24,954
======== ========
Purchase of stock.... (16,574) --
Issuance of
restricted stock... -- --
Amortization of
restricted stock... 1,087 --
Currency translation
adjustments........ (21,734) (21,734)
Net income (loss).... (44,674) (44,674)
-------- --------
Balance June 24,
2001................. $540,543 $(66,408)
======== ========
The accompanying notes are an integral part of the financial statements.
21
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Cash and cash equivalents at beginning of year........... $ 18,778 $44,433 $ 8,372
Operating activities:
Net income (loss)...................................... (44,674) 38,033 56,259
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change (net of
applicable income taxes).......................... -- -- 2,768
(Earnings) losses of unconsolidated equity
affiliates, net of distributions.................. 23,204 6,200 5,287
Depreciation........................................ 81,114 82,750 82,945
Amortization........................................ 9,035 7,778 6,931
Non-cash portion of non-recurring charges........... 43,478 -- --
Deferred income taxes............................... (1,554) 10,692 4,641
Provision for bad debts and quality claims.......... 14,985 14,866 6,241
Other............................................... 72 2,135 415
Changes in assets and liabilities, excluding effects
of acquisitions and foreign currency adjustments:
Receivables....................................... 14,223 (39,257) 28,234
Inventories....................................... 17,221 (18,088) 16,320
Other current assets.............................. 1,214 (1,330) (948)
Payables and accruals............................. 3,285 27,118 (13,959)
Income taxes...................................... (9,971) (4,430) 14,697
--------- ------- ---------
Net -- operating activities.................... 151,632 126,467 209,831
--------- ------- ---------
Investing activities:
Capital expenditures................................... (42,337) (58,609) (118,846)
Acquisitions........................................... (2,159) (7,953) (27,112)
Investments in unconsolidated equity affiliates........ (15,537) (16,069) (10,000)
Return of capital from equity affiliates............... 25,743 -- --
Investment of foreign restricted assets................ (6,770) -- --
Sale of capital assets................................. 41,725 5,637 847
Other.................................................. (887) (1,138) (4,508)
--------- ------- ---------
Net -- investing activities.................... (222) (78,132) (159,619)
--------- ------- ---------
Financing activities:
Borrowing of long-term debt............................ 355,009 72,342 97,000
Repayment of long-term debt............................ (492,450) (81,589) (61,596)
Issuance of Company stock.............................. -- 14 654
Purchase and retirement of Company stock............... (16,574) (48,909) (39,337)
Distributions and advances to minority shareholders.... (12,000) (12,000) (9,000)
Other.................................................. (375) 287 249
--------- ------- ---------
Net -- financing activities.................... (166,390) (69,855) (12,030)
--------- ------- ---------
Currency translation adjustment.......................... 2,836 (4,135) (2,121)
--------- ------- ---------
Net increase (decrease) in cash and cash equivalents..... (12,144) (25,655) 36,061
--------- ------- ---------
Cash and cash equivalents at end of year................. $ 6,634 $18,778 $ 44,433
========= ======= =========
The accompanying notes are an integral part of the financial statements.
22
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND FINANCIAL STATEMENT INFORMATION
Principles of Consolidation: The Consolidated Financial Statements include
the accounts of the Company and all majority-owned subsidiaries. The portion of
the income applicable to noncontrolling interests in the majority-owned
operations is reflected as minority interests in the Consolidated Statements of
Operations. The accounts of all foreign subsidiaries have been included on the
basis of fiscal periods ended three months or less prior to the dates of the
Consolidated Balance Sheets. All significant intercompany accounts and
transactions have been eliminated. Investments in 20 to 50% owned companies and
partnerships where the Company is able to exercise significant influence, but
not control, are accounted for by the equity method and, accordingly,
consolidated income includes the Company's share of the affiliates' income or
losses.
Fiscal Year: The Company's fiscal year is the fifty-two or fifty-three
weeks ending the last Sunday in June. All three fiscal years presented consist
of fifty-two weeks.
Reclassification: The Company has reclassified the presentation of certain
prior year information to conform with the current presentation format.
Revenue Recognition: Revenues from sales are recognized at the time
shipments are made and include amounts billed to customers for shipping and
handling. Costs associated with shipping and handling are included in cost of
sales in the Consolidated Statements of Operations.
Foreign Currency Translation: Assets and liabilities of foreign
subsidiaries are translated at year-end rates of exchange and revenues and
expenses are translated at the average rates of exchange for the year. Gains and
losses resulting from translation are accumulated in a separate component of
shareholders' equity and included in comprehensive income (loss). Gains and
losses resulting from foreign currency transactions (transactions denominated in
a currency other than the subsidiary's functional currency) are included in
other income or expense in the Consolidated Statements of Operations.
Cash and Cash Equivalents: Cash equivalents are defined as short-term
investments having an original maturity of three months or less.
Receivables: Certain customer accounts receivable are factored without
recourse with respect to credit risk. Factored accounts receivable at June 24,
2001, and June 25, 2000, were $34.7 million and $42.9 million, respectively. An
allowance for losses is provided for known and potential losses arising from
yarn quality claims and receivables from customers not factored based on a
periodic review of these accounts. Reserves for such losses were $9.9 million at
June 24, 2001 and $17.2 million at June 25, 2000.
Inventories: The Company utilizes the last-in, first-out ("LIFO") method
for valuing certain inventories representing 47.0% of all inventories at June
24, 2001, and the first-in, first-out ("FIFO") method for all other inventories.
Inventory values computed by the LIFO method are lower than current market
values. Inventories valued at current or replacement cost would have been
approximately $5.0 million and $5.9 million in excess of the LIFO valuation at
June 24, 2001, and June 25, 2000, respectively. The Company experienced a LIFO
liquidation in the current fiscal year resulting in the recognition of
approximately $0.4 million in pre-tax income. Finished goods, work in process,
and raw materials and supplies at June 24, 2001, and June 25, 2000, amounted to
$64.5 million and $81.2 million; $12.5 million and $17.0 million; and $47.4
million and $49.4 million, respectively.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Depreciation is computed for asset groups primarily utilizing the
straight-line method for financial reporting and accelerated methods for tax
reporting. For financial reporting purposes, asset lives have been assigned to
asset categories over periods ranging between three and forty years.
Other Noncurrent Assets: Other noncurrent assets at June 24, 2001, and
June 25, 2000, consist primarily of the cash surrender value of key executive
life insurance policies ($9.3 million and $7.7 million); unamortized bond issue
costs and debt origination fees ($6.1 million and $5.9 million); and acquisition
related assets consisting of the excess cost over fair value of net assets
acquired and other intangibles ($64.6 million
23
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and $82.6 million), respectively. Debt related origination costs have been
amortized on the straight-line method over the life of the corresponding debt,
which approximates the effective interest method. The acquisition related assets
have been amortized on the straight-line method over periods ranging between
five and thirty years. See Recent Accounting Pronouncements in this footnote for
anticipated changes in amortizing and impairment testing of acquisition related
assets for periods beginning after fiscal year 2001. Accumulated amortization at
June 24, 2001, and June 25, 2000, for debt origination costs and acquisition
related assets was $29.9 million and $26.6 million, respectively. See Footnote
15 "Consolidation and Cost Reduction Efforts" for further discussion on current
year activity impacting noncurrent assets.
Long-Lived Assets: Long-lived assets, including the excess cost over fair
value of net assets acquired, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If undiscounted cashflows are not adequate to cover the asset
carrying value, additional analysis is conducted to determine the amount of loss
to be recognized. The impairment loss is determined by the difference between
the carrying amount of the asset and the fair value measured by future
discounted cashflows. See Recent Accounting Pronouncements in this footnote for
anticipated changes in amortizing and impairment testing of acquisition related
assets for periods beginning after fiscal year 2001.
Income Taxes: The Company and its domestic subsidiaries file a
consolidated federal income tax return. Income tax expense is computed on the
basis of transactions entering into pretax operating results. Deferred income
taxes have been provided for the tax effect of temporary differences between
financial statement carrying amounts and the tax basis of existing assets and
liabilities. Income taxes have not been provided for the undistributed earnings
of certain foreign subsidiaries as such earnings are deemed to be permanently
invested.
Earnings (Losses) Per Share: The following table details the computation
of basic and diluted earnings (losses) per share:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Numerator:
Income (loss) before cumulative effect of
accounting change........................... $(44,674) $38,033 $59,027
Cumulative effect of accounting change......... -- -- 2,768
-------- ------- -------
Net income (loss).............................. $(44,674) $38,033 $56,259
======== ======= =======
Denominator:
Denominator for basic earnings (losses) per
share -- weighted average shares............ 53,868 58,488 60,568
Effect of dilutive securities:
Stock options............................... -- 19 2
Restricted stock awards..................... -- 4 --
-------- ------- -------
Diluted potential common shares denominator for
diluted earnings (losses) per
share -- adjusted weighted average shares
and assumed conversions..................... 53,868 58,511 60,570
======== ======= =======
Stock-Based Compensation: With the adoption of SFAS 123, the Company
elected to continue to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Had the fair value-based
method encouraged by SFAS 123 been applied, compensation expense would have been
recorded on the 230,805 options granted in fiscal 2001, the 1,975,570 options
granted in fiscal 2000 and the 414,000 options granted in fiscal 1999 based on
their respective vesting schedules. The fiscal 2001 and 2000 options vest in
annual increments over five years and the fiscal 1999 options vest primarily
over two years. Net income (loss) in fiscal 2001, 2000 and 1999 restated for the
effect would have been $(49.4) million or $(0.92) per diluted
24
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share, $32.7 million or $0.56 per diluted share and $53.3 million or $0.88 per
diluted, respectively. The fair value and related compensation expense of the
2001, 2000 and 1999 options were calculated as of the issuance date using the
Black-Scholes model with the following assumptions:
OPTIONS GRANTED 2001 2000 1999
--------------- ---- ---- ----
Expected life (years)...................................... 10.0 10.0 10.0
Interest rate.............................................. 6.00% 6.00% 6.14%
Volatility................................................. 47.7% 49.5% 49.3%
Dividend yield............................................. -- -- --
Comprehensive Income: Comprehensive income includes net income and other
changes in net assets of a business during a period from non-owner sources,
which are not included in net income. Such non-owner changes may include, for
example, available-for-sale securities and foreign currency translation
adjustments. Other than net income, foreign currency translation adjustments
presently represent the only component of comprehensive income for the Company.
The Company does not provide income taxes on the impact of currency translations
as earnings from foreign subsidiaries are deemed to be permanently invested.
Recent Accounting Pronouncements: In September 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (SFAS 140). SFAS 140 replaces Statement of
Financial Accounting Standards No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (SFAS 125). SFAS 140
revises the standards for accounting and for securitizations and other transfers
of financial assets and collateral and requires certain disclosures, but carries
over most of SFAS 125's provisions. SFAS 140 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on a financial-components approach that focuses on control.
This standard is applied prospectively and was effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. The adoption of this standard did not have any effect on the
Company's results of operation or financial position.
In September 2000, the Emerging Issues Task Force (EITF) issued EITF
Abstract 00-10 "Accounting for Shipping and Handling Fees and Costs." EITF 00-10
requires that any amounts billed to a customer for a sales transaction related
to shipping or handling should be classified as revenues. Costs associated with
providing this service is an accounting policy disclosure and a company may
adopt a policy of including such costs in their cost of sales line item. The
Company was required to adopt EITF 00-10 in the fourth quarter of fiscal year
2001. The Company historically has included revenues earned for shipping and
handling in the net sales line item in the Consolidated Results of Operations.
Costs to provide this service were either historically included in net sales,
for shipping costs, or in cost of sales, for handling expenses. Upon the
adoption of EITF 00-10 the Company has reclassified the presentation of shipping
costs from net sales to cost of sales and has restated all prior periods to
conform with the current year format. Adopting EITF 00-10 had no impact on the
Company's results of operations or financial position.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," (SFAS 141) and
No. 142 "Goodwill and Other Intangible Assets (SFAS 142)." SFAS 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method is
prohibited after this date. SFAS 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets acquired in
a business combination completed after June 30, 2001.
SFAS 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually, or more frequently under certain conditions, for impairment in
accordance with this standard. This impairment test uses a fair value approach
rather than the undiscounted cash flows approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of (SFAS 121)." The amortization of goodwill included in
25
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
investments in equity investees will also no longer be recorded upon adoption of
the new rules. Intangible assets that do not have indefinite lives will continue
to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS 121. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company anticipates that it will apply the
new accounting rules beginning June 25, 2001. The Company is currently assessing
the financial impact SFAS 141 and 142 will have on the consolidated financial
statements. In fiscal 2001, the amortization expense associated with remaining
goodwill approximated $3.3 million.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" (SFAS 143). This standard applies to all entities and addresses
legal obligations associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development or normal operation
of a long-lived asset. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. Additionally, any
associated asset retirement costs are to be capitalized as part of the carrying
amount of the long-lived asset and expensed over the life of the asset. SFAS 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. The Company has not yet assessed the financial impact that
adopting SFAS 143 will have on the consolidated financial statements.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. ACQUISITIONS, ALLIANCES AND DIVESTURES
On May 22, 2001, the Company assumed operating control of Glen Raven's
(Glen Raven) air jet texturing assets located in Altamahaw, North Carolina. This
location is capable of producing an estimated 13.0 million pounds of air jet
texturing volume making Unifi the United States market leader in the production
of air jet textured yarn. The agreement between Glen Raven and the Company is
structured as an operating lease whereby the air texturing equipment and
manufacturing location will be leased from Glen Raven over a seven-year term.
The Glen Raven employees at the Altamahaw plant became Unifi employees.
On June 22, 2001, the Company completed the previously announced sale of
the assets of its wholly owned subsidiary, Unifi Technical Fabrics, LLC, to
Avgol Nonwovens Industries of Holon, Israel. There were substantially no sales
or other operating activities associated with these assets prior to the date of
sale.
In June 2001, the consulting operations of the Company's majority-owned
subsidiary, Unifi Technology Group (UTG) were sold to Camstar Technology Group,
Inc. UTG was formed in the fourth quarter of fiscal year 1999 to provide
consulting services focused on integrated manufacturing, factory automation and
electronic commerce solutions to other domestic manufacturers. Effective June 1,
1999, UTG acquired the assets of Cimtec, Inc. ("Cimtec"), a manufacturing
automation solutions provider, for $10.5 million and a minority-ownership
interest in the newly combined entity was subsequently sold to certain former
Cimtec shareholders and former Unifi executives. The remaining UTG operations,
now conducting business under the name Cimtec Automation, Inc., involves the
sale and repair of certain computer hardware which was part of the Cimtec
business acquired on June 1, 1999.
The combined sales proceeds from the divestures described in the preceding
two paragraphs totaled approximately $39.4 million.
Effective June 1, 2000, the Company and E.I. DuPont De Nemours and Company
(DuPont) initiated a manufacturing alliance. The alliance is expected to
optimize Unifi's and DuPont's partially oriented yarn (POY) manufacturing
facilities, increase manufacturing efficiency and improve product quality. Under
its terms, DuPont and Unifi will cooperatively run their polyester filament
manufacturing facilities as a single operating unit. This consolidation involves
the closing of the DuPont Cape Fear, North Carolina plant and will
26
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shift commodity yarns from our Yadkinville, North Carolina facility to DuPont's
Kinston, North Carolina plant, and bring high-end specialty production to
Yadkinville from Kinston and Cape Fear. The companies will split equally the
costs to complete the necessary plant consolidation and the benefits gained
through asset optimization. Additionally, the companies will collectively
attempt to increase profitability through the development of new products and
related technologies. Likewise, the costs incurred and benefits derived from the
product innovations will be split equally. DuPont and Unifi will continue to own
and operate their respective sites and employees will remain with their
respective employers. DuPont will continue to provide POY to the marketplace and
will use DuPont technology to expand the specialty product range at each
company's sites. Unifi will continue to provide textured yarn to the
marketplace. At termination of the alliance or at any time after June 1, 2005,
Unifi has the option to purchase from DuPont and DuPont has the right to sell to
Unifi, DuPont's U.S. polyester filament business for a price within a
predetermined fair market value range involving this manufacturing alliance. See
Footnote 16 "Alliance Plant Closure Costs" on pages 37 and 38 for additional
information involving this alliance.
On March 8, 2000, the Company acquired Intex Yarns Limited (Intex) located
in Manchester, England for approximately $8.0 million plus assumed debt. This
acquisition added high quality, package-dyeing capabilities in Europe and
compliments the Company's yarn production facility in Letterkenny, Ireland.
During fiscal 1999, the Company formed Unifi do Brasil, LTDA to acquire the
assets of Fairway Polyester, LTDA., a Brazilian company, for $16.6 million
effective April 1, 1999.
The Glen Raven, Intex, Brazilian and Cimtec acquisitions were all accounted
for by the purchase method of accounting and accordingly, the net assets and
operations have been included in the Company's Consolidated Financial Statements
beginning on the date the acquisition was consummated. The transactions are not
considered significant to the Company's consolidated net assets or results of
operations.
3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires start-up costs, as defined, to be expensed
as incurred. In accordance with this SOP, any previously capitalized start-up
costs were required to be written-off as a cumulative effect of a change in
accounting principle. The Company, upon adoption of this SOP in the first
quarter of fiscal 1999, wrote off the unamortized balance of such previously
capitalized start-up costs as of June 29, 1998, of $4.5 million ($2.8 million
after tax) or $.04 per diluted share as a cumulative catch-up adjustment.
4. LONG-TERM DEBT AND OTHER LIABILITIES
A summary of long-term debt follows:
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)
Bonds payable............................................... $248,651 $248,447
Revolving credit facility dated April 15, 1996.............. -- 211,500
Revolving credit facility dated December 20, 2000........... 6,500 --
Accounts receivable securitization.......................... 70,085 --
Sale-leaseback obligation................................... 3,020 3,154
Other obligations........................................... 16,894 16,037
-------- --------
Total debt........................................ 345,150 479,138
Current maturities.......................................... 85,962 217,308
-------- --------
Total long-term debt and other liabilities........ $259,188 $261,830
======== ========
On February 5, 1998, the Company issued $250 million of senior, unsecured
debt securities (the "Notes") which bear a coupon rate of 6.50% and mature in
2008. The estimated fair value of the Notes, based
27
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on quoted market prices, at June 24, 2001, and June 25, 2000, was approximately
$195.0 million and $216.9 million, respectively.
The $400 million revolving credit facility dated April 15, 1996 that was
scheduled to mature April 15, 2001 was refinanced in December 2000. The June 25,
2000 outstanding balance was classified as short term due to the scheduled
maturity falling within 12 months of the prior fiscal year end. The rate of
interest that was charged under this facility was adjusted quarterly based on a
pricing grid which considered the ratio of the Company's debt to earnings before
income taxes, depreciation, amortization and other non-cash charges. The credit
facility provided the Company the option of borrowing at a spread over the base
rate (as defined) for base rate loans or the Adjusted London Interbank Offered
Rate (LIBOR) for Eurodollar loans. In accordance with the pricing grid, the
Company paid a quarterly facility fee ranging from 0.090%-0.150% of the total
amount available under the revolving credit facility. The weighted average
interest rates for the period this debt was outstanding in the current fiscal
year was 6.91% and was 6.12% for the prior fiscal year.
Effective December 20, 2000, the Company refinanced the above described
$400 million credit facility with a new unsecured three year $250 million
revolving bank credit facility. Additionally, the Company entered into a $100
million trade receivables financing agreement (the "Receivables Agreement") that
is secured by its domestic and certain foreign accounts receivable. The
Receivables Agreement does not have a stated maturity but is terminable at the
option of the Company with a five-day written notice. The Company has classified
the $70.1 million outstanding at June 24, 2001, as a current maturity of
long-term debt, pending renegotiation of the revolving credit facility discussed
in the following paragraph, despite the intent of the Company to continue the
Receivables Agreement on a long-term basis. Loans under the new credit facility
initially bear interest at LIBOR plus .825% and advances under the receivables
financing agreement bear interest at the applicable commercial paper rate plus
.30%. The weighted average interest rates for the borrowings made from the
revolver and the accounts receivable securitization from December 20, 2000
through June 24, 2001 were 6.60% and 5.92%, respectively. As of June 24, 2001,
the Company had unused capacity of approximately $243.5 million under the terms
of the new revolving credit facility.
The loans under the new revolving credit facility include financial
covenants that required, at June 24, 2001, tangible net worth of $396.1 million,
a maximum leverage ratio of 3.25 and a minimum interest coverage ratio of 2.50.
The Company was in default of the interest coverage covenant of the new
revolving credit facility at June 24, 2001. As a result, the Company has
obtained a waiver through October 31, 2001, which reduced the facility from $250
million to $150 million and raised the effective interest rate approximately
2.0%. The Company is currently in discussions with the lending group and others
to secure a more flexible long-term borrowing arrangement. The outstanding
balance of the revolving credit facility of $6.5 million at June 24, 2001 has
been classified as a current maturity of long-term debt. The Company believes
that its current financial position as well as its cash flow from operations and
available collateral will allow it to refinance the revolving credit facility on
acceptable terms.
On May 20, 1997, the Company entered into a sales-leaseback agreement with
a financial institution whereby land, buildings and associated real and personal
property improvements of certain manufacturing facilities were sold to the
financial institution and will be leased by the Company over a sixteen-year
period. This transaction has been recorded as a direct financing arrangement. On
June 30, 1997, the Company entered into a Contribution Agreement associated with
the formation of Parkdale America, LLC (see Consolidated Financial Statement
Footnote 11). As a part of the Contribution Agreement, ownership of a
significant portion of the assets financed under the sales-leaseback agreement
and the related debt ($23.5 million) were assumed by the LLC. Payments for the
remaining balance of the sales-leaseback agreement are due semi-annually and are
in varying amounts, in accordance with the agreement. Average annual principal
payments over the next five years are approximately $179 thousand. The interest
rate implicit in the agreement is 7.84%.
Other obligations consist primarily of acquisition-related liabilities and
advances from the Brazilian government. Maturities over the next three years are
$9.3 million, $7.1 million, $0.5 million, respectively.
Interest capitalized during fiscal 2001 and 2000 was $2.4 million and $0.6
million, respectively.
28
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The provision for income taxes for fiscal 2001, 2000 and 1999 consists of
the following:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Currently payable (recoverable):
Federal........................................ $ (6,005) $ 6,629 $20,124
State.......................................... 666 1,682 2,951
Foreign........................................ 108 (225) 653
-------- ------- -------
Total current.......................... (5,231) 8,086 23,728
-------- ------- -------
Deferred:
Federal........................................ (4,239) 9,772 10,219
State.......................................... (1,325) (261) (5,718)
Foreign........................................ (803) 78 140
-------- ------- -------
Total deferred......................... (6,367) 9,589 4,641
-------- ------- -------
Income taxes (benefit) before cumulative effect
of accounting change (1999).................... $(11,598) $17,675 $28,369
======== ======= =======
Income taxes/(benefit) were (20.6%), 31.7% and 32.5% of pretax
earnings/(losses) in fiscal 2001, 2000 and 1999, respectively. A reconciliation
of the provision for income taxes/(benefits) (before cumulative effect of
accounting changes in 1999) with the amounts obtained by applying the federal
statutory tax rate is as follows:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
Federal statutory tax rate....................... (35.0%) 35.0% 35.0%
State income taxes net of federal tax benefit.... (0.5) 3.7 3.1
State tax credits net of federal tax benefit..... (0.4) (2.1) (5.1)
Foreign taxes less than domestic rate............ -- -- (1.8)
Foreign tax benefit of losses less than domestic
rate........................................... 16.8 2.5 --
Foreign Sales Corporation tax benefit............ (0.8) (1.1) (0.7)
Research and experimentation credit.............. (0.1) (0.1) (0.1)
Reversal of tax reserves......................... -- (7.4) --
Nondeductible expenses and other................. (0.6) 1.2 2.1
------ ---- ----
Effective tax rate............................... (20.6%) 31.7% 32.5%
====== ==== ====
29
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The deferred income taxes reflect the net tax effects of temporary
differences between the bases of assets and liabilities for financial reporting
purposes and their bases for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of June 24, 2001, and June 25,
2000, were as follows:
JUNE 24, 2001 JUNE 25, 2000
------------- -------------
(AMOUNTS IN THOUSANDS)
Deferred tax liabilities:
Property, plant and equipment............................. $100,676 $ 97,051
Investments in equity affiliates.......................... 19,297 19,974
Other..................................................... 1,021 394
-------- --------
Total deferred tax liabilities.................... $120,994 $117,419
======== ========
Deferred tax assets:
Accrued liabilities and valuation reserves................ 15,397 9,795
State tax credits......................................... 16,608 16,511
Other items............................................... 8,682 5,067
-------- --------
Total deferred tax assets......................... 40,687 31,373
-------- --------
Net deferred tax liabilities...................... $ 80,307 $ 86,046
======== ========
6. COMMON STOCK, STOCK OPTION PLANS AND RESTRICTED STOCK
Common shares authorized were 500 million in 2001 and 2000. Common shares
outstanding at June 24, 2001, and June 25, 2000, were 53,825,533 and 55,163,193,
respectively.
On October 21, 1999, the shareholders of the Company approved the 1999
Unifi, Inc. Long-Term Incentive Plan. The plan authorized the issuance of up to
6,000,000 shares of Common Stock pursuant to the grant or exercise of stock
options, including Incentive Stock Options ("ISO"), Non-Qualified Stock Options
("NQSO") and restricted stock, but not more than 3,000,000 shares may be issued
as restricted stock. The 230,805 and 1,975,570 options granted in fiscal 2001
and 2000, respectively were all from the 1999 Long-Term Incentive Plan. In
addition, the Company has previous ISO plans with 846,357 shares reserved and
previous NQSO plans with 1,576,007 shares reserved at year end. No additional
options will be issued under any previous ISO or NQSO plan. The transactions for
2001, 2000 and 1999 of all three plans were as follows:
ISO NQSO
-------------------------- --------------------------
OPTIONS WEIGHTED OPTIONS WEIGHTED
OUTSTANDING AVG. $/SHARE OUTSTANDING AVG. $/SHARE
----------- ------------ ----------- ------------
Fiscal 1999:
Granted........................................ 309,000 $16.31 105,000 $17.47
Exercised...................................... (833) 16.31 (25,000) 25.65
Canceled....................................... (12,435) 17.48 (6,668) 31.00
Converted from ISO to NQSO..................... (391,508) 23.24 391,508 23.24
--------- ------ --------- ------
Shares under option -- end of year............... 846,357 $22.15 1,576,007 $25.29
========= ====== ========= ======
Fiscal 2000:
Granted........................................ 1,975,570 $11.90 -- $ --
Exercised...................................... (833) 16.31 -- --
Canceled....................................... (16,500) 22.73 (346,832) 24.74
--------- ------ --------- ------
Shares under option -- end of year............... 2,804,594 $14.93 1,229,175 $25.44
========= ====== ========= ======
Fiscal 2001:
Granted........................................ 230,805 $ 9.11 -- $ --
Canceled....................................... (177,477) 17.32 (40,000) 29.24
--------- ------ --------- ------
Shares under option -- end of year............... 2,857,922 $14.31 1,189,175 $25.31
========= ====== ========= ======
30
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 2001 FISCAL 2000 FISCAL 1999
------------- ------------- -------------
ISO:
Exercisable shares under option -- end of
year......................................... 1,609,931 829,024 685,918
Option price range.............................. $11.19-$25.38 $10.19-$25.38 $10.19-$25.38
Weighted average exercise price for options
exercisable.................................. $ 16.46 $ 22.14 $ 23.52
Weighted average remaining life of shares under
option....................................... 7.4 4.7 6.4
Fair value of options granted................... $ 5.59 $ 7.58 $ 11.21
NQSO:
Exercisable shares under option -- end of
year......................................... 1,189,175 1,229,175 1,542,077
Option price range.............................. $16.31-$31.00 $16.31-$31.00 $16.31-$31.00
Weighted average exercise price for options
exercisable.................................. $ 25.31 $ 25.44 $ 25.48
Weighted average remaining life of shares under
option....................................... 4.1 5.1 6.0
Fair value of options granted................... $ -- $ -- $ 11.21
All options granted in fiscal 2001 and 2000 vest in annual increments over
five years from the grant date.
During fiscal 2001 and 2000, the Company issued a combined total of 104,366
shares and 129,500 shares, respectively of restricted stock to certain employees
under the 1999 Unifi, Inc. Long-Term Incentive Plan. The stock issued vests in
equal annual increments ranging from two to five years from the grant dates.
Compensation expense will be recognized over the vesting terms of the shares
based on the fair market value at the date of grant.
7. RETIREMENT PLANS
The Company has a qualified profit-sharing plan, which provides benefits
for eligible salaried and hourly employees. The annual contribution to the plan,
which is at the discretion of the Board of Directors, amounted to $5.0 million
in 2001 and $11.0 million in both 2000 and 1999. The Company leases its
corporate office building from its profit-sharing plan through an independent
trustee.
8. LEASES AND COMMITMENTS
In addition to the direct financing sales-leaseback obligation described in
Consolidated Financial Statements Footnote 4, the Company is obligated under
operating leases consisting primarily of real estate and equipment. Future
obligations for minimum rentals under the leases during fiscal years after June
24, 2001, are $6.4 million in 2002, $5.4 million in 2003, $5.8 million in 2004,
$4.6 million in 2005, $3.5 million in 2006 and $5.7 million in aggregate
thereafter. Rental expense was $7.9 million, $8.5 million and $7.6 million for
the fiscal years 2001, 2000 and 1999, respectively. The Company had committed
approximately $20.0 million for the purchase and upgrade of equipment and
facilities at June 24, 2001.
9. BUSINESS SEGMENTS, FOREIGN OPERATIONS AND CONCENTRATIONS OF CREDIT RISK
The Company and its subsidiaries are engaged predominantly in the
processing of yarns by texturing of synthetic filament polyester and nylon fiber
with sales domestically and internationally, mostly to knitters and weavers for
the apparel, industrial, hosiery, home furnishing, automotive upholstery and
other end-use markets. Additionally, during fiscal 1999, the Company formed a
limited liability company to provide integrated manufacturing, factory
automation and electronic commerce solutions to other domestic manufactures. The
consulting operations of this business was sold at the end of the current fiscal
year. This operation comprises the majority of the amounts included in the "All
Other" column for all three years presented. The Company also maintains
investments in several minority-owned and jointly owned affiliates. See Footnote
11 in these Consolidated Financial Statements for further information on
unconsolidated affiliates.
31
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with Statement of Financial Accounting Standards No. 131,
segmented financial information of the polyester and nylon operating segments,
as regularly reported to management for the purpose of assessing performance and
allocating resources, is detailed below.
ALL
POLYESTER NYLON OTHER TOTAL
--------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)
Fiscal 2001:
Net sales to external customers............ $791,169 $315,114 $24,106 $1,130,389
Intersegment net sales..................... 63 -- 9,164 9,227
Depreciation and amortization.............. 57,159 22,616 1,048 80,823
Segment operating income (loss)............ 28,430 7,392 (1,859) 33,963
Total assets....................... 608,594 292,369 5,076 906,039
-------- -------- ------- ----------
Fiscal 2000:
Net sales to external customers............ $861,842 $409,433 $20,160 $1,291,435
Intersegment net sales..................... 23 408 11,757 12,188
Depreciation and amortization.............. 59,435 22,001 767 82,203
Segment operating income................... 66,572 40,999 941 108,512
Total assets....................... 695,675 358,205 17,721 1,071,601
-------- -------- ------- ----------
Fiscal 1999:
Net sales to external customers............ $815,628 $445,089 $ 1,561 $1,262,278
Intersegment net sales..................... 17,014 5,159 -- 22,173
Depreciation and amortization.............. 58,294 24,142 48 82,484
Segment operating income (loss)............ 64,710 47,966 (62) 112,614
Total assets....................... 710,277 206,661 13,392 930,330
-------- -------- ------- ----------
Net sales to external customers for fiscal year 2001 does not include $768
thousand of net sales associated with the Company's non-woven start-up
operation. This operation was substantially selling off-quality product during
its ramp-up phase and had not yet been classified internally as a separate
operational segment for purposes of management evaluation.
Certain indirect manufacturing and selling, general and administrative
costs are allocated to the operating segments based on activity drivers relevant
to the respective costs. The primary differences between the segmented financial
information of the operating segments, as reported to management, and the
Company's consolidated reporting relates to intersegment transfer of yarn, fiber
costing and capitalization of property, plant and equipment costs. In fiscal
year 1999, substantially all intersegment transfers of yarn were treated as
internal sales at a selling price, which approximated cost plus a normalized
profit margin. In the current year and for fiscal year 2000, the majority of
intersegment yarn transfers were treated as inventory transfers, and profit
margins recorded only on intersegment transfers from our dyed operations.
Domestic operating divisions' fiber costs are valued on a standard cost basis,
which approximates first-in, first-out accounting. For those components of
inventory valued utilizing the last-in, first-out method (see Footnote 1
"Accounting Polices and Financial Statement Information"), an adjustment is made
at the corporate level to record the difference between standard cost and LIFO.
For significant capital projects, capitalization is delayed for management
segment reporting until the facility is substantially complete. However, for
consolidated financial reporting, assets are capitalized into construction in
progress as costs are incurred or carried as unallocated corporate fixed assets
if they have been placed in service but not as yet been moved for management
segment reporting.
Segment operating income for fiscal 1999 was reduced $9.7 million and $5.1
million for polyester and nylon, respectively, as a result of the early
retirement and termination charge in the third quarter. See Footnote 14 "Early
Retirement and Termination Charge" for additional information.
The change in the polyester segment total assets between fiscal year end
2000 and 2001 reflects reduced working capital of $38.1 million and lower fixed
assets of $51.2 million. The fixed asset reduction is primarily
32
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
associated with current year depreciation. The change in the nylon segment total
assets for this period is a result of lower working capital of $44.6 million,
decreased property and equipment of $16.5 million and lower noncurrent assets of
approximately $3.3 million. The reduction in long-term assets is primarily
associated with depreciation and amortization recorded during the current year.
The change in total assets for the "All Other" segment primarily reflects the
sale of the consulting operations of the Company's majority owned subsidiary,
Unifi Technology Group at the end of the current fiscal year.
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Depreciation and amortization:
Depreciation and amortization of specific
reportable segment assets................... $ 80,823 $ 82,203 $ 82,484
Depreciation of unallocated assets............. 7,271 7,146 6,362
Amortization of unallocated assets............. 2,108 3,841 3,373
---------- ---------- ----------
Consolidated depreciation and amortization..... $ 90,202 $ 93,190 $ 92,219
========== ========== ==========
Operating income (loss):
Reportable segments operating income........... $ 33,963 $ 108,512 $ 112,614
Unallocated start-up operating losses.......... 2,078 -- --
Net standard cost (income) expense adjustment
to LIFO..................................... (2,781) 4,444 (8,040)
Unallocated operating (income) expense project
adjustment.................................. 339 (1,440) 1,442
Provision for bad debts........................ 8,697 8,694 1,129
Interest expense............................... 30,123 30,294 27,459
Interest income................................ (2,549) (2,772) (2,399)
Other (income) expense......................... 7,582 1,052 440
Equity in (earnings) losses of unconsolidated
affiliates.................................. (2,930) 2,989 (4,214)
Minority interests............................. 2,590 9,543 9,401
Alliance plant closure costs................... 15,000 -- --
Asset impairments and write downs.............. 24,541 -- --
Employee severance and related charges......... 7,545 -- --
---------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of accounting change...... $ (56,272) $ 55,708 $ 87,396
========== ========== ==========
Total assets:
Reportable segments total assets............... $ 906,039 $1,071,601 $ 930,330
Cash, receivables and other current assets..... 24,720 16,254 17,661
Unallocated corporate fixed assets............. 16,603 44,159 176,161
Other non-current corporate assets............. 36,010 38,522 41,085
Investments in equity affiliates............... 173,502 208,918 207,142
Intersegment notes and receivables............. (19,555) (24,690) (6,539)
---------- ---------- ----------
Consolidated assets.............................. $1,137,319 $1,354,764 $1,365,840
========== ========== ==========
The Company's domestic operations serve customers principally located in
the southeastern United States as well as international customers located
primarily in Canada, Mexico, Europe and South America. During fiscal 2001, 2000
and 1999 the Company did not have sales to any one customer in excess of 10% of
consolidated revenues. Export sales, excluding those to the Company's
international operations, aggregated $143.4 million in 2001, $182.8 million in
2000 and, $153.9 million in 1999. The concentration of credit risk for the
Company with respect to trade receivables is mitigated due to the large number
of customers, dispersion across different industries and geographic regions and
its factoring arrangements.
33
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's foreign operations primarily consist of manufacturing
operations in Ireland, England, Brazil and Colombia. Net sales, pre-tax
operating income and total assets of the Company's foreign and domestic
operations are as follows:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Foreign operations:
Net sales...................................... $190,763 $ 182,326 $ 141,310
Pre-tax income (loss).......................... (28,430) (4,456) 6,804
Total assets........................... 160,190 193,746 174,146
Domestic operations:
Net sales...................................... $940,394 $1,109,109 $1,120,968
Pre-tax income (loss).......................... (27,842) 60,164 80,592
Total assets........................... 977,129 1,161,018 1,191,694
10. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective June 26, 2000, the Company began accounting for derivative
contracts and hedging activities under Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which requires all derivatives to be recorded on the balance sheet
at fair value. There was no cumulative effect adjustment of adopting this
accounting standard. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Company does not enter into derivative financial instruments for trading
purposes.
The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposure that arises from foreign
exchange rate movements between the dates that foreign currency transactions are
recorded (export sales and purchases commitments) and the dates they are
consummated (cash receipts and cash disbursements in foreign currencies). The
Company utilizes some natural hedging to mitigate these transaction exposures.
The Company also enters into foreign currency forward contracts for the purchase
and sale of European, Canadian and other currencies to hedge balance sheet and
income statement currency exposures. These contracts are principally entered
into for the purchase of inventory and equipment and the sale of Company
products into export markets. Counter-parties for these instruments are major
financial institutions.
Currency forward contracts are entered to hedge exposure for sales in
foreign currencies based on specific sales orders with customers or for
anticipated sales activity for a future time period. Generally, 60-80% of the
sales value of these orders are covered by forward contracts. Maturity dates of
the forward contracts attempt to match anticipated receivable collections. The
Company marks the outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are recorded
as other income and expense. The Company also enters currency forward contracts
for committed or anticipated equipment and inventory purchases. Generally 50-75%
of the asset cost is covered by forward contracts although 100% of the asset
cost may be covered by contracts in certain instances. Forward contracts are
matched with the anticipated date of delivery of the assets and gains and losses
are recorded as a component of the asset cost for purchase transactions the
Company is firmly committed. For anticipated purchase transactions, gains or
losses on hedge contracts are accumulated in Other Comprehensive Income (Loss)
and periodically evaluated to assess hedge effectiveness. In the current year,
the Company recorded and subsequently wrote off approximately $4.7 million of
accumulated losses on hedge contracts associated with the anticipated purchase
of machinery that was later canceled. The contracts outstanding for anticipated
purchase commitments that were subsequently canceled were unwound by entering
into sales contracts with identical remaining maturities and contract values.
These purchase and sales contracts continue to be marked
34
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to market with offsetting gain and losses. The latest maturity for all
outstanding purchase and sales foreign currency forward contracts are October
15, 2001 and March 21, 2002, respectively.
The dollar equivalent of these forward currency contracts and their related
fair values are detailed below:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Foreign currency purchase contracts:
Notional amount................................ $14,400 $49,343 $ 2,842
Fair value..................................... 12,439 46,760 3,250
------- ------- -------
Net (gain) loss........................ $ 1,961 $ 2,583 $ (408)
======= ======= =======
Foreign currency sales contracts:
Notional amount................................ $28,820 $26,303 $28,024
Fair value..................................... 29,369 26,474 27,826
------- ------- -------
Net (gain) loss........................ $ 549 $ 171 $ (198)
======= ======= =======
For the fiscal year ended June 24, 2001, the total impact of foreign
currency related items on the Consolidated Statements of Operations, including
transaction that were hedged and those that were not hedged, was a pre-tax loss
of $9.5 million.
The following methods were used by the Company in estimating its fair value
disclosures for financial instruments:
Cash and cash equivalents, trade receivables and trade payables. The
carrying amounts approximate fair value because of the short maturity of these
instruments.
Long-term debt. The fair value of the Company's borrowings is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities
(see Footnote 4 "Long-Term Debt and Other Liabilities").
Foreign currency contracts. The fair value is based on quotes obtained
from brokers or reference to publicly available market information.
11. INVESTMENT IN UNCONSOLIDATED AFFILIATES
On September 13, 2000, the Company and SANS Fibres of South Africa formed a
50/50 joint venture (UNIFI-SANS Technical Fibers, LLC or UNIFI-SANS) to produce
low-shrinkage high tenacity nylon 6.6 light denier industrial (LDI) yarns in
North Carolina. Sales from this entity are expected to be primarily to customers
in the NAFTA and CBI markets. UNIFI-SANS will also incorporate the two-stage
light denier industrial nylon yarn business of Solutia, Inc. which was purchased
by SANS Fibres. Solutia will exit the two-stage light denier industrial yarn
business transitioning production from its Greenwood, SC site to the UNIFI-SANS
Stoneville, North Carolina facility, a former Unifi manufacturing location. The
Unifi-Sans facility is scheduled to begin production in November 2001. Until
such time, UNIFI-SANS will continue to purchase yarn from Solutia to meet market
demand. Unifi will manage the day-to-day production and shipping of the LDI
produced in North Carolina and SANS Fibres will handle technical support and
sales. Annual LDI production capacity from the joint venture is estimated to be
approximately 9.6 million pounds.
On September 27, 2000, Unifi and Nilit Ltd., located in Israel, formed a
50/50 joint venture to be called U.N.F. Industries Ltd. (U.N.F.). The joint
venture will produce approximately 25.0 million pounds of nylon POY at Nilit's
manufacturing facility in Migdal Ha - Emek, Israel. Production and shipping of
POY from this facility began in March 2001. The nylon POY will be utilized in
the Company's nylon texturing and covering operations.
35
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company continues to maintain a 34% interest in Parkdale
America, LLC (the "LLC") and has reduced its equity interest in Micell
Technologies Inc. ("Micell") from 45.27% to 32.71% during the current year.
Condensed balance sheet and income statement information of the combined
unconsolidated equity affiliates as of and for the twelve-month periods ended
June 24, 2001, June 25, 2000 and June 27, 1999 are as follows:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Current assets................................... $258,679 $223,068 $282,004
Noncurrent assets................................ 216,760 234,093 256,513
Current liabilities.............................. 145,963 37,632 125,730
Shareholders' equity and capital accounts........ 294,411 398,113 390,935
Net sales........................................ $493,012 $507,950 $594,445
Gross profit..................................... 27,229 33,524 57,915
Income from operations........................... 4,224 988 27,653
Net income....................................... 6,642 2,453 21,262
UNIFI-SANS and the LLC are organized as partnerships for U.S. tax purposes.
Taxable income is passed through UNIFI-SANS and the LLC to the members in
accordance with the Operating Agreements of UNIFI-SANS and the LLC. For the
fiscal years ended June 24, 2001, June 25, 2000 and June 27, 1999, distributions
received by the Company from the LLC amounted to $51.9 million, $3.2 million and
$9.5 million, respectively. Included in the above net sales amount for the June
24, 2001 period are sales to Unifi of approximately $12.5 million. This amount
represents sales of nylon POY from U.N.F. for use in the production of nylon
textured yarn in the ordinary course of business.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is summarized below:
JUNE 24, 2001 JUNE 25, 2000 JUNE 27, 1999
------------- ------------- -------------
(AMOUNTS IN THOUSANDS)
Cash payments for:
Interest, net of amounts capitalized........... $28,362 $28,978 $25,396
Income taxes, net of refunds................... 1,392 9,315 8,225
13. MINORITY INTEREST
Effective May 29, 1998, the Company formed Unifi Textured Polyester, LLC
(UTP)with Burlington Industries, Inc. ("Burlington") to manufacture and market
natural textured polyester yarns. The Company has an 85.42% interest in UTP and
Burlington has 14.58%. For the first five years, Burlington is entitled to the
first $9.4 million of earnings and the first $12.0 million of excess cash flow
of the business. Subsequent to this five-year period, earnings and cash flows
are to be allocated based on ownership percentages. UTP's assets, liabilities
and earnings are consolidated with those of the Company and Burlington's
interest in the UTP is included in the Company's financial statements as
minority interest. Minority interest for Burlington's share of UTP in fiscal
2001, 2000 and 1999 amounted to $3.0 million, $9.4 million and $9.4 million,
respectively.
14. EARLY RETIREMENT AND TERMINATION CHARGE
During the third quarter of fiscal 1999, the Company recognized a $14.8
million charge associated with the early retirement and termination of 114
salaried employees. The charge was recorded as a component of selling, general
and administrative expenses in the amount of $8.2 million and cost of goods sold
in the amount of $6.6 million. Substantially all employees were terminated
effective March 31, 1999, with cash payments for
36
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
severance expected to be spread over a period not to exceed three years. At June
24, 2001, a reserve of $5.6 million remained on the Consolidated Balance Sheets
that is expected to equal the future cash expenditures to such terminated
employees.
15. CONSOLIDATION AND COST REDUCTION EFFORTS
In the current year, the Company recorded charges of $7.6 million for
severance and employee related costs and $24.5 million for asset impairments and
write-downs. The majority of these charges relate to U.S. and European
operations and include plant closings and consolidations, the reorganization of
administrative functions and the write down of assets for certain operations
determined to be impaired as well as certain non-core businesses that are being
held for sale. The plant closing and consolidations of the manufacturing and
distribution systems are aimed at improving the overall efficiency and
effectiveness of our operations and reducing our fixed cost structure in
response to decreased sales volumes.
The severance and other employee related costs provide for the termination
of approximately 750 people who were terminated as a result of these worldwide
initiatives and included management, production workers and administrative
support located in Ireland, England and in the United States. Notice of the
termination was made to all employees prior to March 24, 2001 and substantially
all affected personnel were terminated by the end of April 2001. Severance will
be paid in accordance with various plan terms, which vary from lump sum to a
payout over a maximum of 21 months ending December 2002. Additionally, this
charge includes costs associated with medical and dental benefits for former
employees no longer providing services to the Company and provisions for certain
consultant agreements for which no future benefit is anticipated.
The charge for impairment and other write down of assets includes $18.6
million for the write down of duplicate or less efficient property, plant and
equipment to their fair value less disposal cost and the write down of certain
non-core assets which are held for sale. It is anticipated that the remaining
non-core assets and business will be sold prior to the end of calendar 2001.
Additionally, an impairment charge of $5.9 million was recorded for the write
down to fair value of assets, primarily goodwill, associated with the European
polyester dyed yarn operation and Colombian nylon covering operation as the
undiscounted cash flows of the business were not sufficient to cover the
carrying value of these assets. These reviews were prompted by ongoing excess
manufacturing capacity issues. Run-out expenses related to the consolidation and
closing of the affected operations, including equipment relocation and other
costs associated with necessary ongoing plant maintenance expenses, were charged
to operations as incurred and were substantially completed by the end of the
current fiscal year.
The table below summarizes the employee severance portion of the
consolidation and cost reduction charge, the amounts paid and the accrual
balance as of June 24, 2001:
Total charges............................................... $ 7,753
Cash payments............................................... (3,547)
Change in estimate.......................................... (209)
-------
Balance at June 24, 2001.................................... $ 3,997
=======
Substantially all costs other than severance associated with the
consolidation and cost reduction charges are non cash.
16. ALLIANCE PLANT CLOSURE COSTS
In the fourth quarter of the current fiscal year, the Company recorded its
share of the anticipated costs of closing DuPont's Cape Fear, North Carolina
facility. The charge totaled $15.0 million and represents 50% of the severance
and dismantlement cost of closing this plant. The Cape Fear plant produced
polyester POY and was one of two DuPont facilities involved in the Alliance
further discussed in Footnote 2 "Acquisitions, Alliances and Divestures."
Payments for this obligation are to be made over the eighteen-month period
37
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
commencing July 2001 and ending December 2002. This obligation is included in
accrued liabilities on the Consolidated Balance Sheets.
17. QUARTERLY RESULTS (UNAUDITED)
Quarterly financial data for the years ended June 25, 2000, and June 24,
2001, is presented below:
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
(13 WEEKS) (13 WEEKS) (13 WEEKS) (13 WEEKS)
------------- -------------- ------------- --------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2000:
Net sales................................. $306,974 $320,207 $322,096 $342,158
Gross profit.............................. 34,259 41,742 42,870 44,700
Net income................................ 3,332 10,173 13,236 11,292
Earnings per share (basic)................ .06 .17 .23 .20
Earnings per share (diluted).............. .06 .17 .23 .20
2001:
Net sales................................. $319,163 $299,143 $255,223 $257,628
Gross profit.............................. 37,660 28,040 15,975 15,438
Net income (loss)......................... 2,883 (3,428) (28,548) (15,581)
Earnings (loss) per share (basic)......... .05 (.06) (.53) (.29)
Earnings (loss) per share (diluted)....... .05 (.06) (.53) (.29)
Net sales for the first quarter of fiscal year 2001 have been reclassified
to conform with the presentation for the second, third and fourth quarters. Net
sales for all quarters presented reflect the reclassification of freight expense
from net sales into cost of sales.
38
39
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not changed accountants nor are there any disagreements
with its accountants, Ernst & Young LLP, on accounting and financial disclosure
that should be reported pursuant to Item 304 of Regulation S-K.
39
40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT AND COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
(a) Directors of Registrant: The information included under the headings
"Election of Directors", "Nominees for Election as Directors", "Directors
Remaining in Office", "Security Holding of Directors, Nominees, and Executive
Officers", "Directors' Compensation", "Committees of the Board of Directors",
and "Compliance with Section 16(a) of The Securities and Exchange Act",
beginning on Page 2 and ending on Page 6 and on page 15 of the definitive proxy
statement filed with the Commission since the close of the Registrant's fiscal
year ended June 24, 2001, and within 120 days after the close of said fiscal
year, are incorporated herein by reference.
(b) Identification of Executive Officers:
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Brian R. Parke. Mr. Parke is 53 and had been the Manager or President of
the Company's Irish subsidiary (Unifi Textured Yarns Europe) from its
acquisition by the Company in 1984 to January 20, 1999, when he was elected
President and Chief Operating Officer of the Company. On January 26, 2000, Mr.
Parke was elected Chief Executive Officer of the Company. Additionally, Mr.
Parke has been a Vice President of the Company since October 21, 1993 and on
July 22, 1999 was elected to the Company's Board of Directors.
EXECUTIVE VICE PRESIDENTS
Willis C. Moore, III. Mr. Moore is 48 and had been a Partner with Ernst &
Young LLP, or its predecessors from 1975 until December 1994, when he became
employed by the Company as its Chief Financial Officer. Mr. Moore was elected as
a Vice President of the Company on October 19, 1995, Senior Vice President on
October 23, 1997 and Executive Vice President on July 26, 2000. Additionally,
Mr. Moore continues to serve as the Company's Chief Financial Officer.
G. Alfred Webster. Mr. Webster is 53 and has been a Vice President or
Executive Vice President of the Company since 1979. He has been a member of the
Board of Directors since 1986.
SENIOR VICE PRESIDENTS
Thomas H. Caudle. Mr. Caudle is 50 and has been an employee of the Company
since 1982. On January 20, 1999, Mr. Caudle was elected as a Vice President of
Manufacturing Services of the Company and on July 26, 2000 he was elected as a
Senior Vice President in charge of Manufacturing for the Company.
Michael E. Delaney. Mr. Delaney is 45 and has been an employee of the
Company since January 2000, when he joined the Company as Senior Vice President
of Marketing. Prior to coming to the Company, Mr. Delaney was Vice President of
Marketing with Volvo Truck N.A. from July 1997 through December 1999, Vice
President of Marketing with GE Capital Transport International Pool from
December 1995 through July 1997 and Vice President of TIP Intermodel Services
from December 1993 through December 1995.
Stewart Q. Little. Mr. Little is 48 and has been a Vice President of the
Company since October 24, 1985 and a Senior Vice President since January 20,
1999. He is currently serving as Senior Vice President of Customer Development.
Ottis "Lee" Gordon. Mr. Gordon is 55 and has been an employee of the
Company since the merger with Macfield, Inc. in 1991. Prior to the merger, Mr.
Gordon had been an employee of Macfield since 1973. On January 20, 1999, Mr.
Gordon was elected as a Vice President of Product Development of the Company and
on July 26, 2000 he was elected as Senior Vice President of Product Development.
40
41
These executive officers, unless otherwise noted, were elected by the Board
of Directors of the Registrant at the Annual Meeting of the Board of Directors
held on October 26, 2001. Each executive officer was elected to serve until the
next Annual Meeting of the Board of Directors or until his successor was elected
and qualified.
(c) Family Relationship: There are no family relationship between any of
the Officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the headings "Compensation Committees
Interlocks and Insider Participation in Compensation Decisions", "Report of the
Compensation Committee on Executive Compensation", "Executive Officers and their
Compensation", "Option Grants in Fiscal Year 2001", "Option Exercises and
Option/SAR Values", "Employment and Termination Agreements", and the
"Performance Graph-Shareholder Return on Common Stock" beginning on Page 7 and
ending on Page 14 of the Company's definitive proxy statement filed with the
Commission since the close of the Registrant's fiscal year ended June 24, 2001,
and within 120 days after the close of said fiscal year, are incorporated herein
by reference.
For additional information regarding executive compensation reference is
made to Exhibits (10i), (10m) and (10n) of this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners and management is the same
as reported under the heading "Information Relating to Principal Security
Holders" on Page 2 of the definitive proxy statement and under the heading
"Security Holding of Directors, Nominees and Executive Officers" on Page 5 and
Page 6 of the definitive proxy statement filed with the Commission pursuant to
Regulation 14 (a) within 120 days after the close of the fiscal year ended June
24, 2001, which are hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included under the heading "Compensation Committee
Interlocks and Insider Participation In Compensation Decisions", on Page 7 of
the definitive proxy statement filed with the Commission since the close of the
Registrant's fiscal year ended June 24, 2001, and within 120 days after the
close of said fiscal year, is incorporated herein by reference.
41
42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements and report of independent auditors are
filed as a part of this Report.
PAGES
-----
Report of Independent Auditors.............................. 18
Consolidated Balance Sheets at June 24, 2001 and June 25,
2000...................................................... 19
Consolidated Statements of Operations for the Years Ended
June 24, 2001, June 25, 2000, and June 27, 1999........... 20
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income (Loss) for the Years Ended June
24, 2001, June 25, 2000 and June 27, 1999................. 21
Consolidated Statements of Cash Flows for the Years Ended
June 24, 2001, June 25, 2000 and June 27, 1999............ 22
Notes to Consolidated Financial Statements.................. 23
2. Financial Statement Schedules
Schedules for the three years ended June 24, 2001:
II -- Valuation and Qualifying Accounts................ 46
Schedules other than those above are omitted because they are not required,
are not applicable, or the required information is given in the consolidated
financial statements or notes thereto.
Individual financial statements of the Registrant have been omitted because
it is primarily an operating company and all subsidiaries included in the
consolidated financial statements being filed, in the aggregate, do not have
minority equity interest and/or indebtedness to any person other than the
Registrant or its consolidated subsidiaries in amounts which together exceed 5%
of the total assets as shown by the most recent year end consolidated balance
sheet.
With the exception of the information herein expressly incorporated by
reference, the 2001 Proxy Statement is not deemed filed as a part of this Annual
Report on Form 10-K.
42
43
3. Exhibits
EXHIBIT
NO. DESCRIPTION
------- -----------
(2a-1) -- Contribution Agreement, dated June 30, 1997, by and between
Parkdale Mills, Inc., Unifi, Inc., UNIFI Manufacturing,
Inc., and Parkdale America, LLC, filed as Exhibit (2) to
Unifi's Form 8-K filed with the Commission on July 15, 1997,
which is incorporated herein by reference.
(3a) -- Restated Certificate of Incorporation of Unifi, Inc., dated
July 21, 1994, (filed as Exhibit 3(a) with the Company's
Form 10-K for the fiscal year ended June 25, 2000), which is
incorporated herein by reference.
(3b) -- Restated by-laws of Unifi, Inc., effective August 31, 2001,
filed herewith.
(4a) -- Specimen Certificate of Unifi, Inc.'s common stock, filed as
Exhibit 4(a) to the Registration Statement on Form S-1,
(Registration No. 2-45405), which is incorporated herein by
reference.
(4b) -- Unifi, Inc.'s Registration Statement for the 6 1/2% Notes
due 2008, Series B, filed on Form S-4 (Registration No.
333-49243), which is incorporated herein by reference.
(4c) -- Description of Unifi, Inc.'s common stock, filed on November
5, 1998, as Item 5. (Other Events) on Form 8-K, which is
incorporated herein by reference.
(10a) -- *Unifi, Inc. 1982 Incentive Stock Option Plan, as amended,
filed as Exhibit 28.2 to the Registration Statement on Form
S-8, (Registration No. 33-23201), which is incorporated
herein by reference.
(10b) -- *Unifi, Inc. 1987 Non-Qualified Stock Option Plan, as
amended, filed as Exhibit 28.3 to the Registration Statement
on Form S-8, (Registration No. 33-23201), which is
incorporated herein by reference.
(10c) -- *Unifi, Inc. 1992 Incentive Stock Option Plan, effective
July 16, 1992, (filed as Exhibit 10(c) with the Company's
Form 10-K for the fiscal year ended June 27, 1993), and
included as Exhibit 99.2 to the Registration Statement on
Form S-8 (Registration No. 33-53799), which are incorporated
herein by reference.
(10d) -- *Unifi, Inc.'s Registration Statement for selling
Shareholders, who are Directors and Officers of the Company,
who acquired the shares as stock bonuses from the Company,
filed on Form S-3 (Registration No. 33-23201), which is
incorporated herein by reference.
(10e) -- Unifi Spun Yarns, Inc.'s 1992 Employee Stock Option Plan
filed as Exhibit 99.3 to the Registration Statement on Form
S-8 (Registration No. 33-53799), which is incorporated
herein by reference.
(10f) -- *Unifi, Inc.'s 1996 Incentive Stock Option Plan (filed as
Exhibit 10(f) with the Company's Form 10-K for the fiscal
year ended June 30, 1996) which is incorporated herein by
reference.
(10g) -- *Unifi, Inc.'s 1996 Non-Qualified Stock Option Plan (filed
as Exhibit 10(g) with the Company's Form 10-K for the fiscal
year ended June 30, 1996) which is incorporated herein by
reference.
(10h) -- Lease Agreement, dated March 2, 1987, between NationsBank,
Trustee under the Unifi, Inc. Profit Sharing Plan and Trust,
Wachovia Bank and Trust Co., N.A., Independent Fiduciary,
and Unifi, Inc. (filed as Exhibit 10(h) with the Company's
Form 10-K for the fiscal year ended June 25, 2000) which is
incorporated herein by reference.
(10i) -- *Employment Agreement between Unifi, Inc. and G. Allen
Mebane, dated July 19, 1990 (filed as Exhibit 10(i) with the
Company's Form 10-K for the fiscal year ended June 25, 2000)
which is incorporated herein by reference.
43
44
EXHIBIT
NO. DESCRIPTION
------- -----------
(10j) -- Credit Agreement, dated December 20, 2000, by and between
Unifi, Inc. and The Several Lenders from Time to Time Party
thereto and Bank of America, N.A. as Administrative Agent,
Wachovia Bank, N.A. as Syndication Agent, Credit Suisse
First Boston as Documentation Agent and Banc America
Securities LLC as Lead Arranger and Book Manager (the
"Credit Agreement"), filed herewith.
(10k) -- First Amendment To Credit Agreement and Waiver dated August
14, 2001, filed herewith.
(10l) -- Receivables Purchase Agreement, dated December 19, 2000,
among Unifi Receivables, LLC, as Seller, Unifi, Inc., as
Initial Servicer, Blue Ridge Asset Funding Corporation and
Wachovia Bank, N.A., as Agent, filed herewith.
(10m) -- *Change of Control Agreement between Unifi, Inc. and G.
Alfred Webster, dated October 26, 2000, expiring November 1,
2005, filed herewith.
(10n) -- *Agreement, effective February 1, 1999, by and between
Unifi, Inc. and Jerry W. Eller, (filed as Exhibit 10(s) with
the Company's Form 10-K for the fiscal year ended June 27,
1999) which is incorporated herein by reference.
(10o) -- *1999 Unifi, Inc. Long-Term Incentive Plan, (filed as
Exhibit 99.1 to the Registration Statement on Form S-8,
(Registration No. 333-48158), which is incorporated herein
by reference.
(10p) -- Master Agreement POY Manufacturing Alliance between Unifi,
Inc. and E.I. du Pont de Nemours and Company, dated June 1,
2000 (filed as Exhibit 10(o) with the Company's Form 10-K
for the fiscal year ended June 25, 2000) which is
incorporated herein by reference.
(21) -- Subsidiaries of Unifi, Inc.
(23) -- Consent of Ernst & Young LLP.
(b) -- Reports on Form 8-K. None
---------------
* NOTE: These Exhibits are management contracts or compensatory plans or
arrangements required to be filed as an exhibit to this Form 10-K pursuant to
Item 14(c) of this report.
44
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIFI, INC.
September 21, 2001 By: /s/ BRIAN R. PARKE
------------------------------------
Brian R. Parke
Chief Executive Officer
September 21, 2001 By: /s/ WILLIS C. MOORE, III
------------------------------------
Willis C. Moore, III
Executive Vice President
(Chief Financial Officer)
September 21, 2001 By: /s/ EDWARD A. IMBROGNO
------------------------------------
Edward A. Imbrogno
Chief Accounting Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ BRIAN R. PARKE President, Chief Executive September 21, 2001
--------------------------------------------------- Officer
Brian R. Parke and Director
/s/ G. ALFRED WEBSTER Executive Vice President and September 21, 2001
--------------------------------------------------- Director
G. Alfred Webster
/s/ WILLIAM J. ARMFIELD, IV Director September 21, 2001
---------------------------------------------------
William J. Armfield, IV
Director September 21, 2001
---------------------------------------------------
R. Wiley Bourne, Jr.
/s/ CHARLES R. CARTER Director September 21, 2001
---------------------------------------------------
Charles R. Carter
/s/ SUE W. COLE Director September 21, 2001
---------------------------------------------------
Sue W. Cole
/s/ J.B. DAVIS Director September 21, 2001
---------------------------------------------------
J.B. Davis
/s/ RICHARD GREENBURY Director September 21, 2001
---------------------------------------------------
Sir Richard Greenbury
Director September 21, 2001
---------------------------------------------------
Kenneth G. Langone
/s/ DONALD F. ORR Director September 21, 2001
---------------------------------------------------
Donald F. Orr
/s/ ROBERT A. WARD Director September 21, 2001
---------------------------------------------------
Robert A. Ward
45
46
(27)
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------------ ---------- ------------------------------ ------------- ---------
ADDITIONS
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACCOUNTS -- DEDUCTIONS -- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- ---------- ----------------- ------------- ---------
(AMOUNTS IN THOUSANDS)
Allowance for doubtful accounts(a):
Year ended June 24, 2001................ $17,209 14,985 47(b) (22,352)(c) $ 9,889
Year ended June 25, 2000................ 8,749 14,866 225(b) (6,631)(c) 17,209
Year ended June 27, 1999................ 8,225 6,241 240(b) (5,957)(c) 8,749
---------------
(a) The allowance for doubtful accounts includes amounts estimated not to be
collectible for product quality claims, specific customer credit issues and
a general provision for bad debts due to the decline in industry conditions.
(b) May include acquisition related adjustments and/or effects of currency
translation from restating activity of our foreign affiliates from their
respective local currencies to the U.S. dollar.
(c) Includes accounts written off which were deemed not to be collectible and
customer claims paid, net of certain recoveries.
46
EX-3.B
3
g71711ex3-b.txt
RESTATED BY-LAWS OF UNIFI, INC.
1
EXHIBIT (3B)
RESTATED BY-LAWS
OF
UNIFI, INC.
(Effective August 31,2001)
2
RESTATED BY-LAWS
OF
UNIFI, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The Annual Meeting of Shareholders
for the election of Directors and the transaction of such other business as may
come before it shall be held on such date in each calendar year, not later than
the one hundred fiftieth (150) day after the close of the Corporation's
preceding fiscal year, and at such place as shall be fixed by the President and
stated in the notice or waiver of notice of the meeting.
SECTION 1.02. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose of purposes, may be called at any time by any
Director, the President, any Vice President, the Treasurer or the Secretary or
by resolution of the Board of Directors. Special meetings of the shareholders
shall be held at such place as shall be fixed by the person or persons calling
the meeting and stated in the notice or waiver of notice of the meeting.
2
3
SECTION 1.03. NOTICE OF MEETINGS OF SHAREHOLDERS. Whenever
shareholders are required or permitted to take any action at a meeting, written
notice shall state the place, date and hour of the meeting and, unless it is the
Annual Meeting, indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called. If, at any
meeting, action is proposed to be taken which would, if taken, entitle
shareholders fulfilling the requirements of Section 623 of the Business
Corporation Law to receive payment for their shares, the notice of such meeting
shall include a statement of that purpose to that effect. A copy of the notice
of any meeting shall be given, personally or by mail, not less than ten nor more
than fifty days before the date of the meeting, to each shareholder entitled to
vote at such meeting. If mailed, such notice is given when deposited in the
United States mail, with postage thereon prepaid, directed to the shareholder at
his address as it appears on the record of shareholders, or, if he shall have
filed with the Secretary of the Corporation a written request that notices to
him be mailed to some other address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the
3
4
time and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment, the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be given
to each shareholder of record on the new record date entitled to notice under
the next preceding paragraph.
SECTION 1.04. WAIVERS OF NOTICE. Notice of meeting need not be
given to any shareholder who submits a signed Waiver of Notice, in person or by
proxy, whether before or after the meeting. The attendance of any shareholder at
a meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a Waiver of
Notice by him.
SECTION 1.05. QUORUM. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the
4
5
absence of a quorum and at any such adjourned meeting at which the requisite
amount of voting stock shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed.
SECTION 1.06. FIXING RECORD DATE. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights, or
for the purpose of any other action, the Board of Directors may fix, in advance,
a date as the record date for any such determination of shareholders. Such date
shall not be more than fifty nor less than ten days before the date of such
meeting, nor more than fifty days prior to any other action.
When a determination of shareholders of record entitled to notice of or
to vote at any meeting or shareholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof, unless the
Board of Directors fixes a new record date under this Section for the adjourned
meeting.
SECTION 1.07. LIST OF SHAREHOLDERS AT MEETING. A list of
shareholders as of the record date, certified by the corporate officer
responsible for its preparation or by a transfer agent, shall be produced at any
meeting of shareholders upon the request thereat or prior thereto of any
shareholder. If the right to vote
5
6
at any meeting is challenged, the inspectors of election, or person presiding
thereat, shall require such list of shareholders to be produced as evidence of
the right of the persons challenged to vote at such meeting, and all persons who
appear from such list to be shareholders entitled to vote thereat may vote at
such meeting.
SECTION 1.08. PROXIES. Every shareholder entitled to vote at a
meeting of shareholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided in
this Section.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Corporate Officer responsible
for maintaining the list of shareholders.
Except when other provision shall have been made by written agreement
between the parties, the record holder of shares which are held by a pledgee as
security or which belong to another, upon demand therefor and payment of
necessary expenses thereof, shall issue to the pledgor or to such owner of such
shares a proxy to
6
7
vote or take other action thereon.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value, except as authorized in this
Section and Section 620 of the Business Corporation Law.
A proxy which is entitled "irrevocable proxy" and which states that it
is irrevocable, is irrevocable when it is held by any of the following or a
nominee of any of the following:
(1) A Pledgee;
(2) A person who has purchased or agreed to purchase the shares;
(3) A creditor or creditors of the Corporation who extend or
continue credit to the Corporation in consideration of the
proxy if the proxy states that it was given in consideration
of such extension or continuation of credit, the amount
thereof, and the name of the person extending or continuing
credit;
(4) A person who has contracted to perform services as an Officer
of the Corporation, if a proxy is required by the contract of
employment, if the proxy states that it was given in
consideration of such contract of employment, the name of the
employee and the period of employment contracted for;
(5) A person designated by or under an agreement under paragraph
(a) of said Section 620.
Notwithstanding a provision in a proxy, stating that it is irrevocable,
the proxy becomes revocable after the pledge is redeemed, or the debt of the
Corporation is paid, or the period of employment provided for in the contract of
employment has terminated, or the agreement under paragraph (a) of said Section
620 has terminated, and becomes revocable, in a case provided for in
subparagraph (3) or (4) above, at the end of the period, if any,
7
8
specified therein as the period during which it is irrevocable, or three years
after the date of the proxy, whichever period is less, unless the period of
irrevocability is renewed from time to time by the execution of a new
irrevocable proxy as provided in this Section. This paragraph does not affect
the duration of a proxy under the second paragraph of this Section.
A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
SECTION 1.09. SELECTION AND DUTIES OF INSPECTORS. The Board of
Directors, in advance of any shareholders' meeting, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at a shareholders' meeting may, and on
the request of any shareholder entitled to vote thereat shall, appoint one or
more inspectors. In case any person appointed failed to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at
8
9
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or any shareholder entitled to vote thereat,
the inspectors shall make a report in writing of any challenge, question or
matter determined by them and execute a certificate of any fact found by them.
Any report or certificate made by them shall be prima facie evidence of the
facts stated and of the vote as certified by them.
Unless appointed by the Board of Directors or requested by a
shareholder, as above provided in this Section, inspectors shall be dispensed
with at all meetings of shareholders.
The vote upon any question before any shareholders' meeting need not be
by ballot.
SECTION 1.10. QUALIFICATION OF VOTERS. Every shareholder of record
shall be entitled at every meeting of shareholders to one vote for every share
standing in his name on the record of shareholders, except as expressly provided
otherwise in this Section and except as otherwise expressly provided in the
Certificate of Incorporation of the Corporation.
Treasury shares and shares held by another domestic or foreign
corporation of any type or kind, if a majority of the shares entitled to vote in
the election of Directors of such other
9
10
corporation is held by the Corporation, shall not be shares entitled to vote or
to be counted in determining the total number of outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a Trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares held
by a Trustee may be voted by him, either in person or by proxy, only after the
shares have been transferred into his name as Trustee or into the name of his
nominee.
Shares held by or under the control of a receiver may be voted by him
without the transfer thereof into his name if authority so to do is contained in
an order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, or a
nominee of the pledgee.
Redeemable shares which have been called for redemption shall not be
deemed to be outstanding shares for the purpose of voting or determining the
total number of shares entitled to vote on any matter on and after the date on
which written notice of redemption has been sent to holders thereof and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender of certificates
10
11
therefor.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such Officer, agent or proxy as the By-Laws
of such corporation may provide, or, in the absence of such provision, as the
Board of Directors of such corporation may determine.
When shares are registered on the record of shareholders of the
Corporation in the name of, or have passed by operation of law or by virtue of
any deed of trust or other instrument to two or more fiduciaries, and if the
fiduciaries shall be equally divided as to voting such shares, any court having
jurisdiction of their accounts, upon petition by any of such fiduciaries or by
any party in interest, may direct the voting of such shares for the best
interest of the beneficiaries. This paragraph shall not apply in any case where
the instrument or order of the court appointing such fiduciaries shall otherwise
direct how such shares shall be voted.
Notwithstanding the foregoing paragraphs of this Section, the
Corporation shall be protected in treating the persons whose names shares stand
on the record of shareholders as the owners thereof for all purposes.
SECTION 1.11. VOTE OF SHAREHOLDERS. Directors shall be elected by
a plurality of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote in the election. Whenever any corporate action, other
than the election of Directors, is to be taken by vote of the shareholders, it
shall, except as otherwise required by the Business Corporation Law or by
11
12
the Certificate of Incorporation of the Corporation, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of shares entitled
to vote thereon.
SECTION 1.12. WRITTEN CONSENT OF SHAREHOLDERS. Whenever under the
Business Corporation Law shareholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by the holders of all outstanding
shares entitled to vote thereon. This paragraph shall not be construed to alter
or modify the provisions of any section of the Business Corporation Law or any
provision in the Certificate of Incorporation of the Corporation not
inconsistent with the Business Corporation Law under which the written consent
of the holders of less than all outstanding shares is sufficient for corporate
action.
Written consent thus given by the holders of all outstanding shares
entitled to vote shall have the same effect as a unanimous vote of shareholders.
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF BUSINESS; QUALIFICATIONS OF DIRECTORS.
The business of the Corporation shall be managed by its
12
13
Board of Directors, each of whom shall be at least twenty-one years of age.
Directors need not be Stockholders.
The Board of Directors, in addition to the powers and authority
expressly conferred upon it herein, by statute, by the Certificate of
Incorporation of the Corporation and otherwise, is hereby empowered to exercise
all such powers as may be exercised by the Corporation, except as expressly
provided otherwise by the statutes of the State of New York, by the Certificate
of Incorporation of the Corporation and these By-Laws.
SECTION 2.02. NUMBER OF DIRECTORS. The number of Directors which
shall constitute the entire Board shall be ten (10), but this number may be
increased and subsequently again increased or decreased from time to time by the
affirmative vote of the majority of Directors, except that the number of
Directors shall not be less than nine (9).
SECTION 2.03. CLASSIFICATION AND ELECTION. (a) The Directors
shall be divided into three classes designated as Class 1, Class 2 and Class 3.
All classes shall be as nearly equal in number as possible and no class shall
include less than three (3) Directors. The term of office of the Directors
initially classified shall be as follows: Class 1 shall expire at the next
(1992) Annual Meeting of the Shareholders, Class 2 shall expire at the second
succeeding (1993) Annual Meeting of the Shareholders, and Class 3 shall expire
at the third succeeding (1994) Annual Meeting of the Shareholders. (b) At each
Annual Meeting after
13
14
such initial classification, Directors to replace those whose terms expired at
such Annual Meeting shall be elected to hold office until the third succeeding
Annual Meeting of the Shareholders. A Director shall hold office until the
Annual Meeting for the year in which his term expires and subject to prior
death, resignation, retirement, or removal from office, until his successor
shall be elected and qualified.
SECTION 2.04. NEWLY CREATED DIRECTORSHIP AND VACANCIES. Newly
created Directorships or any decrease in Directorship shall be apportioned among
the classes as to make all classes as nearly equal in number as possible. Newly
created Directorships resulting from an increase in the number of Directors and
vacancies caused by death, resignation, retirement, or removal from office,
subject to Section 2.05(b), may be filled by the majority of the Directors
voting on the particular matter, if a quorum is present. If the number of
Directors then in office is less than a quorum, such newly created Directorships
and vacancies may be filled by the affirmative vote of a majority of the
Directors in office. When the number of Directors is increased by the Board, and
the newly created Directorships are filled by the Board, there shall be no
classification of the additional Directors until the next Annual Meeting of the
shareholders. Any Director elected by the Board to fill a vacancy shall serve
until the next meeting of the shareholders, at which the election of the
Directors is in the regular order of business, and until his successor is
elected and qualified.
14
15
In no case will a decrease in the number of Directors shorten the term
of an incumbent Director.
SECTION 2.05(A). RESIGNATIONS. Any Director of the Corporation may
resign at any time by giving written notice to the Board of Directors, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, if any, or if no time is specified
therein, then upon receipt of such notice by the addressee; and, unless
otherwise provided therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 2.05(B). REMOVAL OF DIRECTORS. Any or all of the Directors
may be removed at any time (i) for cause by vote of the shareholders or by
action on the Board of Directors or (ii) without cause by vote of the
shareholders, except as expressly provided otherwise by Section 706 of the
Business Corporation Law. The Board of Directors shall fill vacancies occurring
in the Board by reason of removal of Directors for cause. Vacancies occurring by
reason of removal without cause shall be filled by the Shareholders.
SECTION 2.06. QUORUM OF DIRECTORS. At all meetings of the Board of
Directors, a majority of the number of Directors then office shall be necessary
and sufficient to constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as expressly provided
otherwise
15
16
by the statutes of the State of New York and except as provided in the third
sentence of Section 2.04, in Section 2.11 and Section 7.09 hereof.
A majority of the Directors present, whether or not a quorum is
present, may adjourn any meeting of the Directors to another time and place.
Notice of any adjournment need not be given if such time and place are announced
at the meeting.
SECTION 2.07. ANNUAL MEETING. The Board of Directors shall meet
immediately following the adjournment of the Annual Meeting of shareholders in
each year at the same place and no notice of such meeting shall be necessary.
SECTION 2.08. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such time and place as shall from time to time be fixed
by the Board and no notice thereof shall be necessary.
SECTION 2.09. SPECIAL MEETINGS. Special meetings may be called at
any time by any Director, the President, any Vice President, the Treasurer, or
the Secretary or by resolution of the Board of Directors. Special meetings shall
be held at such place as shall be fixed by the person or persons calling the
meeting and stated in the notice or waiver of notice of the meeting.
SECTION 2.10. COMPENSATION. Directors shall receive such fixed
sums and expenses of attendance for attendance at each meeting of the Board or
of any committee and/or such salary as may be determined from time to time by
the Board of Directors; provided
16
17
that nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 2.11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the entire Board, may designate from among its members an
Executive Committee and other committees, each consisting of three or more
Directors, and each of which, to the extent provided in the resolution, shall
have the authority of the Board of Directors, except that no such committee
shall have authority as to the following matters:
(a) The submission to shareholders of any action that needs
shareholder's authorization under the Business Corporation
Law.
(b) The filling of vacancies in the Board of Directors or in any
committee.
(c) The fixing of compensation of the Directors for serving on the
Board of Directors or on any committee.
(d) The amendment or repeal of the By-Laws, or the adoption of new
By-Laws.
(e) The amendment or repeal of any resolution of the Board of
Directors which by its terms shall not be so amendable or
repealable.
The Board may designate one or more Directors as alternate members of
any such committee, who may replace any absent member or members at any meeting
of such committee. Each such committee shall serve at the pleasure of the Board
of Directors.
Regular meetings of any such committee shall be held at such time and
place as shall from time to time be fixed by such committee and no notice
thereof shall be necessary.
17
18
Special meetings may be called at any time by any Officer of the Corporation or
any member of such committee. Notice of each special meeting of each such
committee shall be given (or waived) in the same manner as notice of a special
meeting of the Board of Directors. A majority of the members of any such
committee shall constitute a quorum for the transaction of business and the act
of a majority of the members present at the time of the vote, if a quorum is
present at such time, shall be the act of the committee.
SECTION 2.12. INTERESTED DIRECTORS. No contract or other
transaction between the Corporation and one or more of its Directors, or between
the Corporation and any other corporation, firm, association or other entity in
which one or more of the Corporation's Directors are Directors or Officers, or
are financially interested, shall be either void or voidable for this reason
alone or by reason alone that such Director or Directors are present at the
meeting of the Board of Directors, or of a committee thereof, which approves
such contract or transaction, or that his or their votes are counted for such
purpose:
(1) If the fact of such common Directorship, Officership or
financial interest is disclosed or known to the Board or
committee, and the Board or committee approves such contract
or transaction by a vote sufficient for such purpose without
counting the vote or votes of such interested Director or
Directors;
(2) If such common Directorship, Officership or financial interest
is disclosed or known to the shareholders entitled to vote
thereon, and such contract or transaction is approved by vote
of the shareholders; or
(3) If the contract or transaction is fair and reasonable as to
the Corporation at the time it is approved by the Board, a
committee of the shareholders.
18
19
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which approves
such contract or transaction.
SECTION 2.13. LOANS TO DIRECTORS. A loan shall not be made by the
Corporation to any Director unless it is authorized by vote of the shareholders.
For this purpose, the shares of the Director who would be the borrower shall not
be shares entitled to vote. A loan made in violation of this Section shall be a
violation of the duty to the Corporation of the Directors approving it, but the
obligation of the borrower with respect to the loan shall not be affected
thereby.
SECTION 2.14. CONSENT TO ACTION. Any action required or permitted
to be taken by the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee consent in writing,
whether done before or after the action so taken, to the adoption of a
resolution authorizing the action. The resolution and the written consent
thereto shall be filed with the Minutes of the proceeding of the Board or the
committee.
ARTICLE III
OFFICERS
SECTION 3.01. ELECTION OR APPOINTMENT: NUMBER. The Chairman of the
Board of Directors and Officers of the Corporation shall be elected or appointed
by the Board of Directors. The Officers
19
20
shall be a President, a Secretary, a Treasurer, and such number of Executive
Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant
Treasurers, and such other Officers, as the Board may from time to time
determine. Any person may hold two or more offices at the same time, except the
offices of President and Secretary. An Officer may, but no Officer need, be
chosen from among the Board of Directors.
SECTION 3.02. TERM. Subject to the provisions of Section 3.03
hereof, all officers shall be elected or appointed to hold office until the
meeting of the Board of Directors following the next Annual Meeting of
shareholders, and each officer shall hold office for the term for which he is
elected or appointed and until his successor has been elected or appointed and
qualified. The Board may require any Officer to give security for the faithful
performance of his duties.
SECTION 3.03. REMOVAL. Any Officer elected or appointed by the
Board of Directors may be removed by the Board with or without cause.
The removal of an Officer without cause shall be without prejudice to
his contract rights, if any. The election or appointment of an Officer shall not
of itself create contract rights.
SECTION 3.04. AUTHORITY. Any Director or such other person as may
be designated by the Board of Directors, and in the absence of such Director or
other person, the President shall be the Chief
20
21
Executive Officer ("CEO") of the Corporation. The CEO shall oversee the general
operations of the Corporation and set company policy that would be implemented,
interpreted and carried out by the President of the Corporation who will report
directly to the CEO. The Chairman of the Board shall preside at all meetings of
the Board of Directors unless some other person is designated by the Board.
SECTION 3.05. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers or notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice-President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any Corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
21
22
ARTICLE IV
CAPITAL STOCK
SECTION 4.01. STOCK CERTIFICATES. The shares of the Corporation
shall be represented by certificates signed by the Chairman of the Board or the
President or a Vice-President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Corporation, and may be sealed with
the seal of the Corporation or a facsimile thereof. The signatures of the
Officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or its employee. In case any Officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such Officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such Officer at the date of
issue.
Each certificate representing shares shall also set fort such
additional material as is required by subdivisions (b) and (c) of Section 508 of
the Business Corporation Law.
SECTION 4.02. TRANSFERS. Stock of the Corporation shall be
transferable in the manner prescribed by the laws of the State of New York and
in these By-Laws Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which
shall be canceled before the new certificate shall be issued.
SECTION 4.03. REGISTERED HOLDERS. The Corporation shall be
22
23
entitled to treat and shall be protected in treating the persons in whose names
shares or any warrants, rights or options stand on the record of shareholders,
warrant holders, right holders or option holders, as the case may be, as the
owners thereof for all purposes and shall not be bound to recognize any
equitable or other claim to, or interest in, any such share, warrant, right or
option on the part of any other person, whether or not the Corporation shall
have notice thereof, except as expressly provided otherwise by the Statutes of
the State of New York.
SECTION 4.04. NEW CERTIFICATES. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Directors may, in their
discretion, require the owner of the lost, stolen or destroyed certificate, or
his legal representatives, to give the Corporation a bond sufficient (in the
judgment of the Directors) to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or theft of any such
certificate or the issuance of such new certificate. A new certificate may be
issued without requiring any bond when, in the judgment of the Directors, it is
proper so to do.
ARTICLE V
FINANCIAL NOTICES TO SHAREHOLDERS
SECTION 5.01. DIVIDENDS. When any dividend is paid or any other
distribution is made, in whole or in part, from sources other than earned
surplus, it shall be accompanied by a written notice
23
24
(1) disclosing the amounts by which such dividend or distribution affects stated
capital, capital surplus and earned surplus, or (2) if such amounts are not
determinable at the time of such notice, disclosing the approximate effect of
such dividend or distribution upon stated capital, capital surplus and earned
surplus and stating that such amounts are not yet determinable.
SECTION 5.02. SHARE DISTRIBUTION AND CHANGES. Every distribution to
shareholders of certificates representing a share distribution or a change of
shares which affects stated capital, capital surplus or earned surplus shall be
accompanied by a written notice (1) disclosing the amounts by which such
distribution or change affects stated capital, capital surplus or earned
surplus, or (2) if such amounts are not determinable at the time of such notice,
disclosing the approximate effect of such distribution or change upon stated
capital, capital surplus and earned surplus and stating that such amounts are
not yet determinable.
When issued shares are changed in any manner which affects stated
capital, capital surplus or earned surplus, and no distribution to shareholders
of certificates representing any shares resulting from such change is made,
disclosure of the effect of such change upon the stated capital, capital surplus
and earned surplus shall be made in the next financial statement covering the
period in which such change is made that is furnished by the Corporation to
holders of shares of the class or series so changed or, if practicable, in the
first notice of dividend or share
24
25
distribution or change that is furnished to such shareholders between the date
of the change and shares and the next such financial statement, and in any event
within six months of the date of such change.
SECTION 5.03. CANCELLATION OF REACQUIRED SHARES. When reacquired
shares other than converted shares are canceled, the stated capital of the
Corporation shall be reduced by the amount of stated capital then represented by
such shares plus any stated capital not theretofore allocated to any designated
class or series which is thereupon allocated to the shares canceled. The amount
by which stated capital has been reduced by cancellation of required shares
during a stated period of time shall be disclosed in the next financial
statement covering such period that is furnished by the Corporation to all its
shareholders or, if practicable, in the first notice of dividend or share
distribution that is furnished to the holders of each class or series of its
shares between the end of the period and the next such financial statement, and
in any event to all its shareholders within six months of the date of the
reduction of capital.
SECTION 5.04. REDUCTION OF STATED CAPITAL. When a reduction of
stated capital has been effected under Section 516 of the Business Corporation
Law, the amount of such reduction shall be disclosed in the next financial
statement covering the period in which such reduction is made that is furnished
by the Corporation to all its shareholders or, if practicable, in the first
notice of dividend or share distribution that is furnished to the holders of
25
26
each class or series of its shares between the date of such reduction and the
next such financial statement, and in any event to all its shareholders within
six months of the date of such reduction.
SECTION 5.05. APPLICATION OF CAPITAL SURPLUS TO ELIMINATION OF A
DEFICIT. Whenever the Corporation shall apply any part or all of its capital
surplus to the elimination of any deficit in the earned surplus account, such
application shall be disclosed in the next financial statement covering the
period in which such elimination is made that is furnished by the Corporation to
all its shareholders or, if practicable, in the first notice of dividend or
share distribution that is furnished to holders of each class or series of its
shares between the date of such elimination and the next such financial
statement, and in any event to all its shareholders within six months of the
date of such action.
SECTION 5.06. CONVERSION OF SHARES. Should the Corporation issue
any convertible shares, then, when shares have been converted, disclosure of the
conversion of shares during a stated period of time and its effect, if any, upon
stated capital shall be made in the next financial statement covering such
period that is furnished by the Corporation to all its shareholders or, if
practicable, in the first notice of dividend or share distribution that is
furnished to the holders of each class or series of its shares between the end
of such period and the next financial statement, and in any event to all its
shareholders within six
26
27
months of the date of the conversion of shares.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. RIGHT TO INDEMNIFICATION. The Corporation shall
indemnify, defend and hold harmless any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, investigative or
other, including appeals, by reason of the fact that he is or was a Director,
Officer or employee of the Corporation, or is or was serving at the request of
the Corporation as a Director, Officer or employee of any Corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a Director, Officer or employee or in
any other capacity while serving as a Director, Officer or employee, to the
fullest extent authorized by the New York Business Corporation Law, as the same
exists or may hereafter be amended, against all expenses, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith; provided, however, that except as provided
in Section 6.02 hereof with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify
27
28
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article shall be a
contract right and shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if required by law at the time of such
payment, the payment of such expenses incurred by a Director or Officer in his
capacity as a Director or Officer (and not in any other capacity in which
service was or is rendered by such person while a Director or Officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such Director or Officer,
to repay all amounts so advanced if it should be determined ultimately that such
Director or Officer is not entitled to be indemnified under this Section or
otherwise.
"Employee" as used herein, includes both an active employee in the
Corporation's service, as well as a retired employee who is or has been a party
to a written agreement under which he might be, or might have been, obligated to
render services to the Corporation.
SECTION 6.02. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 6.01 is not paid in full by the Corporation within sixty (60) days or,
in cases of advances of expenses, twenty (20)
28
29
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it permissible
under the New York Business Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the New York Business Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its shareholders) that the claimant had not met such
applicable standard of conduct shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of conduct. The
Corporation shall be precluded from asserting in any judicial proceeding
commenced pursuant to this Article that the procedures and presumptions of this
Article are not valid, binding and
29
30
enforceable and shall stipulate in any such proceeding that the Corporation is
bound by all provisions of this Article.
SECTION 6.03. NONEXCLUSIVENESS. The indemnification and advances of
expenses granted pursuant to, or provided by, this Article shall not be deemed
exclusive of any other rights to which a Director or Officer seeking
indemnification or advancement or expenses may be entitled, whether contained in
the Certificate of Incorporation or these By-Laws, and the Board of Directors is
authorized, from time to time in its discretion, to enter into agreements with
one or more Directors, Officers and other persons providing for the maximum
indemnification allowed by applicable law.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article (a) shall apply to acts or omissions antedating the adoption of this
By-Law, (b) shall be severable, (c) shall not be exclusive of other rights to
which any Director, Officer or employee may now or hereafter become entitled
apart from this Article, (d) shall continue as to a person who has ceased to be
such Director, Officer or employee and (e) shall inure to the benefit of the
heirs, Executors and Administrators of such a person.
30
31
SECTION 6.04. INSURANCE FOR INDEMNIFICATION OF DIRECTORS AND
OFFICERS. The Corporation shall have the power to purchase and maintain
insurance (a) to indemnify the Corporation for any obligations which it incurs
as the result of the indemnification of Directors and Officers under the
provisions of this Article; (b) to indemnify Directors and Officers in instances
which they may be indemnified by the Corporation under the provisions of this
Article; and (c) to indemnify Directors and Officers in instances in which they
may not otherwise be indemnified by the Corporation under the provisions of this
Article, provided the contract of insurance covering such Directors and Officers
provides, in a manner acceptable to the Superintendent of Insurance of the State
of New York, for a retention amount and for co-insurance.
No insurance under the preceding paragraph of this Section may provide
for any payment, other than the cost of defense, to or on behalf of any Director
of Officer: (i) if a judgment or other final adjudication adverse to the insured
Director or Officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled, or (ii) in relation to any risk the insurance of which is
prohibited under the insurance laws of the State of New York.
31
32
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. OFFICES. The principal office of the Corporation
shall be in the City of New York, County of New York, State of New York. The
Corporation may also have offices at other places, within and/or without the
State of New York.
SECTION 7.02. SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal of New York".
SECTION 7.03. CHECKS. All checks or demands for money shall be
signed by such person or persons as the Board of Directors may from time to time
determine.
SECTION 7.04. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the 1st day of July in each year and shall end on the 30th day of June
of the ensuing year and the first fiscal year shall end on June 30, 1969.
SECTION 7.05. BOOKS AND RECORDS. The Corporation shall keep correct
and complete books and records of accounts and shall keep minutes of the
proceedings of its shareholders, Board of Directors and Executive Committee, if
any, and shall keep at the office of the Corporation in New York State or at the
office of its transfer agent or registrar in New York State, a record containing
the names and addresses of all shareholders, the number and class of shares held
by each and the dates when they respectively became the owners of record
thereof. Any of the foregoing books, minutes or records may be in written form
or in any other form capable of being converted into written form within a
reasonable time.
32
33
SECTION 7.6. DUTY OF DIRECTORS AND OFFICERS. Directors and Officers
shall discharge the duties of their respective positions in good faith and with
that degree of diligence, care and skill which ordinarily prudent men would
exercise under similar circumstances in like positions. In discharging their
duties, Directors and Officers, when acting in good faith, may rely upon
financial statements of the Corporation represented to them to be correct by the
President or the Officer of the Corporation having charge of its books of
accounts, or stated in a written report by an independent public or certified
public accountant or firm of such accountants fairly to reflect the financial
condition of the Corporation.
SECTION 7.07. WHEN NOTICE OR LAPSE OF TIME UNNECESSARY; NOTICE
DISPENSED WITH WHEN DELIVERY IS PROHIBITED. Whenever, under the Business
Corporation Law or the Certificate of Incorporation or the By-Law of the
Corporation or by the terms of any agreement or instrument, the Corporation or
the Board of Directors or any committee thereof is authorized to take any action
after notice to any person or persons or after the lapse of a prescribed period
of time, such action may be taken without notice and without the lapse of such
period of time, if at any time before or after such action is completed the
person or persons entitled to such notice or entitled to participate in the
action to be taken or, in the case of a shareholder, by his attorney-in-fact,
submit a signed waiver of notice of such requirements.
33
34
Whenever any notice or communication is required to be given to any
person by the Business Corporation Law, the Certificate of Incorporation of the
Corporation or theses By-Laws, or by the terms of any agreement or instrument,
or as a condition precedent to taking any corporate action and communication
with such person is then unlawful under any statute of the State of New York or
of the United States or any regulation, proclamation or order issued under said
statutes, then the giving of such notice or communication to such person shall
not be required and there shall be no duty to apply for license or other
permission to do so. Any affidavit, certificate or other instrument which is
required to be made or filed as proof of the giving of any notice or
communication required the Business Corporation Law shall, if such notice or
communication to any person is dispensed with under this paragraph, include a
statement that such notice or communication was not given to any person with
whom communication is unlawful. Such affidavit, certificate or other instrument
shall be as effective for all purposes as though such notice or communication
had been personally given to such person.
SECTION 7.08. ENTIRE BOARD. As used in these By-Laws, the term
"Entire Board" means the total number of Directors which the Corporation would
have if there were no vacancies.
SECTION 7.09. AMENDMENT OF BY-LAWS. These By-Laws may be amended or
repealed and new By-Laws adopted by the Board of Directors or by vote of the
holders of the shares at the time entitled to vote of the holders of the shares
at the time
34
35
entitled to vote in the election of any Directors, except that any amendment by
the Board changing the number of Directors shall require the vote of a majority
of the Entire Board and except that any By-Laws adopted by the Board may be
amended or repealed by the shareholders entitled to vote thereon as provided in
the Business Corporation Law.
If any By-Law regulating an impending election of Directors is adopted,
amended or repealed by the Board, the shall be set forth in the notice of the
next meeting of shareholders for the election of Directors the By-Law so
adopted, amended or repealed, together with a concise statement of the changes
made.
SECTION 7.10 NONAPPLICATION OF NORTH CAROLINA SHAREHOLDER PROTECTION
ACT. The provisions of North Carolina General Statutes 55-75 through 55-79
shall not be applicable to this Corporation.
SECTION 7.11. SECTION HEADINGS. The Headings to the Articles and
Sections of these By-Laws have been inserted for convenience of reference only
and shall not be deemed to be a part of these By-Laws.
35
EX-10.J
4
g71711ex10-j.txt
CREDIT AGREEMENT DATED 12/20/2000
1
EXHIBIT (10j)
CREDIT AGREEMENT
Dated as of December 20, 2000
among
UNIFI, INC.,
as Borrower,
AND
CERTAIN SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTY HERETO,
as Subsidiary Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
BANK OF AMERICA, N.A.,
as Administrative Agent,
WACHOVIA BANK, N.A.,
as Syndication Agent
AND
CREDIT SUISSE FIRST BOSTON,
as Documentation Agent
BANC OF AMERICA SECURITIES LLC,
as Lead Arranger and Book Manager
2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 20, 2000 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement"),
is by and among UNIFI, INC., a New York corporation (the "Borrower"), the
Subsidiary Guarantors (as defined herein), the Lenders (as defined herein) from
time to time party hereto, BANK OF AMERICA, N.A., as Administrative Agent for
the Lenders (in such capacity, the "Administrative Agent"), WACHOVIA BANK, N.A.,
as Syndication Agent for the Lenders (in such capacity, the "Syndication Agent")
and CREDIT SUISSE FIRST BOSTON, as Documentation Agent for the Lenders (in such
capacity, the "Documentation Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a
$250,000,000 credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquisition" means the acquisition by any Person of the
Capital Stock or all or substantially all of the Property of another
Person, whether or not involving a merger or consolidation with such
Person.
"Additional Credit Party" means each Person that becomes a
Subsidiary Guarantor after the Closing Date by execution of a Joinder
Agreement.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted CD Rate" means a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1% determined by the Administrative
Agent according to the following formula:
3
Adjusted CD Rate = CD Rate + Assessment Rate + Applicable
Percentage
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the Capital
Stock in such Person. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Administrative Agent" shall have the meaning assigned to such
term in the heading hereof, together with any successors or assigns.
"Applicable Lending Office" means, for each Lender, the office
of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Administrative Agent and the Borrower
by written notice as the office by which its Eurodollar Loans are made
and maintained.
"Applicable Percentage" means, for any day, the rate per annum
set forth below opposite the applicable Leverage Ratio then in effect,
it being understood that the Applicable Percentage for (i) Eurodollar
Loans shall be the percentage set forth under the column "Applicable
Percentage for Eurodollar Loans", (ii) Base Rate Loans shall be the
percentage set forth under the column "Applicable Percentage for Base
Rate Loans", (iii) for Swingline CD Loans shall be the percentage set
forth under the column "Applicable Percentage for Swingline CD Loans",
(iv) Letter of Credit Fees shall be the percentage set forth under the
column "Applicable Percentage for Letter of Credit Fees", (v) Facility
Fee shall be the percentage set forth under the column "Applicable
Percentage for Facility Fee" and (vi) Utilization Fee shall be the
percentage set forth under the column "Applicable Percentage for
Utilization Fee":
2
4
===================================================================================================================
APPLICABLE APPLICABLE APPLICABLE
APPLICABLE APPLICABLE PERCENTAGE PERCENTAGE APPLICABLE PERCENTAGE
PERCENTAGE FOR PERCENTAGE FOR FOR PERCENTAGE FOR
PRICING LEVERAGE EURODOLLAR FOR BASE SWINGLINE LETTER OF FOR FACILITY UTILIZATION
LEVEL RATIO LOANS RATE LOANS CD LOANS CREDIT FEES FEES FEES
-------------------------------------------------------------------------------------------------------------------
I < 1.0 to 1.0 .335% 0.0% .335% .335% .115% .10%
-------------------------------------------------------------------------------------------------------------------
II < 1.5 to 1.0 .375% 0.0% .375% .375% .125% .125%
but > 1.0 to
-
1.0
-------------------------------------------------------------------------------------------------------------------
III < 2.5 to 1.0 .475% 0.0% .475% .475% .150% .125%
but > 1.5 to
-
1.0
-------------------------------------------------------------------------------------------------------------------
IV < 3.0 to 1.0 .575% 0.0% .575% .575% .175% .25%
but > 2.5 1.0
-
-------------------------------------------------------------------------------------------------------------------
V > 3.0 to 1.0 .775% 0.0% .775% .775% .225% .25%
-
-------------------------------------------------------------------------------------------------------------------
provided, however, (A) until the first Calculation Date to occur
subsequent to March 31, 2001, 0.25% shall automatically be added to the
Applicable Percentage for Eurodollar Loans, the Applicable Percentage
for Letter of Credit Fees and the Applicable Percentage for Swingline
CD Loans, as applicable, set forth above and (B) commencing with the
first Calculation Date to occur subsequent to March 31, 2001, for each
day during which the Loans (including the Swingline Loans) outstanding
exceed fifty percent (50%) of the Revolving Committed Amount, the
Applicable Percentage for Utilization Fees shall automatically be added
to the Applicable Percentage for Eurodollar Loans, the Applicable
Percentage for Letter of Credit Fees and the Applicable Percentage for
Swingline CD Loans, as applicable, set forth above. The Applicable
Percentages shall be determined and adjusted quarterly on the date
(each a "Calculation Date") five Business Days after the date by which
the Borrower is required to provide the officer's certificate in
accordance with the provisions of Section 7.1(c) for the most recently
ended fiscal quarter of the Consolidated Parties; provided, however,
(i) the initial Applicable Percentages shall be based on Pricing Level
IV and shall remain in effect at such Pricing Level until the first
Calculation Date to occur after the Closing Date, (ii) until the first
Calculation Date to occur subsequent to March 31, 2001, the Applicable
Percentages shall be based on the higher of (x) Pricing Level IV and
(y) the Pricing Level which would otherwise be in effect as determined
by the Leverage Ratio as of the last day of the most recently ended
fiscal quarter of the Consolidated Parties preceding such Calculation
Date and (iii) if the Borrower fails to provide the officer's
certificate as required by Section 7.1(c) for the last day of the most
recently ended fiscal quarter of the Consolidated Parties subsequent to
March 31, 2001, the Applicable Percentage from such Calculation Date
shall be based on Pricing Level V until such time as an appropriate
officer's certificate is provided, whereupon the Applicable Percentage
shall be determined by the Leverage Ratio as of the last day of the
most recently ended fiscal quarter of the Consolidated Parties
preceding such Calculation Date. Each Applicable Percentage shall be
effective from one
3
5
Calculation Date until the next Calculation Date. Any adjustment in the
Applicable Percentages shall be applicable to all existing Loans and
Letters of Credit as well as any new Loans made or Letters of Credit
issued.
"Assessment Rate" means, for any day, the annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) which
is payable by Bank of America to the Federal Deposit Insurance
Corporation (or any successor) for deposit insurance for Dollar time
deposits with Bank of America at the Principal Office as determined by
Bank of America. The Adjusted CD Rate shall be adjusted automatically
on and as of the effective date of any change in the Assessment Rate.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary)
of any Consolidated Party whether by sale, lease, transfer or otherwise
(including pursuant to any casualty or condemnation event).
"Attributed Principal Amount" means, on any day, with respect
to any Securitization Transaction entered into by a Consolidated Party,
the aggregate outstanding amount paid to, or borrowed by, such
Consolidated Party as of such date under such Securitization
Transaction.
"Bank of America" means Bank of America, N.A. and its
successors.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or
4
6
for any substantial part of its Property or make any general assignment
for the benefit of creditors; or (iv) such Person shall be unable to,
or shall admit in writing its inability to, pay its debts generally as
they become due.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Burlington" means Burlington Industries, Inc., a Delaware
corporation.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, except that, when used in
connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in U.S. dollar deposits in
London, England.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of
a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests and
(v) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial
5
7
paper rating from S&P is at least A-1 or the equivalent thereof or from
Moody's is at least P-1 or the equivalent thereof (any such bank being
an "Approved Bank"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Bank (or by the parent company
thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase
agreements entered into by any Person with a bank or trust company
(including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which
such Person shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations and (e) Investments, classified in accordance
with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of
at least $500,000,000 and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions
(a) through (d).
"CD Rate" means, for any Swingline Loan which bears interest
at the Adjusted CD Rate, the most recent weekly average dealer offering
rate for negotiable certificates of deposit with a three-month maturity
in the secondary market as published in the most recent Federal Reserve
System publication entitles "Select Interest Rate" published weekly on
Form H.15 as of the date hereof, or any successor publication thereof,
or if the foregoing publication or any successor or substitute thereof
shall not be published by the Federal Reserve System for any week, then
the weekly offering rate determined by Bank of America on the basis of
quotations for such certificates received by it from three certificate
of deposit dealers of recognized standing. Each change in the CD Rate
shall be effective on the date thereof, without notice to the Borrower.
"Change of Control" means the occurrence of any of the
following events: (i) any Person or two or more Persons acting in
concert shall have acquired "beneficial ownership," directly or
indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over,
Voting Stock of the Borrower (or other securities convertible into such
Voting Stock) representing 25% or more of the combined voting power of
all Voting Stock of the Borrower, or (ii) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 24 month period were directors of the Borrower
(together with any new director whose election by the Borrower's Board
of Directors or whose nomination for election by the Borrower's
shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the directors of the Borrower then in office. As
6
8
used herein, "beneficial ownership" shall have the meaning provided in
Rule 13d-3 of the Securities and Exchange Commission under the
Securities Act of 1934.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Commitment" means the Revolving Commitment, the Swingline
Commitment and the LOC Commitment.
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of the Consolidated Parties on a consolidated
basis for such period, as determined in accordance with GAAP.
"Consolidated EBITDA" means, for any period with respect to
the Consolidated Parties on a consolidated basis, the sum of (a)
Consolidated Net Income for such period, plus (b) an amount which, in
the determination of Consolidated Net Income for such period, has been
deducted for (i) Consolidated Interest Expense, (ii) total federal,
state, local and foreign income, value added and similar taxes and
(iii) depreciation and amortization expense and other non-cash charges
minus (c) an amount which, in determination of Consolidated Net Income
for such period, has been added for non-cash earnings minus (d) prior
to April 23, 2003, partnership distributions from UTP to Burlington
during such period to the extent such distributions exceed $9,400,000
during such period.
"Consolidated Interest Expense" means, for any period, all
interest expense (including the amortization of debt discount and
premium, the interest component under Capital Leases and the implied
interest component under Securitization Transactions) of the
Consolidated Parties on a consolidated basis for such period, as
determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Consolidated Parties on a consolidated basis, as determined in
accordance with GAAP.
"Consolidated Net Tangible Assets" means, as of any date, the
total assets appearing on the most recent consolidated balance sheet of
the Consolidated Parties provided pursuant to Section 7.1(a) and (b)
and prepared in accordance with GAAP minus (i) all current liabilities
(due within one year) of the Consolidated Parties as shown on such
balance sheet and (ii) all Intangible Assets and liabilities relating
thereto.
7
9
"Consolidated Parties" means a collective reference to the
Borrower and its Subsidiaries, and "Consolidated Party" means any one
of them.
"Consolidated Tangible Net Worth" means, as of any date,
shareholders' equity or net worth of the Consolidated Parties on a
consolidated basis minus the net book value of all assets in each case
shown as "intangible assets" on a balance sheet of the Consolidated
Parties including, without limitation, goodwill, patents, trade names,
trademarks, copyrights, franchises, organizational expense and deferred
expenses, as determined in accordance with GAAP.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the Guaranty Agreement, the LOC Documents, each
Joinder Agreement, the Administrative Agent's Fee Letter and all other
related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto (in each case as the same may
be amended, modified, restated, supplemented, extended, renewed or
replaced from time to time), and "Credit Document" means any one of
them.
"Credit Parties" means a collective reference to the Borrower
and the Guarantors, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (i) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender and the Swingline Lender) and the Administrative Agent,
whenever arising, under this Credit Agreement, the Notes or any of the
other Credit Documents (including, but not limited to, any interest
accruing after the occurrence of a Bankruptcy Event with respect to any
Credit Party, regardless of whether such interest is an allowed claim
under the Bankruptcy Code) and (ii) all liabilities and obligations,
whenever arising, owing from any Credit Party to any Lender, or any
Affiliate of a Lender, arising under any Hedging Agreement related to
the Revolving Loans.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a)
has failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day
of when due, (b) other than as set forth in (a) above, has failed to
pay to the Administrative Agent or any Lender an amount owed by such
Lender pursuant to the terms of this Credit Agreement within one
Business Day of when due, unless such amount is subject to a good faith
dispute or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or with respect to which (or with
respect to any of assets of which) a receiver, trustee or similar
official has been appointed.
8
10
"Documentation Agent" shall have the meaning assigned to such
term in the heading hereof.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; and (iii) any other Person approved by the Administrative
Agent, the Issuing Lender and, unless an Event of Default has occurred
and is continuing at the time any assignment is effected in accordance
with Section 11.3, the Borrower (such approval not to be unreasonably
withheld or delayed by the Borrower and such approval to be deemed
given by the Borrower if no objection is received by the assigning
Lender and the Administrative Agent from the Borrower within two
Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrower); provided, however,
that neither the Borrower nor an Affiliate of the Borrower shall
qualify as an Eligible Assignee.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance by any Consolidated Party
to any Person which is not a Credit Party of (a) shares of its Capital
Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to
the conversion of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Consolidated Party within the meaning of Section
4001(a)(14) of ERISA, or is a member
9
11
of a group which includes any Consolidated Party and which is treated
as a single employer under Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by any Consolidated Party or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial
employer (as such term is defined in Section 4001(a)(2) of ERISA), or
the termination of a Multiple Employer Plan; (iii) the distribution of
a notice of intent to terminate or the actual termination of a Plan
pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution
of proceedings to terminate or the actual termination of a Plan by the
PBGC under Section 4042 of ERISA; (v) any event or condition which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan; (vi) the complete or partial withdrawal of any Consolidated Party
or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions
for imposition of a lien under Section 302(f) of ERISA exist with
respect to any Plan; or (viii) the adoption of an amendment to any Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate
based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Administrative
Agent to be equal to the quotient obtained by dividing (a) the
Interbank Offered Rate for such Eurodollar Loan for such Interest
Period by (b) 1 minus the Eurodollar Reserve Requirement for such
Eurodollar Loan for such Interest Period.
"Eurodollar Reserve Requirement" means, at any time, the
maximum rate at which reserves (including, without limitation, any
marginal, special, supplemental, or emergency reserves) are required to
be maintained under regulations issued from time to time by the Board
of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurodollar liabilities"
(as such term is used in Regulation D). Without limiting the effect of
the foregoing, the Eurodollar Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by
reference to which the Adjusted Eurodollar Rate is to be determined, or
(ii) any category of extensions of credit or other assets which include
Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Requirement.
"Event of Default" shall have the meaning as defined in
Section 9.1.
10
12
"Existing Letter of Credit" means the letters of credit
described by date of issuance, letter of credit number, undrawn amount,
name of beneficiary and date of expiry on Schedule 1.1(b) hereto.
"Facility Fee" shall have the meaning assigned to such term in
Section 3.5(a).
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative
Agent.
"Foreign Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is not a Domestic Subsidiary of such
Person.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (a) all Indebtedness of such Person other than
Indebtedness of the types referred to in clause (e), (f), (g), (i), and
(l) of the definition of "Indebtedness" set forth in this Section 1.1,
(b) all Indebtedness of another Person of the type referred to in
clause (a) above secured by (or for which the holder of such Funded
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (c) all Guaranty
Obligations of such Person with respect to Indebtedness of the type
referred to in clause (a) above of another Person and (d) Indebtedness
of the type referred to in clause (a) above of any partnership or
unincorporated joint venture in which such Person is a general partner
or a joint venturer.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means a collective reference to UTP and each of
the Subsidiary Guarantors.
11
13
"Guaranty Agreement" means that certain Guaranty Agreement
dated as of the date hereof given by UTP in favor of the Administrative
Agent and the Lenders, as amended, modified, supplemented or restated
from time to time.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (a) to purchase any such Indebtedness or any
Property constituting security therefor, (b) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (c) to lease or purchase Property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (d) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement.
"Immaterial Subsidiary" means any Subsidiary of a Credit Party
in which (a) the portion of Consolidated EBITDA for the twelve month
period most recently ending attributable to such Subsidiary does not
exceed 5% of Consolidated EBITDA for such period and (b) the assets of
such Subsidiary do not constitute more than 5% of Total Assets, as of
the end of the most recent fiscal quarter of the Borrower.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily
made, (c) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of
business and due within six months of the incurrence thereof) which
would appear as liabilities on a balance sheet of such Person, (e) all
obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (f) all Indebtedness of others secured by
(or for which
12
14
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (g)
all Guaranty Obligations of such Person, (h) the principal portion of
all obligations of such Person under Capital Leases, (i) all
obligations of such Person under Hedging Agreements, (j) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) the principal portion of all obligations of such Person under
Synthetic Leases, (l) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner
or a joint venturer, (m) all preferred Capital Stock issued by such
Person and required by the terms thereof to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date, and (n) the
outstanding Attributed Principal Amount under any Securitization
Transaction.
"Indenture" means that certain Indenture dated as of February
5, 1998 between the Borrower and First Union National Bank, as trustee,
as amended, modified or supplemented from time to time.
"Intangible Assets" means, as of any date, the value, as shown
on or reflected in the most recent consolidated balance sheet of the
Consolidated Parties provided pursuant to Section 7.1(a) and (b) and
prepared in accordance with GAAP, of: (i) all trade names, trademarks,
licenses, patents, copyrights, service marks, goodwill and other like
intangibles; (ii) organizational and development costs; (iii) deferred
charges (other than prepaid items, such as insurance, taxes, interest,
commission, rents, pensions, compensation and similar items and
intangible assets being amortized) and (iv) unamortized debt discount
and expense, less unamortized premium.
"Interbank Offered Rate" means, for any Eurodollar Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Interbank Offered Rate" shall mean, for any
Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing
on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if
necessary, to the nearest 1/100 of 1%).
"Interest Coverage Ratio" means, with respect to the
Consolidated Parties on a consolidated basis for the twelve month
period ending on the last day of any fiscal
13
15
quarter, the ratio of (a) Consolidated EBITDA for such period minus
Consolidated Capital Expenditures for such period to (b) Consolidated
Interest Expense for such period.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last Business Day of each March, June, September and December, the date
of repayment of principal of such Loan and the Maturity Date, (b) as to
Eurodollar Loans, the last Business Day of each applicable Interest
Period, the date of repayment of principal of such Loan and the
Maturity Date, and in addition where the applicable Interest Period for
a Eurodollar Loan is greater than three months, then also the date
three months from the beginning of the Interest Period and each three
months thereafter and (c) as to Swingline Loans, the last Business Day
of each March, June, September and December, the date of repayment of
principal of such Swingline Loan and the Maturity Date.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Maturity Date, and (c)
where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
"Investment" means (a) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or
otherwise) of assets, Capital Stock, bonds, notes, debentures,
partnership, joint ventures or other ownership interests or other
securities of any Person or (b) any deposit with, or advance, loan or
other extension of credit to, any Person (other than deposits made in
connection with the purchase of equipment or other assets in the
ordinary course of business) or (c) any other capital contribution to
or investment in any Person, including, without limitation, any
Guaranty Obligations (including any support for a letter of credit
issued on behalf of such Person) incurred for the benefit of such
Person.
"ISP98" shall have the meaning assigned to such term in
Section 2.2(h).
"Issuing Lender" means Bank of America.
"Issuing Lender Fees" shall have the meaning assigned to such
term in Section 3.5(c)(ii).
14
16
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.12 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.12.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Letter of Credit" means (i) any letter of credit issued by
the Issuing Lender for the account of the Borrower in accordance with
the terms of Section 2.2 and (ii) any Existing Letter of Credit.
"Letter of Credit Fee" shall have the meaning assigned to such
term in Section 3.5(b).
"Leverage Ratio" means, with respect to the Consolidated
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter, the ratio of (a) Funded
Indebtedness of the Consolidated Parties on a consolidated basis on the
last day of such period to (b) Consolidated EBITDA for such period.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan bearing interest at the Adjusted Base Rate or the
Adjusted Eurodollar Rate) and/or any Swingline Loans, individually or
collectively, as appropriate.
"LOC Commitment" means the commitment of the Issuing Lender to
issue Letters of Credit, and to honor payment obligations under,
Letters of Credit hereunder in an aggregate face amount at any time
outstanding (together with the amounts of any unreimbursed drawings
thereon) of up to the LOC Committed Amount and with respect to each
Lender, the commitment of each Lender to purchase participation
interests in the Letters of Credit.
"LOC Committed Amount" means TEN MILLION DOLLARS
($10,000,000).
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any
15
17
application therefor, and any agreements, instruments, guarantees or
other documents (whether general in application or applicable only to
such Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed by the Borrower.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, assets, property, condition (financial or
otherwise), liabilities or prospects of the Borrower and its
Subsidiaries taken as a whole, (b) the ability of any Credit Party to
perform any material obligation under the Credit Documents to which it
is a party or (c) the material rights and remedies of the Lenders under
the Credit Documents.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"Material Subsidiary" means any Subsidiary of a Credit Party
in which (a) the portion of Consolidated EBITDA for the twelve month
period most recently ending attributable to such Subsidiary exceeds 5%
of Consolidated EBITDA for such period or (b) the assets of such
Subsidiary constitute more than 5% of Total Assets, as of the end of
the most recent fiscal quarter of the Borrower.
"Maturity Date" means December 20, 2003.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Consolidated
Party or any ERISA Affiliate and at least one employer other than the
Consolidated Parties or any ERISA Affiliate are contributing sponsors.
"Net Cash Proceeds" means the aggregate cash proceeds received
by the Consolidated Parties in respect of any Equity Issuance, net of
(a) direct costs (including, without limitation, legal, accounting and
investment banking fees, and sales
16
18
commissions) and (b) taxes paid or payable as a result thereof; it
being understood that "Net Cash Proceeds" shall include, without
limitation, any cash received upon the sale or other disposition of any
non-cash consideration received by the Consolidated Parties in any
Equity Issuance.
"Note" or "Notes" means the Revolving Notes and/or the
Swingline Notes, individually or collectively, as appropriate.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Exhibit 3.2, as
required by Section 3.2.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Other Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Participation Interest" means a purchase by a Lender of a
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2, in Swingline Loans as provided in Section 2.3 or in any
Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permitted Acquisition" means an Acquisition by the Borrower
or any Subsidiary of the Borrower for consideration no greater than the
fair market value of the Capital Stock or Property acquired, provided
that (i) the Property acquired (or the Property of the Person acquired)
in such Acquisition is used or useful in the same or a substantially
similar line of business as the Borrower is engaged in on the Closing
Date, (ii) the Administrative Agent shall have received all items in
respect of the Acquisition required to be delivered by the terms of
Section 7.12(a), (iii) in the case of an Acquisition of the Capital
Stock of another Person, the board of directors (or other comparable
governing body) of such other Person shall have duly approved such
Acquisition, (iv) the representations and warranties made by the Credit
Parties in any Credit Document shall be true and correct in all
material respects at and as if made as of the date of such Acquisition
(after giving effect thereto) except to the extent such representations
and warranties expressly relate to an earlier date, (v) after giving
effect to such Acquisition, the aggregate cash consideration for all
such Acquisitions occurring subsequent to the Closing Date shall not
exceed $125,000,000 and (vi) immediately prior to and after giving
effect to such Acquisition, no Default or Event of Default shall exist.
17
19
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made by any Consolidated Party in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
(iii) Investments consisting of Capital Stock, obligations, securities
or other property received by any Consolidated Party in settlement of
accounts receivable (created in the ordinary course of business) from
bankrupt obligors; (iv) Investments by one Credit Party in another
Credit Party (other than UTP); (v) Investments by any Credit Party in
UTP to the extent permitted by Section 8.1(d); (vi) Permitted
Acquisitions; (vii) Investments by any Credit Party in a SPE in
connection with any Securitization Transaction permitted by Section
8.1(f); and (viii) other loans, advances and Investments of a nature
not contemplated in the foregoing subsections in an aggregate amount
not to exceed an amount equal to 30% of Consolidated Net Tangible
Assets, provided, that, at the time of any such loan, advance or
Investment, the Borrower shall have a Senior Debt Rating of at least
BBB-.
"Permitted Liens" means:
(i) Liens (other than Liens created or imposed
under ERISA) for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes being contested in good
faith by appropriate proceedings for which adequate reserves
determined in accordance with GAAP have been established (and
as to which the Property subject to any such Lien is not yet
subject to foreclosure, sale or loss on account thereof);
(ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and suppliers
and other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary
course of business, provided that such Liens secure only
amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the same
or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which
the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);
(iii) Liens (other than Liens created or imposed
under ERISA) incurred or deposits made by any Consolidated
Party in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders,
statutory obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money);
18
20
(iv) Liens in connection with attachments or
judgments (including judgment or appeal bonds) provided that
the judgments secured shall, within 60 days after the entry
thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 60 days
after the expiration of any such stay;
(v) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vi) Liens on Property securing purchase money
Indebtedness (including Capital Leases and Synthetic Leases)
to the extent permitted under Section 8.1(b), provided that
any such Lien attaches to such Property concurrently with or
within 90 days after the acquisition thereof;
(vii) leases or subleases granted to others not
interfering in any material respect with the business of any
Consolidated Party;
(viii) any interest of title of a lessor under, and
Liens arising from UCC financing statements (or equivalent
filings, registrations or agreements in foreign jurisdictions)
relating to, leases permitted by this Credit Agreement;
(ix) normal and customary rights of setoff upon
deposits of cash in favor of banks or other depository
institutions;
(x) Liens of a collecting bank arising under
Section 4-210 of the Uniform Commercial Code on items in the
course of collection;
(xi) Liens existing as of the Closing Date and
set forth on Schedule 1.1(a); provided that no such Lien shall
at any time be extended to or cover any Property other than
the Property subject thereto on the Closing Date; and
(xii) Liens created or deemed to exist in
connection with any Securitization Transaction permitted under
Section 8.1(f), but only to the extent that any such Lien
relates to the applicable accounts receivables actually sold,
contributed or otherwise conveyed pursuant to such
Securitization Transaction.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, business trust,
association, trust or other enterprise (whether or not incorporated) or
any Governmental Authority.
19
21
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
"Prime Rate" means the per annum rate of interest established
from time to time by Bank of America as its prime rate, which rate may
not be the lowest rate of interest charged by Bank of America to its
customers.
"Principal Office" means the principal office of Bank of
America, presently located at Charlotte, North Carolina.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation T, U, or X" means Regulation T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles) of any
Materials of Environmental Concern.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Required Lenders" means, Lenders which are then in compliance
with their obligations hereunder (as determined by the Administrative
Agent) and holding in the aggregate more than 50% of (i) the
Commitments (and Participation Interests therein), or (ii) if the
Commitments have been terminated, the outstanding Loans and
Participation Interests (including the Participation Interests of the
Issuing Lender in any Letter of Credit).
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its material property is subject.
20
22
"Restricted Payment" means (i) any dividend or other payment
or distribution, direct or indirect, on account of any shares of any
class of Capital Stock of any Consolidated Party, now or hereafter
outstanding (including without limitation any payment in connection
with any merger or consolidation involving any Consolidated Party), or
to the direct or indirect holders of any shares of any class of Capital
Stock of any Consolidated Party, now or hereafter outstanding, in their
capacity as such (other than dividends or distributions payable in the
same class of Capital Stock of the applicable Person or to any Credit
Party (directly or indirectly through Subsidiaries), (ii) any
redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any
class of Capital Stock of any Consolidated Party, now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of any Consolidated Party,
now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of
the Revolving Committed Amount, (i) to make Revolving Loans in
accordance with the provisions of Section 2.1(a) and (ii) to purchase
Participation Interests in Letters of Credit in accordance with the
provisions of Section 2.2(c).
"Revolving Commitment Percentage" means, for any Lender, the
percentage identified as its Revolving Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with
any assignment made in accordance with the provisions of Section 11.3.
"Revolving Committed Amount" means TWO HUNDRED FIFTY MILLION
DOLLARS ($250,000,000), as such amount may be reduced pursuant to
Section 3.4 or increased pursuant to Section 2.1(f).
"Revolving Loans" shall have the meaning assigned to such term
in Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Revolving Loans provided pursuant to Section 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, restated, supplemented, extended, renewed or replaced from
time to time.
"Revolving Obligations" means, collectively, the Revolving
Loans, the Swingline Loans and the LOC Obligations.
21
23
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Securitization Transaction" means any receivables financing
in which any Credit Party sells, conveys or otherwise transfers any
account receivables or interests therein and certain property related
thereto and proceeds thereof (collectively, the "Transferred Assets")
to one or more SPEs and which one of such SPEs then either sells and/or
grants a security interest in such Transferred Assets as security for a
loan, to any Person that is not a Subsidiary or Affiliate of the
Borrower.
"Senior Debt Rating" means the higher of the publicly
announced ratings by S&P and Moody's for the senior unsecured
(non-credit enhanced) long term debt of the Borrower.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or is to engage, (iv) the
fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (v) the present fair salable value of
the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"SPE" means, in respect of any Securitization Transaction, any
Subsidiary of any Credit Party to which any Credit Party sells,
contributes or otherwise conveys any Transferred Assets in connection
with such Securitization Transaction.
"Subsidiary" means, as to any Person at any time, (a) any
corporation more than 50% of whose Capital Stock of any class or
classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether
or not at such time, any class or classes of such corporation shall
have or might
22
24
have voting power by reason of the happening of any contingency) is at
such time owned by such Person directly or indirectly through
Subsidiaries, and (b) any partnership, association, joint venture or
other entity of which such Person directly or indirectly through
Subsidiaries owns at such time more than 50% of the Capital Stock.
"Subsidiary Guarantor" means each of the Persons identified as
a "Subsidiary Guarantor" on the signature pages hereto and each
Additional Credit Party which may hereafter execute a Joinder
Agreement, together with their successors and permitted assigns, and
"Subsidiary Guarantor" means any one of them.
"Swingline CD Loans" means any Swingline Loan that bears
interest at a rate based upon the Adjusted CD Rate.
"Swingline Committed Amount" means TWENTY MILLION DOLLARS
($20,000,000).
"Swingline Lender" means Bank of America, together with any
successors or assigns.
"Swingline Loan Request" means a request by the Borrower for a
Swingline Loan in substantially the form of Exhibit 2.3(b).
"Swingline Loans" means the loans made by the Swingline Lender
pursuant to Section 2.3.
"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender evidencing the Swingline Loans provided
pursuant to Section 2.3, as such promissory note may be amended,
modified, supplemented, extended, renewed or replaced from time to
time.
"Syndication Agent" shall have the meaning assigned to such
term in the heading hereof.
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an Operating Lease.
"Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Total Assets" means, as of any date, all items, which in
accordance with GAAP, would be classified as assets of the Consolidated
Parties on a consolidated basis.
23
25
"Transferred Assets" shall have the meaning assigned to such
term in the definition of "Securitization Transaction" set forth in
this Section 1.1.
"Unifi Manufacturing" means Unifi Manufacturing, Inc., a North
Carolina corporation.
"Unifi Technology" means Unifi Technology Group, Inc., a North
Carolina corporation.
"Utilization Fee" means the percent per annum set forth in the
column "Applicable Percentage for Utilization Fees" in the definition
of "Applicable Percentage", which shall be calculated as set forth in
the definition of "Applicable Percentage".
"UTP" means Unifi Textured Polyester, LLC, a North Carolina
limited liability company.
"Voting Stock" means, with respect to any Person, Capital
Stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
24
26
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements as at June 25, 2000); provided,
however, if (a) the Credit Parties shall object to determining such compliance
on such basis at the time of delivery of such financial statements due to any
change in GAAP or the rules promulgated with respect thereto or (b) the
Administrative Agent or the Required Lenders shall so object in writing within
60 days after delivery of such financial statements, then such calculations
shall be made on a basis consistent with the most recent financial statements
delivered by the Credit Parties to the Lenders as to which no such objection
shall have been made.
Notwithstanding the above, the parties hereto acknowledge and agree
that, for purposes of the calculation of the Leverage Ratio pursuant to Section
7.11(ii), income statement items (whether positive or negative) attributable to
the Property acquired in any Permitted Acquisition and any Indebtedness incurred
by the Borrower or any of its Subsidiaries in order to consummate such Permitted
Acquisition shall be included to the extent relating to any period applicable in
such calculations occurring after the date of such Permitted Acquisition (and,
notwithstanding the foregoing, during the first four fiscal quarters following
the date of such Permitted Acquisition, such Permitted Acquisition and any
Indebtedness incurred by the Borrower or any of its Subsidiaries in order to
consummate such Permitted Acquisition shall be deemed to have occurred on the
first day of the four fiscal quarter period immediately preceding the date of
such Permitted Acquisition).
SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Revolving Commitment. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make available to the Borrower such Lender's Revolving
Commitment Percentage of revolving credit loans requested by the Borrower in
Dollars ("Revolving Loans") from time to time from the Closing Date until the
Maturity Date, or such earlier date as the Revolving Commitments shall have been
terminated as provided herein; provided, however, that (i) with regard to the
Lenders collectively, the aggregate principal amount of Revolving Loans
outstanding plus LOC Obligations outstanding plus Swingline Loans outstanding
shall not exceed the Revolving
25
27
Committed Amount and (ii) with regard to each Lender individually, such Lender's
pro rata share of outstanding Revolving Loans plus such Lender's pro rata share
of LOC Obligations outstanding plus (other than the Swingline Lender) such
Lender's pro rata share of Swingline Loans outstanding shall not exceed such
Lender's Revolving Commitment Percentage of the Revolving Committed Amount.
Revolving Loans may consist of Base Rate Loans or Eurodollar Loans, or a
combination thereof, as the Borrower may request; provided, however, that no
more than six Eurodollar Loans shall be outstanding hereunder at any time (it
being understood that, for purposes hereof, Eurodollar Loans with different
Interest Periods shall be considered as separate Eurodollar Loans, even if they
begin on the same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single Interest
Period). Revolving Loans hereunder may be repaid and reborrowed in accordance
with the provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall
request a Revolving Loan borrowing by written notice (or
telephonic notice promptly confirmed in writing) to the
Administrative Agent not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day prior to the date of
the requested borrowing in the case of Base Rate Loans, and on
the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request
for borrowing shall be irrevocable and shall specify (A) that
a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate
principal amount to be borrowed, and (D) whether the borrowing
shall be comprised of Base Rate Loans, Eurodollar Loans or a
combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. If the Borrower shall fail to
specify in any such Notice of Borrowing (I) an applicable
Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period
of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base
Rate Loan hereunder. The Administrative Agent shall give
notice to each affected Lender promptly upon receipt of each
Notice of Borrowing pursuant to this Section 2.1(b)(i), the
contents thereof and each such Lender's share of any borrowing
to be made pursuant thereto.
(ii) Minimum Amounts. Each Base Rate Loan that is
a Revolving Loan shall be in a minimum aggregate principal
amount of $5,000,000 and integral multiples of $500,000 in
excess thereof (or the remaining amount of the Revolving
Committed Amount, if less) and each Eurodollar Loan that is a
Revolving Loan shall be in a minimum aggregate principal
amount of $5,000,000 and integral multiples of $1,000,000 in
excess thereof (or the remaining amount of the Revolving
Committed Amount, if less).
26
28
(iii) Advances. Each Lender will make its
Revolving Commitment Percentage of each Revolving Loan
borrowing available to the Administrative Agent for the
account of the Borrower as specified in Section 3.15(a), or in
such other manner as the Administrative Agent may specify in
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the
date specified in the applicable Notice of Borrowing in
Dollars and in funds immediately available to the
Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent by
crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
(c) Repayment. The principal amount of all Revolving
Loans shall be due and payable in full on the Maturity Date, unless
accelerated sooner pursuant to Section 9.2.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as
Revolving Loans shall be comprised in whole or in part of Base
Rate Loans, such Base Rate Loans shall bear interest at a per
annum rate equal to the Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as
Revolving Loans shall be comprised in whole or in part of
Eurodollar Loans, such Eurodollar Loans shall bear interest at
a per annum rate equal to the Adjusted Eurodollar Rate.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Revolving Notes. The Revolving Loans made by each
Lender shall be evidenced by a duly executed promissory note of the
Borrower to such Lender in an original principal amount equal to such
Lender's Revolving Commitment Percentage of the Revolving Committed
Amount and in substantially the form of Exhibit 2.1(e).
(f) Increase of Revolving Committed Amount. The Borrower
shall have the right to increase the Revolving Committed Amount in one
or more separate increases prior to the Maturity Date; provided that
the ability of the Borrower to effect any such increase shall be
subject to the following terms and conditions:
(i) no Event of Default shall have occurred and
be continuing on the date on which such Revolving Committed
Amount increase is to become effective;
27
29
(ii) the representations and warranties set forth
in Section 6 of this Credit Agreement shall be true and
correct in all material respects on and as of the date on
which such increase is to become effective (except for those
which expressly relate to an earlier date);
(iii) such increase must be in a minimum amount of
$10,000,000 and in integral multiples of $5,000,000 above the
then existing Revolving Committed Amount;
(iv) the Revolving Committed Amount may not be
increased to an amount greater than THREE HUNDRED MILLION
DOLLARS ($300,000,000);
(v) on or before the date on which such increase
is to become effective, the Administrative Agent shall have
received (A) for its own account, the mutually acceptable fees
and expenses paid in connection with such increase and (B) for
the account of each Person providing the increase in the
Revolving Committed Amount, a commitment fee on the amount of
such increase in an amount to be determined at such time;
(vi) any such increase in the Revolving Committed
Amount shall be applied to (A) upon any existing Lender's
written consent, the Revolving Commitment of one or more
existing Lenders and/or (B) one or more institutions that is
not an existing Lender (each, a "New Lender"); provided that
(x) each New Lender is an Eligible Assignee and (y) if
applicable, such New Lender becomes a Lender hereunder
pursuant to the execution and delivery of an appropriate
joinder agreement or of counterparts to this Credit Agreement
in a manner acceptable to the Borrower and the Administrative
Agent;
(vii) if any Loans are outstanding at the time of
the increase in the Revolving Committed Amount, the Borrower
shall, if applicable, prepay one or more existing Loans (such
prepayment to be subject to Section 3.12) in an amount
necessary such that after giving effect to the increase in the
Revolving Committed Amount, each Lender will hold its pro rata
share (based on its Revolving Commitment Percentage of the
increased Revolving Committed Amount) of outstanding Loans;
(viii) the Borrower shall execute and deliver such
Note(s) in favor of any New Lenders as are necessary; and
(ix) Schedule 2.1(a) hereto shall be amended to
reflect the revised Revolving Commitment Percentages and
Commitments of the Lenders.
28
30
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. Subject to the terms and conditions hereof
and of the LOC Documents, if any, and any other terms and conditions
which the Issuing Lender may reasonably require and in reliance upon
the representations and warranties set forth herein, the Issuing Lender
agrees to issue, and each Lender severally agrees to participate in the
issuance by the Issuing Lender of Letters of Credit in Dollars from
time to time from the Closing Date until the Maturity Date as the
Borrower may request, in a form acceptable to the Issuing Lender;
provided, however, that (i) the LOC Obligations outstanding shall not
at any time exceed the LOC Committed Amount, (ii) with regard to the
Lenders collectively, the aggregate principal amount of Revolving Loans
outstanding plus LOC Obligations outstanding plus Swingline Loans
outstanding shall not exceed the Revolving Committed Amount and (iii)
with regard to each Lender individually, such Lender's pro rata share
of outstanding Revolving Loan plus such Lender's pro rata share of LOC
Obligations outstanding plus (other than the Swingline Lender) such
Lender's pro rata share of Swingline Loans outstanding shall not exceed
such Lender's Revolving Commitment Percentage of the Revolving
Committed Amount. No Letter of Credit shall (x) have an original expiry
date more than one year from the date of issuance or (y) as originally
issued or as extended, have an expiry date extending beyond the
Maturity Date. Each Letter of Credit (1) shall comply with the related
LOC Documents and (2) may be issued only for the purposes set forth in
Section 6.14 hereof. The issuance and expiry dates of each Letter of
Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted by the Borrower to the Issuing
Lender at least three (3) Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon request, disseminate to each of the Lenders a detailed
report specifying the Letters of Credit which are then issued and
outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the beneficiary, the face amount and the expiry
date, as well as any payment or expirations which may have occurred.
(c) Participation.
(i) On the Closing Date, each Lender shall
automatically acquire a participation in the liability of the
Issuing Lender under each Existing Letter of Credit in an
amount equal to its pro rata share of the obligations under
such Existing Letter of Credit (based on the respective
Revolving Commitment Percentages of the Lenders) and shall
absolutely, unconditionally and irrevocably assume and be
obligated to pay to the Issuing Lender and discharge when due,
its pro rata share of the obligations arising under such
Existing Letter of Credit. Each Existing Letter of Credit
shall be deemed for all purposes of this Credit Agreement and
the other Credit Documents to be a Letter of Credit.
29
31
(ii) Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a
Participation Interest from the Issuing Lender in such Letter
of Credit and the obligations arising thereunder and any
collateral relating thereto, in each case in an amount equal
to its pro rata share of the obligations under such Letter of
Credit (based on the respective Revolving Commitment
Percentages of the Lenders) and shall absolutely,
unconditionally and irrevocably assume and be obligated to pay
to the Issuing Lender and discharge when due, its pro rata
share of the obligations arising under such Letter of Credit.
Without limiting the scope and nature of each Lender's
Participation Interest in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed as required
hereunder or under any such Letter of Credit, each such Lender
shall pay to the Issuing Lender its pro rata share of such
unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing
pursuant to the provisions of subsection (d) below. The
obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected
by the occurrence of a Default, an Event of Default or any
other occurrence or event. Any such reimbursement shall not
relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit,
together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender that
the Borrower intends to otherwise reimburse the Issuing Lender for such
drawing, the Borrower shall be deemed to have requested that the
Lenders make a Revolving Loan in the amount of the drawing as provided
in subsection (e) below on the related Letter of Credit, the proceeds
of which will be used to satisfy the related reimbursement obligations.
The Borrower promises to reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a
Revolving Loan obtained hereunder or otherwise) in same day funds. If
the Borrower shall fail to reimburse the Issuing Lender as provided
hereinabove, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the Adjusted Base Rate plus 2%.
The Borrower's reimbursement obligations hereunder shall be absolute
and unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Lender, the Administrative Agent, the Lenders,
the beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the other Lenders of
the amount of any unreimbursed drawing and each Lender shall promptly
pay to the Administrative Agent for the account of the Issuing Lender
in Dollars and in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment
shall be made on the day such notice is received by such Lender from
the Issuing Lender if such notice is received at or
30
32
before 2:00 P.M. (Charlotte, North Carolina time) otherwise such
payment shall be made at or before 12:00 Noon (Charlotte, North
Carolina time) on the Business Day next succeeding the day such notice
is received. If such Lender does not pay such amount to the Issuing
Lender in full upon such request, such Lender shall, on demand, pay to
the Administrative Agent for the account of the Issuing Lender interest
on the unpaid amount during the period from the date of such drawing
until such Lender pays such amount to the Issuing Lender in full at a
rate per annum equal to, if paid within two (2) Business Days of the
date that such Lender is required to make payments of such amount
pursuant to the preceding sentence, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each Lender's obligation
to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations of the Borrower hereunder and
shall be made without any offset, abatement, withholding or reduction
whatsoever. Simultaneously with the making of each such payment by a
Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a Participation Interest in an amount equal to such
payment (excluding the portion of such payment constituting interest
owing to the Issuing Lender) in the related unreimbursed drawing
portion of the LOC Obligation and in the interest thereon and in the
related LOC Documents, and shall have a claim against the Borrower with
respect thereto.
(e) Repayment with Revolving Loans. On any day on which
the Borrower shall have requested, or been deemed to have requested, a
Revolving Loan advance to reimburse a drawing under a Letter of Credit,
the Administrative Agent shall give notice to the Lenders that a
Revolving Loan has been requested or deemed requested by the Borrower
to be made in connection with a drawing under a Letter of Credit, in
which case a Revolving Loan advance comprised of Base Rate Loans (or
Eurodollar Loans to the extent the Borrower has complied with the
procedures of Section 2.1(b)(i) with respect thereto) shall be
immediately made to the Borrower by all Lenders (notwithstanding any
termination of the Commitments pursuant to Section 9.2) pro rata based
on the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid
directly to the Issuing Lender for application to the respective LOC
Obligations. Each such Lender hereby irrevocably agrees to make its pro
rata share of each such Revolving Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date
specified in the preceding sentence notwithstanding (i) the amount of
such borrowing may not comply with the minimum amount for advances of
Revolving Loans otherwise required hereunder, (ii) whether any
conditions specified in Section 5.2 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (v) whether the date of such borrowing is
a date on which Revolving Loans are otherwise permitted to be made
31
33
hereunder or (vi) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the
event that any Revolving Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect
to the Borrower or any other Credit Party), then each such Lender
hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such
purchase) from the Issuing Lender such Participation Interests in the
outstanding LOC Obligations as shall be necessary to cause each such
Lender to share in such LOC Obligations ratably (based upon the
respective Revolving Commitment Percentages of the Lenders (determined
before giving effect to any termination of the Commitments pursuant to
Section 9.2)), provided that at the time any purchase of Participation
Interests pursuant to this sentence is actually made, the purchasing
Lender shall be required to pay to the Issuing Lender, to the extent
not paid to the Issuer by the Borrower in accordance with the terms of
subsection (d) above, interest on the principal amount of Participation
Interests purchased for each day from and including the day upon which
such borrowing would otherwise have occurred to but excluding the date
of payment for such Participation Interests, at the rate equal to, if
paid within two (2) Business Days of the date of the Revolving Loan
advance, the Federal Funds Rate, and thereafter at a rate equal to the
Base Rate.
(f) Designation of Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of
Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Credit Party other than
the Borrower, provided that notwithstanding such statement, the
Borrower shall be the actual account party for all purposes of this
Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect
to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any
Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may
have the Letters of Credit be subject to The Uniform Customs and
Practice for Documentary Credits (the "UCP") or the International
Standby Practices 1998 (the "ISP98"), in either case, as published as
of the date of issue by the International Chamber of Commerce, in which
case the UCP or ISP98 may be incorporated therein and deemed in all
respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
32
34
(i) In addition to its other obligations under
this Section 2.2, the Borrower hereby agrees to pay, and
protect, indemnify and save each Lender harmless from and
against, any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that such Lender may incur or be subject to
as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or (B) the failure of such Lender to
honor a drawing under a Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present
or future de jure or de facto government or Governmental
Authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between the Borrower and the Lenders
(including the Issuing Lender), the Borrower shall assume all
risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. No Lender (including the Issuing
Lender) shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) for any loss or delay in
the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from
causes beyond the control of such Lender, including, without
limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Issuing Lender's
rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by any Lender (including the
Issuing Lender), under or in connection with any Letter of
Credit or the related certificates, if taken or omitted in
good faith, shall not put such Lender under any resulting
liability to the Borrower or any other Credit Party. It is the
intention of the parties that this Credit Agreement shall be
construed and applied to protect and indemnify each Lender
(including the Issuing Lender) against any and all risks
involved in the issuance of the Letters of Credit, all of
which risks are hereby assumed by the Borrower (on behalf of
itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. No Lender
(including the Issuing Lender) shall, in any way, be liable
for any failure by such Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of such
Lender.
33
35
(iv) Nothing in this subsection (i) is intended
to limit the reimbursement obligations of the Borrower
contained in subsection (d) above. The obligations of the
Borrower under this subsection (i) shall survive the
termination of this Credit Agreement. No act or omission of
any current or prior beneficiary of a Letter of Credit shall
in any way affect or impair the rights of the Lenders
(including the Issuing Lender) to enforce any right, power or
benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (i), the Borrower shall have no
obligation to indemnify any Lender (including the Issuing
Lender) in respect of any liability incurred by such Lender
(A) arising solely out of the gross negligence or willful
misconduct of such Lender, as determined by a court of
competent jurisdiction, or (B) caused by such Lender's failure
to pay under any Letter of Credit after presentation to it of
a request strictly complying with the terms and conditions of
such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law,
regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5.2 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(k) Conflict with LOC Documents. In the event of any
conflict between this Credit Agreement and any LOC Document (including
any letter of credit application), this Credit Agreement shall control.
2.3 SWINGLINE LOANS SUBFACILITY.
(a) Swingline Loans. Subject to the terms and conditions
set forth herein and in the other Credit Documents and in reliance upon
the representations and warranties set forth herein, the Swingline
Lender hereby agrees, to make loans to the Borrower in Dollars at any
time and from time to time from the Closing Date to but not including
the Maturity Date, or such earlier date as the Revolving Commitments
shall have been terminated as provided herein (each such loan, a
"Swingline Loan" and collectively, the "Swingline Loans"); provided
that (i) the aggregate principal amount of the Swingline Loans
outstanding at any one time shall not exceed the Swingline Committed
Amount
34
36
and (ii) with regard to the Lenders collectively, the aggregate
principal amount of Revolving Loans outstanding plus LOC Obligations
outstanding plus Swingline Loans outstanding shall not exceed the
Revolving Committed Amount. Prior to the Maturity Date, Swingline Loans
may be repaid and reborrowed by the Borrower in accordance with the
provisions hereof.
(b) Method of Borrowing and Funding Swingline Loans. By
no later than 1:00 p.m. (Charlotte, North Carolina time), on the date
of the requested borrowing of Swingline Loans, the Borrower shall
telephone the Swingline Lender as well as submit a Swingline Loan
Request to the Swingline Lender in the form of Exhibit 2.3(b) setting
forth (i) the amount of the requested Swingline Loan, (ii) whether the
Swingline Loan shall bear interest at the Adjusted Base Rate or the
Adjusted CD Rate and (iii) the date of the requested Swingline Loan and
complying in all respects with Section 5.2. The Swingline Lender shall
initiate the transfer of funds representing the Swingline Loan advance
to the Borrower by 3:00 p.m. on the Business Day of the requested
borrowing. Each Swingline Loan shall be in a minimum amount of $250,000
and in integral multiples of $50,000 in excess thereof.
(c) Repayment and Participations of Swingline Loans. The
principal amount of all Swingline Loans shall be due and payable on the
earlier of (i) a date not more than fourteen (14) Business Days from
the date of advance thereof and (ii) the Maturity Date. Each repayment
of a Swingline Loan may be accomplished by requesting Revolving Loans
which request is not subject to the conditions set forth in Section
5.2. In the event that the Borrower shall fail to timely repay any
Swingline Loan, and in any event upon (i) a request by the Swingline
Lender, (ii) the occurrence of an Event of Default described in Section
9.1(f) or (iii) the acceleration of any Loan or termination of any
Commitment pursuant to Section 9.2, each other Lender shall irrevocably
and unconditionally purchase from the Swingline Lender, without
recourse or warranty, an undivided interest and participation in such
Swingline Loan in an amount equal to such other Lender's Revolving
Commitment Percentage thereof, by directly purchasing a participation
in such Swingline Loan in such amount (regardless of whether the
conditions precedent thereto set forth in Section 5.2 are then
satisfied, whether or not the Borrower has submitted a Notice of
Borrowing and whether or not the Commitments are then in effect, any
Event of Default exists or all the Loans have been accelerated) and
paying the proceeds thereof to the Swingline Lender at the address
provided in Section 11.1, or at such other address as the Swingline
Lender may designate, in Dollars and in immediately available funds. If
such amount is not in fact made available to the Swingline Lender by
any Lender, the Swingline Lender shall be entitled to recover such
amount on demand from such Lender, together with accrued interest
thereon for each day from the date of demand thereof, at the Federal
Funds Rate. If such Lender does not pay such amount forthwith upon the
Swingline Lender's demand therefor, and until such time as such Lender
makes the required payment, the Swingline Lender shall be deemed to
continue to have outstanding Swingline Loans in the amount of such
unpaid participation obligation for all purposes of the Credit
Documents other than those provisions requiring the other Lenders to
purchase
35
37
a participation therein. Further, such Lender shall be deemed to have
assigned any and all payments made of principal and interest on its
Loans, and any other amounts due to it hereunder to the Swingline
Lender to fund Swingline Loans in the amount of the participation in
Swingline Loans that such Lender failed to purchase pursuant to this
Section 2.4(c) until such amount has been purchased (as a result of
such assignment or otherwise). The principal amount of all Swingline
Loans shall be due and payable in full on the Maturity Date, unless
accelerated sooner pursuant to Section 9.2 or required to be repaid by
the Swingline Lender pursuant to the foregoing terms of this Section
2.4(c).
(d) Interest. Subject to the provisions of Section 3.1,
each Swingline Loan shall bear interest at a per annum rate equal to
either (i) the Adjusted Base Rate or (ii) the Adjusted CD Rate.
Interest on Swingline Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Swingline Note. The Swingline Loans made by the
Swingline Lender shall be evidenced by a duly executed promissory note
of the Borrower to the Swingline Lender in the face amount of the
Swingline Committed Amount and in substantially the form of Exhibit
2.3(e).
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
rate which would otherwise be applicable (or if no rate is applicable, whether
in respect of interest, fees or other amounts, then the Adjusted Base Rate plus
2%).
3.2 EXTENSION AND CONVERSION.
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided, however, that (i) except as
provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans
or extended as Eurodollar Loans for new Interest Periods only on the last day of
the Interest Period applicable thereto, (ii) without the consent of the Required
Lenders, Eurodollar Loans may be extended, and Base Rate Loans may be converted
into Eurodollar Loans, only if the conditions precedent set forth in Section 5.2
are satisfied on the date of extension or conversion, (iii) Loans extended as,
or converted into, Eurodollar Loans shall be subject to the terms of the
definition of "Interest Period" set forth in Section 1.1 and
36
38
shall be in such minimum amounts as provided in Section 2.1(b)(ii), (iv) no more
than six Eurodollar Loans shall be outstanding hereunder at any time (it being
understood that, for purposes hereof, Eurodollar Loans with different Interest
Periods shall be considered as separate Eurodollar Loans, even if they begin on
the same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single Interest
Period) and (v) any request for extension or conversion of a Eurodollar Loan
which shall fail to specify an Interest Period shall be deemed to be a request
for an Interest Period of one month. Each such extension or conversion shall be
effected by the Borrower by giving a Notice of Extension/Conversion (or
telephonic notice promptly confirmed in writing) to the office of the
Administrative Agent specified in specified in Schedule 2.1(a), or at such other
office as the Administrative Agent may designate in writing, prior to 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day of, in the case of the
conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business
Day prior to, in the case of the extension of a Eurodollar Loan as, or
conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Loans to be so extended or converted, the types of Loans into
which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
Borrower of the matters specified in subsections (b), (c), (d), (e) and (f) of
Section 5.2. In the event the Borrower fails to request extension or conversion
of any Eurodollar Loan in accordance with this Section, or any such conversion
or extension is not permitted or required by this Section, then such Eurodollar
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Administrative Agent shall give each
Lender notice as promptly as practicable of any such proposed extension or
conversion affecting any Loan.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. The Borrower shall have the
right to prepay Loans in whole or in part from time to time; provided,
however, that each partial prepayment of Loans shall be in a minimum
principal amount of $5,000,000 and integral multiples of $1,000,000.
Subject to the foregoing terms, amounts prepaid under this Section
3.3(a) shall be applied as the Borrower may elect; provided that if the
Borrower fails to specify a voluntary prepayment then such prepayment
shall be applied to Revolving Loans, in each case first to Base Rate
Loans and then to Eurodollar Loans in direct order of Interest Period
maturities. All prepayments under this Section 3.3(a) shall be subject
to Section 3.12, but otherwise without premium or penalty and shall be
accompanied by interest on the principal amount prepaid through the
date of prepayment.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time
(A) the sum of the aggregate amount of Revolving Loans
outstanding plus the aggregate amount of LOC Obligations
outstanding plus the aggregate amount of Swingline Loans
37
39
outstanding shall exceed the Revolving Committed Amount, (B)
the aggregate amount of LOC Obligations outstanding shall
exceed the LOC Committed Amount or (C) the amount of Swingline
Loans outstanding shall exceed the Swingline Committed Amount,
the Borrower shall immediately make payment on the Loans
and/or to a cash collateral account in respect of the LOC
Obligations in an amount sufficient to eliminate such excess.
(ii) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to Section 3.3(b) shall
be applied first to Loans and then to a cash collateral
account to secure LOC Obligations. Within the parameters of
the applications set forth above, prepayments shall be applied
first to Base Rate Loans and then to Eurodollar Loans in
direct order of Interest Period maturities. All prepayments
under this Section 3.3(b) shall be subject to Section 3.12.
3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT.
The Borrower may from time to time permanently reduce or
terminate the Revolving Committed Amount in whole or in part (in
minimum aggregate amounts of $5,000,000 or in integral multiples of
$1,000,000 in excess thereof (or, if less, the full remaining amount of
the then applicable Revolving Committed Amount)) upon five Business
Days' prior written notice to the Administrative Agent; provided, that,
no such termination or reduction shall be made which would cause the
aggregate amount of outstanding Revolving Loans plus the aggregate
amount of LOC Obligations outstanding plus the aggregate amount of
Swingline Loans outstanding to exceed the Revolving Committed Amount
unless, concurrently with such termination or reduction, the Loans are
repaid to the extent necessary to eliminate such excess. The
Administrative Agent shall promptly notify each affected Lender of
receipt by the Administrative Agent of any notice from the Borrower
pursuant to this Section 3.4.
3.5 FEES.
(a) Facility Fee. In consideration of the Revolving
Commitments of the Lenders hereunder, the Borrower agrees to pay to the
Administrative Agent for the pro rata benefit of the Lenders (based on
each Lender's Revolving Commitment Percentage of the Revolving
Committed Amount) a fee (the "Facility Fee") equal to the product of
(i) the Applicable Percentage for Facility Fees multiplied by (ii) the
Revolving Committed Amount. The Facility Fee shall commence to accrue
on the Closing Date and shall be due and payable in arrears on the last
Business Day of each March, June, September and December (and any date
that the Revolving Committed Amount is reduced as provided in Section
3.4 and the Maturity Date) for the immediately preceding quarter (or
portion thereof), beginning with the first of such dates to occur after
the Closing Date.
(b) Letter of Credit Fees.
38
40
(i) Letter of Credit Issuance Fee. In
consideration of the issuance of standby Letters of Credit
hereunder, the Borrower promises to pay to the Administrative
Agent for the account of each Lender a fee (the "Letter of
Credit Fee") on such Lender's Revolving Commitment Percentage
of the average daily maximum amount available to be drawn
under each such standby Letter of Credit computed at a per
annum rate for each day from the date of issuance to the date
of expiration equal to the Applicable Percentage. The Standby
Letter of Credit Fee will be payable quarterly in arrears on
the last Business Day of each March, June, September and
December for the immediately preceding quarter (or a portion
thereof).
(ii) Issuing Lender Fees. In addition to the
Letter of Credit Fee payable pursuant to clause (i) above, the
Borrower promises to pay to the Issuing Lender for its own
account without sharing by the other Lenders (A) a letter of
credit fronting fee of one-tenth percent (1/10%) per annum on
the average daily maximum amount available to be drawn under
outstanding Letters of Credit payable quarterly in arrears
with the Letter of Credit Fee, and (B) customary charges from
time to time of the Issuing Lender with respect to the
issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Lender Fees").
3.6 CAPITAL ADEQUACY.
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower, the Borrower shall be obligated to
pay to such Lender such additional amount or amounts as will compensate such
Lender for such reduction. Each determination by any such Lender of amounts
owing under this Section shall, absent manifest error, be conclusive and binding
on the parties hereto.
3.7 LIMITATION ON EURODOLLAR LOANS.
If on or prior to the first day of any Interest Period for any
Eurodollar Loan:
(a) the Administrative Agent determines (which
determination shall be conclusive) that by reason of circumstances
affecting the relevant market, adequate and
39
41
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify the Agent that the Eurodollar Rate will
not adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Eurodollar Loans, continue Eurodollar Loans, or to
convert Base Rate Loans into Eurodollar Loans and the Borrower shall, on the
last day(s) of the then current Interest Period(s) for the outstanding
Eurodollar Loans, either prepay such Eurodollar Loans or convert such Eurodollar
Loans into Base Rate Loans in accordance with the terms of this Credit
Agreement.
3.8 ILLEGALITY.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist), (b) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base Rate
Loan to Eurodollar Loans, shall forthwith be canceled and, until such time as it
shall no longer be unlawful for such Lender to make or maintain Eurodollar
Loans, such Lender shall then have a commitment only to make a Base Rate Loan
when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding
as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans
on the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 3.13.
3.9 REQUIREMENTS OF LAW.
If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, or its obligation
40
42
to make Eurodollar Loans, or change the basis of taxation of any
amounts payable to such Lender (or its Applicable Lending Office) under
this Credit Agreement or its Notes in respect of any Eurodollar Loans
(other than taxes imposed on the overall net income of such Lender by
the jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement (other
than the Eurodollar Reserve Requirement utilized in the determination
of the Adjusted Eurodollar Rate) relating to any extensions of credit
or other assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office),
including the Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its
Applicable Lending Office) or the London interbank market any other
condition affecting this Credit Agreement or its Notes or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, converting into, continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand such amount or amounts as will compensate such Lender for
such increased cost or reduction. If any Lender requests compensation by the
Borrower under this Section 3.9, the Borrower may, by notice to such Lender
(with a copy to the Administrative Agent), suspend the obligation of such Lender
to make or continue Eurodollar Loans, or to convert Base Rate Loans into
Eurodollar Loans, until the event or condition giving rise to such request
ceases to be in effect (in which case the provisions of Section 3.10 shall be
applicable); provided that such suspension shall not affect the right of such
Lender to receive the compensation so requested. Each Lender shall promptly
notify the Borrower and the Administrative 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 3.9 and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. Any Lender claiming compensation under this
Section 3.9 shall furnish to the Borrower and the Administrative Agent a
statement setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
3.10 TREATMENT OF AFFECTED LOANS.
If the obligation of any Lender to make any Eurodollar Loan or to
continue, or to convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans
shall be automatically converted into Base Rate Loans on the
41
43
last day(s) of the then current Interest Period(s) for such Eurodollar Loans
(or, in the case of a conversion required by Section 3.8 hereof, on such earlier
date as such Lender may specify to the Borrower with a copy to the
Administrative Agent) and, unless and until such Lender gives notice as provided
below that the circumstances specified in Section 3.8 or 3.9 hereof that gave
rise to such conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans
have been so converted, all payments and prepayments of principal that
would otherwise be applied to such Lender's Eurodollar Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued
by such Lender as Eurodollar Loans shall be made or continued instead
as Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 3.8 or 3.9 hereof that gave
rise to the conversion of such Lender's Eurodollar Loans pursuant to this
Section 3.10 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, interest rate basis, and
Interest Periods) in accordance with their respective Commitments.
3.11 TAXES.
(a) Any and all payments by any Credit Party to or for
the account of any Lender or the Administrative Agent hereunder or
under any other Credit Document shall be made free and clear of and
without deduction for any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender
and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender (or its Applicable Lending Office) or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If any Credit Party shall be
required by law to deduct any Taxes from or in respect of any sum
payable under this Credit Agreement or any other Credit Document to any
Lender or the Administrative Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 3.11) such Lender or the Administrative Agent receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) such Credit Party shall make such
42
44
deductions, (iii) such Credit Party shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance
with applicable law, and (iv) such Credit Party shall furnish to the
Administrative Agent, at its address referred to in Section 11.1, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Credit Agreement or any other Credit Document
or from the execution or delivery of, or otherwise with respect to,
this Credit Agreement or any other Credit Document (hereinafter
referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section
3.11) paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto.
(d) Each Lender that is not a United States person under
Section 7701(a)(30) of the Code, on or prior to the date of its
execution and delivery of this Credit Agreement in the case of each
Lender listed on the signature pages hereof and on or prior to the date
on which it becomes a Lender in the case of each other Lender, and from
time to time thereafter if requested in writing by the Borrower or the
Administrative Agent (but only so long as such Lender remains lawfully
able to do so), shall provide the Borrower and the Administrative Agent
with (i) Internal Revenue Service Form W-8 BEN or W-8 ECI, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces
the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Credit Agreement is effectively
connected with the conduct of a trade or business in the United States,
(ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (iii)
any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender is entitled to
an exemption from or a reduced rate of tax on payments pursuant to this
Credit Agreement or any of the other Credit Documents. Each Lender that
is a United States Person shall submit a properly completed and duly
executed Internal Revenue Service Form W-9, or any successor form
prescribed by the Internal Revenue Service, certifying that it is
exempt from backup withholding.
(e) For any period with respect to which a Lender has
failed to provide the Borrower and the Administrative Agent with the
appropriate form pursuant to Section 3.11(d) (unless such failure is
due to a change in treaty, law, or regulation occurring subsequent to
the date on which a form originally was required to be provided), such
Lender shall not be entitled to indemnification under Section 3.11(a)
or 3.11(b) with
43
45
respect to Taxes imposed by the United States; provided, however, that
should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure
to deliver a form required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
(f) If any Credit Party is required to pay additional
amounts to or for the account of any Lender pursuant to this Section
3.11, then such Lender will agree to use reasonable efforts to change
the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment
of Taxes, the applicable Credit Party shall furnish to the
Administrative Agent the original or a certified copy of a receipt
evidencing such payment.
(h) Without prejudice to the survival of any other
agreement of the Credit Parties hereunder, the agreements and
obligations of the Credit Parties contained in this Section 3.11 shall
survive the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the
Commitments hereunder.
3.12 COMPENSATION.
Upon the request of any Lender, the Borrower shall pay to such Lender
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or conversion of a
Eurodollar Loan for any reason (including, without limitation, (i) in
connection with any assignment by Bank of America pursuant to Section
11.3(b) as part of the syndication of the Loans during the 180-day
period immediately following the Closing Date) and (ii) the
acceleration of the Loans pursuant to Section 9.2) on a date other than
the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any condition precedent
specified in Section 5 to be satisfied) to borrow, convert, continue,
or prepay a Eurodollar Loan on the date for such borrowing, conversion,
continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, continuation, or conversion under this Credit
Agreement.
With respect to Eurodollar Loans, such indemnification may include an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or
44
46
of such failure to borrow, convert or continue to the last day of the applicable
Interest Period (or, in the case of a failure to borrow, convert or continue,
the Interest Period that would have commenced on the date of such failure) in
each case at the applicable rate of interest for such Eurodollar Loans provided
for herein (excluding, however, the Applicable Percentage included therein, if
any) over (b) the amount of interest (as reasonably determined by such Lender)
which would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank Eurodollar
market. The covenants of the Borrower set forth in this Section 3.12 shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
3.13 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the
terms of Section 3.3) prepayment of principal of any Loan or
reimbursement obligations arising from drawings under Letters of
Credit, each payment of interest on the Loans or reimbursement
obligations arising from drawings under Letters of Credit, each payment
of Facility Fees, each payment of the Letter of Credit Fee, each
reduction in Commitments and each conversion or extension of any Loan,
shall be allocated pro rata among the Lenders in accordance with the
respective principal amounts of their outstanding Revolving Loans and
Participation Interests.
(b) Advances. No Lender shall be responsible for the
failure or delay by any other Lender in its obligation to make its
ratable share of a borrowing hereunder; provided, however, that the
failure of any Lender to fulfill its obligations hereunder shall not
relieve any other Lender of its obligations hereunder. Unless the
Administrative Agent shall have been notified in writing by any Lender
prior to the date of any requested borrowing that such Lender does not
intend to make available to the Administrative Agent its ratable share
of such borrowing to be made on such date, the Administrative Agent may
assume that such Lender has made such amount available to the
Administrative Agent on the date of such borrowing, and the
Administrative Agent in reliance upon such assumption, may (in its sole
discretion but without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Administrative Agent, the Administrative
Agent shall be able to recover such corresponding amount from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon the Administrative Agent's demand therefor, the Administrative
Agent will promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the Administrative Agent.
The Administrative Agent shall also be entitled to recover from the
Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to
the Borrower to the date such corresponding amount is
45
47
recovered by the Administrative Agent at a per annum rate equal to (i)
from the Borrower at the applicable rate for the applicable borrowing
pursuant to the Notice of Borrowing and (ii) from a Lender at the
Federal Funds Rate.
3.14 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant 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, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a Participation Interest in such Loans, LOC
Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each Lender whose payment shall have been rescinded or otherwise restored.
The Borrower agrees that any Lender so purchasing such a Participation Interest
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
Participation Interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such Participation
Interest. Except as otherwise expressly provided in this Credit Agreement, if
any Lender or the Administrative Agent shall fail to remit to the Administrative
Agent or any other Lender an amount payable by such Lender or the Administrative
Agent to the Administrative Agent or such other Lender pursuant to this Credit
Agreement on the date when such amount is due, such payments shall be made
together with interest thereon for each date from the date such amount is due
until the date such amount is paid to the Administrative Agent or such other
Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.14 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.14 to share in the benefits of any recovery on such secured claim.
3.15 PAYMENTS, COMPUTATIONS, ETC.
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Administrative Agent in Dollars
in immediately available funds, without setoff, deduction, counterclaim
or withholding of any kind, at the Administrative
46
48
Agent's office specified in Schedule 2.1(a) not later than 2:00 P.M.
(Charlotte, North Carolina time) on the date when due. Payments
received after such time shall be deemed to have been received on the
next succeeding Business Day. The Administrative Agent may (but shall
not be obligated to) debit the amount of any such payment which is not
made by such time to any ordinary deposit account of the Borrower or
any other Credit Party maintained with the Administrative Agent (with
notice to the Borrower or such other Credit Party). The Borrower shall,
at the time it makes any payment under this Credit Agreement, specify
to the Administrative Agent the Loans, LOC Obligations, Fees, interest
or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that it fails so to specify,
or if such application would be inconsistent with the terms hereof, the
Administrative Agent shall distribute such payment to the Lenders in
such manner as the Administrative Agent may determine to be appropriate
in respect of obligations owing by the Borrower hereunder, subject to
the terms of Section 3.13(a)). The Administrative Agent will distribute
such payments to such Lenders, if any such payment is received prior to
12:00 Noon (Charlotte, North Carolina time) on a Business Day in like
funds as received prior to the end of such Business Day and otherwise
the Administrative Agent will distribute such payment to such Lenders
on the next succeeding Business Day. Whenever any payment hereunder
shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day
(subject to accrual of interest and Fees for the period of such
extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following
calendar month, then such payment shall instead be made on the next
preceding Business Day. Except as expressly provided otherwise herein,
all computations of interest and fees shall be made on the basis of
actual number of days elapsed over a year of 360 days. Interest shall
accrue from and include the date of borrowing, but exclude the date of
payment.
(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event
of Default, all amounts collected or received by the Administrative
Agent or any Lender on account of the Credit Party Obligations or any
other amounts outstanding under any of the Credit Documents shall be
paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Administrative Agent in connection with enforcing the rights of
the Lenders under the Credit Documents;
SECOND, to payment of any fees owed to the Administrative
Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender;
47
49
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of
the Credit Party Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to
the next succeeding category; (ii) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that the
then outstanding Loans and LOC Obligations held by such Lender bears to
the aggregate then outstanding Loans and LOC Obligations) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH"
and "SIXTH" above; and (iii) to the extent that any amounts available
for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such
amounts shall be held by the Administrative Agent in a cash collateral
account and applied (A) first, to reimburse the Issuing Lender from
time to time for any drawings under such Letters of Credit and (B)
then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above
in the manner provided in this Section 3.15(b).
3.16 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts
evidencing each Loan made by such Lender to the Borrower from time to
time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Credit Agreement. Each
Lender will make reasonable efforts to maintain the accuracy of its
account or accounts and to promptly update its account or accounts from
time to time, as necessary.
(b) The Administrative Agent shall maintain the Register
pursuant to Section 11.3(c), and a subaccount for each Lender, in which
Register and subaccounts (taken together) shall be recorded (i) the
amount, type and Interest Period of each such Loan hereunder, (ii) the
amount of any principal or interest due and payable or to become due
and payable to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder from or for the account
of any Credit Party and each
48
50
Lender's share thereof. The Administrative Agent will make reasonable
efforts to maintain the accuracy of the subaccounts referred to in the
preceding sentence and to promptly update such subaccounts from time to
time, as necessary.
(c) The entries made in the accounts, Register and
subaccounts maintained pursuant to subsection (b) of this Section 3.16
(and, if consistent with the entries of the Administrative Agent,
subsection (a)) shall be prima facie evidence of the existence and
amounts of the obligations of the Credit Parties therein recorded;
provided, however, that the failure of any Lender or the Administrative
Agent to maintain any such account, such Register or such subaccount,
as applicable, or any error therein, shall not in any manner affect the
obligation of the Credit Parties to repay the Credit Party obligations
owing to such Lender.
SECTION 4
GUARANTY
4.1 THE GUARANTY.
Each of the Subsidiary Guarantors hereby jointly and severally
guarantees to each Lender, each Affiliate of a Lender that enters into a Hedging
Agreement, and the Administrative Agent as hereinafter provided, as primary
obligor and not as surety, the prompt payment of the Credit Party Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) strictly in
accordance with the terms thereof. The Subsidiary Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as a
mandatory cash collateralization or otherwise), the Subsidiary Guarantors will,
jointly and severally, promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Credit Party Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) in accordance
with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of each
Subsidiary Guarantor hereunder shall be limited to an aggregate amount equal to
the largest amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Subsidiary Guarantors under Section 4.1 are
joint and several, absolute, unconditional and irrevocable, irrespective of the
value, genuineness, validity,
49
51
regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release, impairment or exchange of any other guarantee of or
security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Subsidiary Guarantors hereunder shall be absolute and
unconditional under any and all circumstances. Each Subsidiary Guarantor agrees
that such Subsidiary Guarantor shall have no right of subrogation, indemnity,
reimbursement or contribution against the Borrower or any other Subsidiary
Guarantor for amounts paid under this Section 4 until such time as the Lenders
(and any Affiliates of Lenders entering into Hedging Agreements) have been paid
in full, all Commitments under this Credit Agreement have been terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents or Hedging Agreements between any Credit Party and any
Lender, or any Affiliate of a Lender. Without limiting the generality of the
foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Subsidiary Guarantor hereunder which shall remain absolute and
unconditional as described above:
(a) at any time or from time to time, without notice to
any Guarantor, the time for any performance of or compliance with any
of the Credit Party Obligations shall be extended, or such performance
or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of
any of the Credit Documents, any Hedging Agreement between any Credit
Party and any Lender, or any Affiliate of a Lender or any other
agreement or instrument referred to in the Credit Documents or such
Hedging Agreements shall be done or omitted;
(c) the maturity of any of the Credit Party Obligations
shall be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement between any Credit
Party and any Lender, or any Affiliate of a Lender or any other
agreement or instrument referred to in the Credit Documents or such
Hedging Agreements shall be waived or any other guarantee of any of the
Credit Party Obligations or any security therefor shall be released,
impaired or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of
the Credit Party Obligations shall fail to attach or be perfected; or
(e) any of the Credit Party Obligations shall be
determined to be void or voidable (including, without limitation, for
the benefit of any creditor of any Guarantor)
50
52
or shall be subordinated to the claims of any Person (including,
without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Subsidiary Guarantor hereby
expressly waives diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that the Administrative Agent or any
Lender exhaust any right, power or remedy or proceed against any Person under
any of the Credit Documents, any Hedging Agreement between any Credit Party and
any Lender, or any Affiliate of a Lender or any other agreement or instrument
referred to in the Credit Documents or such Hedging Agreements, or against any
other Person under any other guarantee of, or security for, any of the Credit
Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Subsidiary Guarantors under this Section 4 shall
be automatically reinstated if and to the extent that for any reason any payment
by or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Subsidiary Guarantor agrees that it will
indemnify the Administrative Agent and each Lender on demand for all reasonable
costs and expenses (including, without limitation, fees and expenses of counsel)
incurred by the Administrative Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4,
each Subsidiary Guarantor hereby specifically waives the benefits of N.C. Gen.
Stat. ss.ss. 26-7 through 26-9, inclusive, to the extent applicable. Each
Subsidiary Guarantor further agrees that such Subsidiary Guarantor shall have no
right of recourse to security for the Credit Party Obligations, except through
the exercise of rights of subrogation pursuant to Section 4.2 and through the
exercise of rights of contribution pursuant to Section 4.6.
4.5 REMEDIES.
The Subsidiary Guarantors agree that, to the fullest extent permitted
by law, as between the Subsidiary Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, the Credit Party
Obligations may be declared to be forthwith due and payable as provided in
Section 9.2 (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 9.2) for purposes of Section 4.1
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or preventing the Credit Party Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Credit Party Obligations being deemed to have
become
51
53
automatically due and payable), the Credit Party Obligations (whether or not due
and payable by any other Person) shall forthwith become due and payable by the
Subsidiary Guarantors for purposes of Section 4.1.
4.6 RIGHTS OF CONTRIBUTION.
The Subsidiary Guarantors hereby agree as among themselves that, if any
Subsidiary Guarantor shall make an Excess Payment (as defined below), such
Subsidiary Guarantor shall have a right of contribution from each other
Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's
Contribution Share (as defined below) of such Excess Payment. The payment
obligations of any Subsidiary Guarantor under this Section 4.6 shall be
subordinate and subject in right of payment to the prior payment in full to the
Administrative Agent and the Lenders of the Guaranteed Obligations, and none of
the Subsidiary Guarantors shall exercise any right or remedy under this Section
4.6 against any other Subsidiary Guarantor until payment and satisfaction in
full of all of such Guaranteed Obligations. For purposes of this Section 4.6,
(a) "Guaranteed Obligations" shall mean any obligations arising under the other
provisions of this Section 4; (b) "Excess Payment" shall mean the amount paid by
any Subsidiary Guarantor in excess of its Pro Rata Share of any Guaranteed
Obligations; (c) "Pro Rata Share" shall mean, for any Subsidiary Guarantor in
respect of any payment of Guaranteed Obligations, the ratio (expressed as a
percentage) as of the date of such payment of Guaranteed Obligations of (i) the
amount by which the aggregate present fair salable value of all of its assets
and properties exceeds the amount of all debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder) to (ii) the amount by which the aggregate present fair
salable value of all assets and other properties of all of the Credit Parties
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Credit Parties hereunder) of the Credit Parties; provided,
however, that, for purposes of calculating the Pro Rata Shares of the Subsidiary
Guarantors in respect of any payment of Guaranteed Obligations, any Subsidiary
Guarantor that became a Subsidiary Guarantor subsequent to the date of any such
payment shall be deemed to have been a Subsidiary Guarantor on the date of such
payment and the financial information for such Subsidiary Guarantor as of the
date such Subsidiary Guarantor became a Subsidiary Guarantor shall be utilized
for such Subsidiary Guarantor in connection with such payment; and (d)
"Contribution Share" shall mean, for any Subsidiary Guarantor in respect of any
Excess Payment made by any other Subsidiary Guarantor, the ratio (expressed as a
percentage) as of the date of such Excess Payment of (i) the amount by which the
aggregate present fair salable value of all of its assets and properties exceeds
the amount of all debts and liabilities of such Subsidiary Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Subsidiary Guarantor hereunder) to (ii) the amount by
which the aggregate present fair salable value of all assets and other
properties of the Credit Parties other than the maker of such Excess Payment
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Credit Parties) of the Credit Parties other than the maker of
such Excess Payment; provided, however, that, for purposes of calculating the
Contribution
52
54
Shares of the Subsidiary Guarantors in respect of any Excess Payment, any
Subsidiary Guarantor that became a Subsidiary Guarantor subsequent to the date
of any such Excess Payment shall be deemed to have been a Subsidiary Guarantor
on the date of such Excess Payment and the financial information for such
Subsidiary Guarantor as of the date such Subsidiary Guarantor became a
Subsidiary Guarantor shall be utilized for such Subsidiary Guarantor in
connection with such Excess Payment. This Section 4.6 shall not be deemed to
affect any right of subrogation, indemnity, reimbursement or contribution that
any Subsidiary Guarantor may have under applicable law against the Borrower in
respect of any payment of Guaranteed Obligations.
4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE.
The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement and
to make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit, whichever shall occur first, shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
(a) Executed Credit Documents. Receipt by the
Administrative Agent of duly executed copies of: (i) this Credit
Agreement, (ii) the Notes and (iii) all other Credit Documents, each in
form and substance acceptable to the Administrative Agent in its sole
discretion.
(b) Corporate Documents. Receipt by the Administrative
Agent of the following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation, certificate of formation or
other charter documents of each Credit Party certified to be
true and complete as of a recent date by the appropriate
Governmental Authority of the state or other jurisdiction of
its incorporation and certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of
the Closing Date.
(ii) Bylaws. A copy of the bylaws or operating
agreement of each Credit Party certified by a secretary or
assistant secretary of such Credit Party to be true and
correct as of the Closing Date.
53
55
(iii) Resolutions. Copies of resolutions of the
Board of Directors of each Credit Party approving and adopting
the Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Closing Date.
(iv) Good Standing. Copies of certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing could
have a Material Adverse Effect.
(v) Incumbency. An incumbency certificate of
each Credit Party certified by a secretary or assistant
secretary to be true and correct as of the Closing Date.
(c) Financial Statements. Receipt by the Administrative
Agent of (i) unaudited consolidated financial statements of the
Consolidated Parties, prepared in accordance with GAAP as of the fiscal
quarter ending September 24, 2000 for the fiscal quarter ending as of
such date and (ii) such other information relating to the Borrower and
its Subsidiaries as the Administrative Agent may reasonably require in
connection with the structuring and syndication of credit facilities of
the type described herein.
(d) Opinions of Counsel. The Administrative Agent shall
have received a legal opinion in form and substance reasonably
satisfactory to the Administrative Agent dated as of the Closing Date
from counsel to the Credit Parties.
(e) Material Adverse Effect. No material adverse change
shall have occurred since June 25, 2000 in the condition (financial or
otherwise), business, assets, liabilities, operations, management or
prospects of the Consolidated Parties taken as a whole.
(f) Litigation. There shall not exist any pending or
threatened action, suit, investigation or proceeding against a
Consolidated Party that could have a Material Adverse Effect.
(g) Officer's Certificates. The Administrative Agent
shall have received a certificate or certificates executed by the chief
financial officer of the Borrower as of the Closing Date stating that
(A) each Credit Party is in compliance with all existing financial
obligations, (B) all governmental, shareholder and third party consents
and approvals, if any, with respect to the Credit Documents and the
transactions contemplated thereby have been obtained, (C) no action,
suit, investigation or proceeding is pending or threatened in any court
or before any arbitrator or governmental instrumentality that purports
to affect any Credit Party or any transaction contemplated by the
Credit
54
56
Documents, if such action, suit, investigation or proceeding could have
a Material Adverse Effect, and (D) immediately after giving effect to
this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (1) each of
the Credit Parties is Solvent, (2) no Default or Event of Default
exists, (3) all representations and warranties contained herein and in
the other Credit Documents are true and correct in all material
respects, and (4) the Credit Parties are in compliance with each of the
financial covenants set forth in Section 7.11.
(h) Fees and Expenses. Payment by the Credit Parties of
all fees and expenses owed by them to the Lenders and the
Administrative Agent, including, without limitation, payment to the
Administrative Agent of the fees set forth in the Fee Letter.
(i) Other. Receipt by the Lenders of such other
documents, instruments, agreements or information as reasonably
requested by any Lender, including, but not limited to, information
regarding litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), real estate leases, material
contracts, debt agreements, property ownership and contingent
liabilities of the Consolidated Parties.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligations of each Lender to make, convert or extend any Loan and
of the Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to satisfaction of
the following conditions in addition to satisfaction on the Closing Date of the
conditions set forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of
any Revolving Loan, an appropriate Notice of Borrowing or Notice of
Extension/Conversion or (ii) in the case of any Letter of Credit, the
Issuing Lender shall have received an appropriate request for issuance
in accordance with the provisions of Section 2.2(b);
(b) The representations and warranties set forth in
Section 6 shall, subject to the limitations set forth therein, be true
and correct in all material respects as of such date (except for those
which expressly relate to an earlier date);
(c) There shall not have been commenced against any
Consolidated Party an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
for the winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded;
(d) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto;
55
57
(e) No circumstances, events or conditions shall have
occurred since June 25, 2000 which would have a Material Adverse
Effect; and
(f) Immediately after giving effect to the making of such
Loan (and the application of the proceeds thereof) or to the issuance
of such Letter of Credit, as the case may be, (i) the sum of the
aggregate principal amount of outstanding Revolving Loans plus LOC
Obligations outstanding plus outstanding Swingline Loans shall not
exceed the Revolving Committed Amount and (ii) the LOC Obligations
shall not exceed the LOC Committed Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit pursuant to Section 2.2(b) shall
constitute a representation and warranty by the Credit Parties of the
correctness of the matters specified in subsections (b), (c), (d), (e) and (f)
above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Administrative Agent and
each Lender that:
6.1 FINANCIAL CONDITION.
The financial statements delivered to the Lenders pursuant to Section
5.1(c) and Section 7.1(a) and (b), (i) have been prepared in accordance with
GAAP and (ii) present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated and consolidating financial condition,
results of operations and cash flows of the Consolidated Parties as of such date
and for such periods.
6.2 NO MATERIAL CHANGE.
Since June 25, 2000, (a) there has been no development or event
relating to or affecting a Consolidated Party which has had or could have a
Material Adverse Effect and (b) except as otherwise permitted under this Credit
Agreement, no dividends or other distributions have been declared, paid or made
upon the Capital Stock in a Consolidated Party nor has any of the Capital Stock
in a Consolidated Party been redeemed, retired, purchased or otherwise acquired
for value.
6.3 ORGANIZATION AND GOOD STANDING; COMPLIANCE WITH LAW.
Each of the Consolidated Parties (a) is duly organized, validly
existing and is in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the requisite power and authority, and
the legal right, to own and operate all its property, to lease the
56
58
property it operates as lessee and to conduct the business in which it is
currently engaged and (c) is duly qualified to conduct business and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except to the extent that the failure to so qualify or be in good standing could
not reasonably be expected to have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party. This Credit Agreement has been, and each other Credit
Document to which any Credit Party is a party will be, duly executed and
delivered on behalf of the Credit Parties. This Credit Agreement constitutes,
and each other Credit Document to which any Credit Party is a party when
executed and delivered will constitute, a legal, valid and binding obligation of
such Credit Party enforceable against such party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any indenture, loan agreement, mortgage, deed of
trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, the violation of which could have a Material Adverse
Effect, or (d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Credit Documents) upon or with
respect to its properties.
57
59
6.6 NO DEFAULT.
No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture, mortgage, security agreement or other
agreement or obligation to which it is a party or by which any of its properties
is bound which default could have a Material Adverse Effect. No Default or Event
of Default has occurred or exists except as previously disclosed in writing to
the Lenders.
6.7 OWNERSHIP.
Each Consolidated Party is the owner of, and has good and marketable
title to, all of its respective assets and none of such assets is subject to any
Lien other than Permitted Liens.
6.8 INDEBTEDNESS.
Except as otherwise permitted under Section 8.1, the Consolidated
Parties have no Indebtedness.
6.9 LITIGATION.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against any Consolidated Party which might have a Material Adverse
Effect.
6.10 TAXES.
Each Consolidated Party has filed, or caused to be filed, all tax
returns (federal, state, local and foreign) required to be filed and paid (a)
all amounts of taxes shown thereon to be due (including interest and penalties)
and (b) all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP. No
Credit Party is aware as of the Closing Date of any proposed tax assessments
against it or any Consolidated Party.
6.11 COMPLIANCE WITH LAW.
Each Consolidated Party is in compliance with all Requirements of Law
and all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could not have a Material Adverse Effect.
58
60
6.12 ERISA.
Except as would not have or reasonably be expected to have a Material
Adverse Effect:
(a) During the five-year period prior to the date on
which this representation is made or deemed made: (i) no ERISA Event
has occurred, and, to the best knowledge of the Credit Parties, no
event or condition has occurred or exists as a result of which any
ERISA Event could reasonably be expected to occur, with respect to any
Plan; (ii) no "accumulated funding deficiency," as such term is defined
in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, has occurred with respect to any Plan; (iii) each Plan has been
maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Code, and any
other applicable federal or state laws; and (iv) no lien in favor of
the PBGC or a Plan has arisen or is reasonably likely to arise on
account of any Plan.
(b) The actuarial present value of all "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or
not vested, under each Single Employer Plan, as of the last annual
valuation date prior to the date on which this representation is made
or deemed made (determined, in each case, in accordance with Financial
Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value
of the assets of such Plan.
(c) Neither any Consolidated Party nor any ERISA
Affiliate has incurred, or, to the best knowledge of the Credit
Parties, could be reasonably expected to incur, any withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer
Plan. Neither any Consolidated Party nor any ERISA Affiliate would
become subject to any withdrawal liability under ERISA if any
Consolidated Party or any ERISA Affiliate were to withdraw completely
from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. Neither any Consolidated Party
nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the
Credit Parties, reasonably expected to be in reorganization, insolvent,
or terminated.
(d) No prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility has occurred with respect to a Plan which has
subjected or may subject any Consolidated Party or any ERISA Affiliate
to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such
liability.
59
61
(e) Neither any Consolidated Party nor any ERISA
Affiliates has any material liability with respect to "expected
post-retirement benefit obligations" within the meaning of the
Financial Accounting Standards Board Statement 106. Each Plan which is
a welfare plan (as defined in Section 3(1) of ERISA) to which Sections
601-609 of ERISA and Section 4980B of the Code apply has been
administered in compliance in all material respects of such sections.
(f) Neither the execution and delivery of this Credit
Agreement nor the consummation of the financing transactions
contemplated thereunder will involve any transaction which is subject
to the prohibitions of Sections 404, 406 or 407 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975
of the Code. The representation by the Credit Parties in the preceding
sentence is made in reliance upon and subject to the accuracy of the
Lenders' representation in Section 11.15 with respect to their source
of funds and is subject, in the event that the source of the funds used
by the Lenders in connection with this transaction is an insurance
company's general asset account, to the application of Prohibited
Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995),
compliance with the regulations issued under Section 401(c)(1)(A) of
ERISA, or the issuance of any other prohibited transaction exemption or
similar relief, to the effect that assets in an insurance company's
general asset account do not constitute assets of an "employee benefit
plan" within the meaning of Section 3(3) of ERISA of a "plan" within
the meaning of Section 4975(e)(1) of the Code.
6.13 SUBSIDIARIES.
Set forth on Schedule 6.13 is a complete and accurate list of all
Subsidiaries of each Consolidated Party.
6.14 GOVERNMENTAL REGULATIONS, ETC.
(a) No part of the Letters of Credit or proceeds of the
Loans will be used, directly or indirectly, in any manner that would
constitute a violation of Regulation T, Regulation U or Regulation X.
"Margin stock" within the meaning of Regulation U does not constitute
more than 25% of the value of the consolidated assets of the
Consolidated Parties. None of the transactions contemplated by this
Credit Agreement (including, without limitation, the direct or indirect
use of the proceeds of the Loans) will violate or result in a violation
of the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or regulations issued pursuant thereto, or
Regulation T, U or X. If requested by any Lender or Administrative
Agent, the Borrower will furnish to the Administrative Agent and each
Lender a statement to the effect of the foregoing sentences in
conformity with the requirements of FR Form U-1 referred to in
Regulation U.
60
62
(b) No Consolidated Party is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act
or the Investment Company Act of 1940, each as amended. In addition, no
Consolidated Party is (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as
amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(c) No director, executive officer or principal
shareholder of any Consolidated Party is a director, executive officer
or principal shareholder of any Lender. For the purposes hereof the
terms "director", "executive officer" and "principal shareholder" (when
used with reference to any Lender) have the respective meanings
assigned thereto in Regulation O issued by the Board of Governors of
the Federal Reserve System.
(d) Each Consolidated Party has obtained and holds in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of
way and other rights, consents and approvals which are necessary for
the ownership of its respective Property and to the conduct of its
respective businesses as presently conducted.
(e) No Consolidated Party is in violation of any
applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or any other
jurisdiction, or of any agency thereof (including without limitation,
environmental laws and regulations), which violation could have a
Material Adverse Effect.
(f) Each Consolidated Party is current with all material
reports and documents, if any, required to be filed with any state or
federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT.
The proceeds of the Loans hereunder shall be used solely by the
Borrower (i) for working capital, (ii) to make Consolidated Capital
Expenditures, (iii) for general corporate purposes, (iv) to refinance existing
Indebtedness of the Borrower and (v) to make Permitted Acquisitions. The Letters
of Credit shall be used only for or in connection with appeal bonds,
reimbursement obligations arising in connection with surety and reclamation
bonds, reinsurance, domestic or international trade transactions and obligations
not otherwise aforementioned relating to transactions entered into by the
applicable account party in the ordinary course of business.
61
63
6.16 ENVIRONMENTAL MATTERS.
(a) Each of the facilities and properties owned, leased
or operated by the Consolidated Parties (the "Properties") and all
operations at the Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law
with respect to the Properties or the businesses operated by the
Consolidated Parties (the "Businesses"), and there are no conditions
relating to the Businesses or Properties that could give rise to
liability under any applicable Environmental Laws.
(b) None of the Properties contains, or has previously
contained, any Materials of Environmental Concern at, on or under the
Properties in amounts or concentrations that constitute or constituted
a violation of, or could give rise to liability under, Environmental
Laws.
(c) No Consolidated Party has received any written or
verbal notice of, or inquiry from any Governmental Authority regarding,
any violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the
Businesses, nor does any Consolidated Party have knowledge or reason to
believe that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties, or generated, treated,
stored or disposed of at, on or under any of the Properties or any
other location, in each case by or on behalf of any Consolidated Party
in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or
administrative action is pending or, to the best knowledge of any
Credit Party, threatened, under any Environmental Law to which any
Consolidated Party is or will be named as a party, nor are there any
consent decrees or other decrees, consent orders, administrative orders
or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the
Consolidated Parties, the Properties or the Businesses.
(f) There has been no release, or threat of release, of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations (including, without
limitation, disposal) of any Consolidated Party in connection with the
Properties or otherwise in connection with the Businesses, in violation
of or in amounts or in a manner that could give rise to liability under
Environmental Laws.
62
64
6.17 INTELLECTUAL PROPERTY.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use could not have a Material Adverse Effect. No claim has been asserted and
is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Credit Party know of any such claim, and to the Credit
Parties' knowledge the use of such Intellectual Property by any Consolidated
Party does not infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, could not have a Material Adverse Effect.
6.18 SOLVENCY.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.
6.19 INVESTMENTS.
All Investments of each Consolidated Party are Permitted Investments.
6.20 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.21 NO BURDENSOME RESTRICTIONS.
No Consolidated Party is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
6.22 BROKERS' FEES.
None of the Borrower or any of its Subsidiaries has any obligation to
any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents.
63
65
6.23 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party, and none of the Consolidated
Parties (a) has suffered any strikes, walkouts, work stoppages or other material
labor difficulty within the last five years, or (b) has knowledge of any
potential or pending strike, walkout or work stoppage.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 FINANCIAL STATEMENTS.
The Credit Parties will furnish, or cause to be furnished, to the
Administrative Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available,
and in any event within 90 days after the close of each fiscal year of
the Consolidated Parties, (i) the consolidated balance sheet and income
statement of the Consolidated Parties, as of the end of such fiscal
year, together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal year, setting forth
in comparative form consolidated figures for the preceding fiscal year
and (ii) a balance sheet and income statement of UTP, as of the end of
such fiscal year, all such financial information described above to be
in reasonable form and detail and audited by independent certified
public accountants of recognized national standing reasonably
acceptable to the Administrative Agent and whose opinion shall be to
the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available,
and in any event within 45 days after the close of each fiscal quarter
of the Consolidated Parties (other than the fourth fiscal quarter, in
which case 90 days after the end thereof), (i) a consolidated balance
sheet and income statement of the Consolidated Parties, as of the end
of such fiscal quarter, together with related consolidated statements
of operations and retained earnings and of cash flows for such fiscal
quarter, in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year and
(ii) a balance sheet and income statement of UTP, as of the end of such
fiscal quarter, all such financial information described above to be in
reasonable form and
64
66
detail and reasonably acceptable to the Administrative Agent, and
accompanied by a certificate of the chief financial officer of the
Borrower to the effect that such quarterly financial statements fairly
present in all material respects the financial condition of the
Consolidated Parties and have been prepared in accordance with GAAP,
subject to changes resulting from audit and normal year-end audit
adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit 7.1(c), (i) demonstrating
compliance with the financial covenants contained in Section 7.11 by
calculation thereof as of the end of each such fiscal period, (ii)
containing a calculation of Consolidated Net Tangible Assets as of the
end of each such fiscal period and (iii) stating that no Default or
Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Credit Parties propose to take with respect thereto.
(d) Accountant's Certificate. Within the period for
delivery of the annual financial statements provided in Section 7.1(a),
a certificate of the accountants conducting the annual audit stating
that they have reviewed this Credit Agreement and stating further
whether, in the course of their audit, they have become aware of any
Default or Event of Default and, if any such Default or Event of
Default exists, specifying the nature and extent thereof.
(e) Auditor's Reports. Promptly upon receipt thereof, a
copy of any other report or "management letter" submitted by
independent accountants to any Consolidated Party in connection with
any annual, interim or special audit of the books of such Person.
(f) Reports. Promptly upon request of the Administrative
Agent, (i) copies of any filings and registrations with, and reports to
or from, the Securities and Exchange Commission, or any successor
agency, and copies of all financial statements, proxy statements,
notices and reports as any Consolidated Party shall send to its
shareholders or to a holder of any Indebtedness owed by any
Consolidated Party in its capacity as such a holder and (ii) upon the
request of the Administrative Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(g) Notices. Upon obtaining knowledge thereof, the Credit
Parties will give written notice to the Administrative Agent
immediately of (i) the occurrence of an event or condition consisting
of a Default or Event of Default, specifying the nature and existence
thereof and what action the Credit Parties propose to take with respect
thereto, and (ii) the occurrence of any of the following with respect
to any Consolidated Party (A) the pendency or commencement of any
litigation, arbitral or governmental
65
67
proceeding against such Person which if adversely determined is likely
to have a Material Adverse Effect, (B) the institution of any
proceedings against such Person with respect to, or the receipt of
notice by such Person of potential liability or responsibility for
violation, or alleged violation of any federal, state or local law,
rule or regulation, including but not limited to, Environmental Laws,
the violation of which could have a Material Adverse Effect, or (C) any
notice or determination concerning the imposition of any withdrawal
liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan.
(h) ERISA. Upon obtaining knowledge thereof, the Credit
Parties will give written notice to the Administrative Agent promptly
(and in any event within five business days) of: (i) of any event or
condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, an ERISA Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against the
Credit Parties or any ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the
meaning of Title IV of ERISA); (iii) the failure to make full payment
on or before the due date (including extensions) thereof of all amounts
which any Consolidated Party or any ERISA Affiliate is required to
contribute to each Plan pursuant to its terms and as required to meet
the minimum funding standard set forth in ERISA and the Code with
respect thereto; or (iv) any change in the funding status of any Plan
that could have a Material Adverse Effect, together with a description
of any such event or condition or a copy of any such notice and a
statement by the chief financial officer of the Borrower briefly
setting forth the details regarding such event, condition, or notice,
and the action, if any, which has been or is being taken or is proposed
to be taken by the Credit Parties with respect thereto. Promptly upon
request, the Credit Parties shall furnish the Administrative Agent and
the Lenders with such additional information concerning any Plan as may
be reasonably requested, including, but not limited to, copies of each
annual report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(i) Environmental. The Consolidated Parties will conduct
and complete all investigations, studies, sampling, and testing and all
remedial, removal, and other actions necessary to address all Materials
of Environmental Concern on, from or affecting any of the Properties to
the extent necessary to be in compliance with all Environmental Laws
and with the validly issued orders and directives of all Governmental
Authorities with jurisdiction over such Properties to the extent any
failure could have a Material Adverse Effect.
(j) Other Information. With reasonable promptness upon
any such request, such other information regarding the business,
properties or financial condition of any
66
68
Consolidated Party as the Administrative Agent or the Required Lenders
may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Except as otherwise permitted by Section 8.4, each Credit Party will,
and will cause each of its Subsidiaries to, do all things necessary to preserve
and keep in full force and effect its existence, rights, franchises and
authority.
7.3 BOOKS AND RECORDS.
Each Credit Party will, and will cause each of its Subsidiaries to,
keep complete and accurate books and records of its transactions in accordance
with good accounting practices on the basis of GAAP (including the establishment
and maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities (including without
limitation ERISA), applicable to it and its Property if noncompliance with any
such law, rule, regulation, order or restriction could have a Material Adverse
Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that no Consolidated
Party shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could have
a Material Adverse Effect.
7.6 INSURANCE.
Each Credit Party will, and will cause each of its Subsidiaries to, at
all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice.
67
69
7.7 MAINTENANCE OF PROPERTY.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 PERFORMANCE OF OBLIGATIONS.
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
7.9 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans and will use the
Letters of Credit solely for the purposes set forth in Section 6.15.
7.10 AUDITS/INSPECTIONS.
Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Administrative Agent or any Lender, including, without
limitation, independent accountants, agents, attorneys, and appraisers to visit
and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Administrative
Agent or its representatives or any Lender or its representatives to investigate
and verify the accuracy of information provided to the Lenders and to discuss
all such matters with the officers, employees and representatives of such
Person.
7.11 FINANCIAL COVENANTS.
(i) Interest Coverage Ratio. The Interest Coverage Ratio,
as of the last day of each fiscal quarter of the Borrower, shall be
greater than or equal to 2.5 to 1.0;
(ii) Leverage Ratio. The Leverage Ratio, as of the last
day of each fiscal quarter of the Borrower occurring during each of the
periods set forth below, shall be less than or equal to:
68
70
Period Ratio
------ -----
From the Closing Date through December 28, 2002 3.25 to 1.0
From December 29, 2002 and thereafter 2.75 to 1.0
(iii) Consolidated Tangible Net Worth. At all times
Consolidated Tangible Net Worth shall be greater than or equal to the
sum of (a) $393,914,141, increased on a cumulative basis as of the end
of each fiscal quarter of the Borrower, commencing with the fiscal
quarter ending September 24, 2000 by an amount equal to 50% of
Consolidated Net Income for the fiscal quarter then ended (without
deductions for any losses) plus 100% of the Net Cash Proceeds from any
Equity Issuance subsequent to the Closing Date.
7.12 ADDITIONAL CREDIT PARTIES.
(a) As soon as practicable and in any event within 30
days after any Person becomes a Subsidiary of any Credit Party, the
Borrower shall provide the Administrative Agent with written notice
thereof and shall (except with respect to any SPE) if such Person is a
Domestic Subsidiary of a Credit Party, cause such Person to execute a
Joinder Agreement in substantially the same form as Exhibit 7.12 and
cause such Person to deliver such other documentation as the
Administrative Agent may reasonably request in connection with the
foregoing, including, without limitation, certified resolutions and
other organizational and authorizing documents of such Person, and
favorable opinions of counsel to such Person all in form, content and
scope reasonably satisfactory to the Administrative Agent.
(b) If Unifi Technology becomes a Material Subsidiary, as
soon as practicable and in any event within 30 days after Unifi
Technology becomes a Material Subsidiary, the Borrower shall provide
the Administrative Agent with written notice thereof and shall cause
Unifi Technology to execute a Joinder Agreement in substantially the
same form as Exhibit 7.12 and cause Unifi Technology to deliver such
other documentation as the Administrative Agent may reasonably request
in connection with the foregoing, including, without limitation,
certified resolutions and other organizational and authorizing
documents of Unifi Technology, and favorable opinions of counsel to
Unifi Technology all in form, content and scope reasonably satisfactory
to the Administrative Agent.
7.13 ENVIRONMENTAL LAWS.
(a) The Consolidated Parties shall comply in all material
respects with, and take reasonable actions to ensure compliance in all
material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material
respects with and maintain, and take reasonable actions to ensure that
all tenants
69
71
and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws except to the
extent that failure to do so would not reasonably be expected to have a
Material Adverse Effect;
(b) The Consolidated Parties shall conduct and complete
all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws and
promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws
except to the extent that the same are being contested in good faith by
appropriate proceedings and the failure to do or the pendency of such
proceedings would not reasonably be expected to have a Material Adverse
Effect; and
(c) The Credit Parties shall defend, indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective
employees, agents, officers and directors, from and against any and all
claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental
Law applicable to the operations of the Borrower or any of its
Subsidiaries or the Properties, or any orders, requirements or demands
of Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this paragraph shall
survive repayment of the Loans and all other amounts payable hereunder,
and termination of the Commitments.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this
Credit Agreement is in effect or any amounts payable hereunder or under any
other Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 INDEBTEDNESS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and
the other Credit Documents;
70
72
(b) purchase money Indebtedness (including obligations in
respect of Capital Leases or Synthetic Leases) hereafter incurred by
the Borrower to finance the purchase of fixed assets provided that (i)
the total of all such Indebtedness (including any such Indebtedness
referred to in subsection (b) above) shall not exceed an aggregate
principal amount of $50,000,000 at any one time outstanding; (ii) such
Indebtedness when incurred shall not exceed the purchase price of the
asset(s) financed; and (iii) no such Indebtedness shall be refinanced
for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing;
(c) obligations of the Borrower in respect of Hedging
Agreements entered into in order to manage existing or anticipated
interest rate or exchange rate risks and not for speculative purposes;
(d) Indebtedness owing from (i) one Credit Party (other
than UTP) to another Credit Party and (ii) UTP to Unifi Manufacturing
in an amount not to exceed $20,000,000 in the aggregate at any one
time;
(e) other unsecured Indebtedness of the Subsidiaries of
the Borrower (other than UTP) in an amount not to exceed $20,000,000 in
the aggregate at any one time;
(f) non-recourse Indebtedness and obligations (and
recourse Indebtedness and obligations related to covenants, indemnities
and performance guarantees and undertakings customary in receivables
financings) of the Consolidated Parties in connection with
Securitization Transactions; provided that the Attributed Principal
Amount for all such Securitization Transactions entered into by the
Consolidated Parties shall not exceed $100,000,000 in the aggregate at
any one time;
(g) Indebtedness of the Borrower arising under the
Indenture in an aggregate principal amount not to exceed $250,000,000
at any one time during the term of this Credit Agreement and renewals
and refinancings thereof on terms and conditions no less favorable to
the Credit Parties than the terms and conditions contained in the
Indenture and in a principal amount not in excess of the principal
balance outstanding under the Indenture at the time of such
refinancing; and
(h) other unsecured Indebtedness of the Borrower in an
amount not to exceed $50,000,000 in the aggregate at any one time.
8.2 LIENS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property (other than any "margin stock" within the meaning of Regulation U),
whether now owned or after acquired, except for Permitted Liens.
71
73
8.3 NATURE OF BUSINESS.
The Credit Parties will not permit any Consolidated Party to
substantively alter the character or conduct of the business conducted by such
Person as of the Closing Date.
8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC.
The Credit Parties will not permit any Consolidated Party to enter into
any transaction of merger or consolidation or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution); provided that,
notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower
may merge or consolidate with any of its Subsidiaries provided that the Borrower
shall be the continuing or surviving corporation and (ii) after giving effect to
such transaction, no Default or Event of Default exists, (b) any Credit Party
other than the Borrower may merge or consolidate with any other Credit Party
other than the Borrower provided that after giving effect to such transaction,
no Default or Event of Default exists, (c) any Consolidated Party which is not a
Credit Party may be merged or consolidated with or into any Credit Party
provided that (i) such Credit Party shall be the continuing or surviving
corporation and (ii) after giving effect to such transaction, no Default or
Event of Default exists, (d) any Consolidated Party which is not a Credit Party
may be merged or consolidated with or into any other Consolidated Party which is
not a Credit Party provided that, after giving effect to such transaction, no
Default or Event of Default exists and (e) any Immaterial Subsidiary of the
Borrower may dissolve itself so long as (i) the assets of such Immaterial
Subsidiary are transferred to another Credit Party prior to such dissolution and
(ii) the Borrower provides the Administrative Agent with written notice of such
dissolution within five (5) Business Days of the occurrence of such dissolution.
8.5 ASSET DISPOSITIONS.
The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition other than (a) the sale of inventory in the ordinary course of
business for fair consideration, (b) the sale or disposition of machinery and
equipment no longer used or useful in the conduct of such Person's business, (c)
the sale, transfer or other disposition of account receivables pursuant to any
Securitization Transaction permitted by Section 8.1(f), (d) other sales of
assets during the term of this Credit Agreement having an aggregate fair market
value less than an amount equal to 10% of Total Assets of the Consolidated
Parties, (e) the sale, transfer or other disposition of "margin stock" within
the meaning of Regulation U, (f) the sale or transfer by the Borrower or another
Credit Party of the capital stock of any SPE to the Borrower or another Credit
Party and (g) the sale or transfer by any Consolidated Party which is not a
Credit Party of the capital stock of any SPE to another Consolidated Party which
is not a Credit Party.
8.6 INVESTMENTS.
The Credit Parties will not permit any Consolidated Party to make
Investments in or to any Person, except for Permitted Investments.
72
74
8.7 RESTRICTED PAYMENTS.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment; provided, however, (a) any Subsidiary of the Borrower may
make dividends or other distributions to the Borrower or any Subsidiary of the
Borrower which is the parent company of such Subsidiary, (b) from the Closing
Date through December 28, 2002, any Consolidated Party may make a Restricted
Payment so long as (i) the Leverage Ratio, as of the fiscal quarter most
recently ending, is less than or equal to 3.0 to 1.0, (ii) no Default or Event
of Default shall exist immediately prior to or after giving effect thereto and
(iii) the Borrower shall have a Senior Debt Rating of at least BBB- at the time
of such Restricted Payment and (c) from December 29, 2002 and thereafter, any
Consolidated Party may make a Restricted Payment so long as (i) no Default or
Event of Default shall exist immediately prior to or after giving effect thereto
and (ii) the Borrower shall have a Senior Debt Rating of at least BBB- at the
time of such Restricted Payment.
8.8 PREPAYMENTS OF INDEBTEDNESS, ETC.
(a) Other than with respect to Indebtedness arising under
this Credit Agreement and the other Credit Documents, the Credit
Parties will not permit any Consolidated Party to, after the issuance
thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness if such amendment or modification
would add or change any terms in a manner adverse to the issuer of such
Indebtedness, or shorten the final maturity or average life to maturity
or require any payment to be made sooner than originally scheduled or
increase the interest rate applicable thereto or change any
subordination provision thereof.
(b) Other than with respect to Indebtedness arising under
this Credit Agreement and the other Credit Documents, the Credit
Parties will not permit any Consolidated Party to, during the existence
of a Default or Event of Default, or if a Default or Event of Default
would be caused as a result thereof, make (or give any notice with
respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including without limitation,
by way of depositing money or securities with the trustee with respect
thereto before due for the purpose of paying when due), refund,
refinance or exchange of any Indebtedness.
8.9 TRANSACTIONS WITH AFFILIATES.
The Credit Parties will not permit any Consolidated Party to enter into
or permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Person other than (a)
normal compensation and reimbursement of expenses of officers and directors, (b)
transactions permitted by Section 8.1 and (c) except as otherwise specifically
limited in this Credit Agreement, other transactions which are entered into in
the ordinary course of such Person's business on terms and conditions
substantially as favorable to
73
75
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate.
8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Credit Parties will not permit any Consolidated Party to (a) change
its fiscal year or (b) amend, modify or change its articles of incorporation,
certificate of formation (or corporate charter or other similar organizational
document) or bylaws, operating agreement (or other similar document) in a manner
that would adversely affect the rights of the Lenders.
8.11 LIMITATION ON RESTRICTED ACTIONS.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor pursuant to the Credit Documents or any renewals, refinancings,
exchanges, refundings or extension thereof, except (in respect of any of the
matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement and the
other Credit Documents, (ii) applicable law, (iii) any document or instrument
governing Indebtedness incurred pursuant to Section 8.1(b), provided that any
such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith, (iv) the Indenture or (v) any
document or instrument governing any Securitization Transaction permitted under
Section 8.1(f), but only to the extent that (A) such restriction relates only to
the applicable accounts receivables actually sold, conveyed or otherwise
contributed pursuant to such Securitization Transaction or (B) such restriction
becomes effective only upon the occurrence of certain triggering events
customary in receivables financings.
8.12 NO FURTHER NEGATIVE PLEDGES.
The Credit Parties will not permit any Consolidated Party to enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation,
except (a) pursuant to this Credit Agreement and the other Credit Documents, (b)
pursuant to any document or instrument governing Indebtedness incurred pursuant
to Section 8.1(b), provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith, (c)
pursuant to the Indenture or (d) pursuant to any document or instrument
governing any Securitization Transaction permitted under Section 8.1(f), but
only to the extent that such restriction relates only to the applicable accounts
receivables actually sold, contributed or otherwise conveyed pursuant to such
Securitization Transaction.
74
76
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any
principal of any of the Loans or of any reimbursement
obligations arising from drawings under Letters of Credit, or
(ii) default, and such default shall continue for
five (5) or more Business Days, in the payment when due of any
interest on the Loans or on any reimbursement obligations
arising from drawings under Letters of Credit, or of any Fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or
statement made or deemed to be made by any Credit Party herein, in any
of the other Credit Documents, or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall
prove untrue in any material respect on the date as of which it was
deemed to have been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or observance
of any term, covenant or agreement contained in Sections 7.2,
7.4, 7.9, 7.11 or 7.13, or 8.1 through 8.12, inclusive;
(ii) default in the due performance or observance
of any term, covenant or agreement contained in Sections
7.1(a), (b), (c) or (d) and such default shall continue
unremedied for a period of at least 5 days after the earlier
of a responsible officer of a Credit Party becoming aware of
such default or notice thereof by the Administrative Agent; or
(iii) default in the due performance or observance
by it of any term, covenant or agreement (other than those
referred to in subsections (a), (b), (c)(i) or (c)(ii) of this
Section 9.1) contained in this Credit Agreement and such
default
75
77
shall continue unremedied for a period of at least 30 days
after the earlier of a responsible officer of a Credit Party
becoming aware of such default or notice thereof by the
Administrative Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall
default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents (subject to applicable
grace or cure periods, if any), or (ii) except as a result of or in
connection with a merger of a Subsidiary permitted under Section 8.4,
any Credit Document shall fail to be in full force and effect or to
give the Administrative Agent and/or the Lenders the Liens, rights,
powers and privileges purported to be created thereby, or any Credit
Party shall so state in writing; or
(e) Guaranties. Except as the result of or in connection
with a merger of a Subsidiary permitted under Section 8.4, the guaranty
given by any Guarantor hereunder or under the Guaranty Agreement
(including any Additional Credit Party) or any provision under any such
guaranty shall cease to be in full force and effect, or any Guarantor
(including any Additional Credit Party) hereunder or under the Guaranty
Agreement or any Person acting by or on behalf of such Guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty, or
any Guarantor shall default in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed
pursuant to any guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur
with respect to any Consolidated Party; or
(g) Defaults under Other Agreements.
(i) Any Consolidated Party shall default in the
performance or observance (beyond the applicable grace period
with respect thereto, if any) of any material obligation or
condition of any contract or lease material to the
Consolidated Parties, taken as a whole; or
(ii) With respect to any Indebtedness (other than
Indebtedness outstanding under this Credit Agreement) in
excess of $10,000,000 in the aggregate for the Consolidated
Parties taken as a whole, (A) any Consolidated Party shall (1)
default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such
Indebtedness, or (2) the occurrence and continuance of a
default in the observance or performance relating to such
Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee
or agent on behalf of such holders) to cause (determined
without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its
stated
76
78
maturity; or (B) any such Indebtedness shall be declared due
and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated
maturity thereof; or
(h) Judgments. One or more judgments or decrees shall be
entered against one or more of the Consolidated Parties involving a
liability of $10,000,000 or more in the aggregate (to the extent not
paid or fully covered by insurance provided by a carrier who has
acknowledged coverage and has the ability to perform) and any such
judgments or decrees shall not have been vacated, discharged or stayed
or bonded pending appeal within 30 days from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if
such event or condition could have a Material Adverse Effect: (i) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of any Consolidated Party or any ERISA Affiliate in favor of the PBGC
or a Plan; (ii) an ERISA Event shall occur with respect to a Single
Employer Plan, which is, in the reasonable opinion of the
Administrative Agent, likely to result in the termination of such Plan
for purposes of Title IV of ERISA; (iii) an ERISA Event shall occur
with respect to a Multiemployer Plan or Multiple Employer Plan, which
is, in the reasonable opinion of the Administrative Agent, likely to
result in (A) the termination of such Plan for purposes of Title IV of
ERISA, or (B) any Consolidated Party or any ERISA Affiliate incurring
any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within
the meaning of Section 4245 of ERISA) such Plan; or (iv) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975
of the Code) or breach of fiduciary responsibility shall occur which
may subject any Consolidated Party or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any person against any such
liability; or
(j) Ownership. There shall occur a Change of Control.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Administrative Agent shall, upon the request and direction of
the Required Lenders, by written notice to the Credit Parties, take any of the
following actions:
77
79
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Administrative Agent and/or any of the Lenders hereunder
to be due whereupon the same shall be immediately due and payable
without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Credit Parties.
(c) Cash Collateral. Direct the Credit Parties to pay
(and the Credit Parties agree that upon receipt of such notice, or upon
the occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Administrative Agent additional cash, to be
held by the Administrative Agent, for the benefit of the Lenders, in a
cash collateral account as additional security for the LOC Obligations
in respect of subsequent drawings under all then outstanding Letters of
Credit in an amount equal to the maximum aggregate amount which may be
drawn under all Letters of Credits then outstanding.
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents including
without limitation, all rights and remedies against a Guarantor and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(f) shall occur with respect to the Borrower, then the Commitments
shall automatically terminate and all Loans, all reimbursement obligations
arising from drawings under Letters of Credit, all accrued interest in respect
thereof, all accrued and unpaid Fees and other indebtedness or obligations owing
to the Administrative Agent and/or any of the Lenders hereunder automatically
shall immediately become due and payable without the giving of any notice or
other action by the Administrative Agent or the Lenders.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT, POWERS AND IMMUNITIES.
Each Lender hereby irrevocably appoints and authorizes the
Administrative Agent to act as its agent under this Credit Agreement and the
other Credit Documents with such powers and discretion as are specifically
delegated to the Administrative Agent by the terms of this Credit Agreement and
the other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 10.5 and the first sentence of Section 10.6 hereof shall
include its Affiliates and its own
78
80
and its Affiliates' officers, directors, employees, and agents): (a) shall not
have any duties or responsibilities except those expressly set forth in this
Credit Agreement and shall not be a trustee or fiduciary for any Lender; (b)
shall not be responsible to the Lenders for any recital, statement,
representation, or warranty (whether written or oral) made in or in connection
with any Credit Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Credit Document, or for
the value, validity, effectiveness, genuineness, enforceability, or sufficiency
of any Credit Document, or any other document referred to or provided for
therein or for any failure by any Credit Party or any other Person to perform
any of its obligations thereunder; (c) shall not be responsible for or have any
duty to ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any Credit Party
or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Credit Document;
and (e) shall not be responsible for any action taken or omitted to be taken by
it under or in connection with any Credit Document, except for its own gross
negligence or willful misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
10.2 RELIANCE BY ADMINISTRATIVE AGENT.
The Administrative Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telecopy) believed by it to be
genuine and correct and to have been signed, sent or made by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Credit Party), independent accountants, and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the payee of any Note as the holder thereof for all purposes hereof
unless and until the Administrative Agent receives and accepts an Assignment and
Acceptance executed in accordance with Section 11.3(b) hereof. As to any matters
not expressly provided for by this Credit Agreement, the Administrative 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 the Required Lenders,
and such instructions shall be binding on all of the Lenders; provided, however,
that the Administrative Agent shall not be required to take any action that
exposes the Administrative Agent to personal liability or that is contrary to
any Credit Document or applicable law or unless it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking any such action.
10.3 DEFAULTS.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless the
Administrative Agent has received written notice from a Lender or a Credit Party
specifying such Default or Event of Default and stating
79
81
that such notice is a "Notice of Default". In the event that the Administrative
Agent receives such a notice of the occurrence of a Default or Event of Default,
the Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.2 hereof) take such action
with respect to such Default or Event of Default as shall reasonably be directed
by the Required Lenders, provided that, unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interest of the Lenders.
10.4 RIGHTS AS A LENDER.
With respect to its Commitment and the Loans made by it, Bank of
America (and any successor acting as Administrative Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. Bank of America (and any successor acting as Administrative Agent) and
its Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or Affiliates as if it were not acting
as Administrative Agent, and Bank of America (and any successor acting as
Administrative Agent) and its Affiliates may accept fees and other consideration
from any Credit Party or any of its Subsidiaries or Affiliates for services in
connection with this Credit Agreement or otherwise without having to account for
the same to the Lenders.
10.5 INDEMNIFICATION.
The Lenders agree to indemnify the Administrative Agent (to the extent
not reimbursed under Section 11.5 hereof, but without limiting the obligations
of the Credit Parties under such Section) ratably in accordance with their
respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative Agent (including
by any Lender) in any way relating to or arising out of any Credit Document or
the transactions contemplated thereby or any action taken or omitted by the
Administrative Agent under any Credit Document (including any of the foregoing
arising from the negligence of the Administrative Agent); provided that no
Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any costs or
expenses payable by the Credit Parties under Section 11.5, to the extent that
the Administrative Agent is not promptly reimbursed for such costs and expenses
by the Credit Parties. The agreements in this Section 10.5 shall survive the
repayment of the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Commitments hereunder.
80
82
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Credit Parties and their Subsidiaries and decision to enter into this Credit
Agreement and that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under the Credit
Documents. Except for notices, reports, and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition, or business of any Credit Party or any of its Subsidiaries
or Affiliates that may come into the possession of the Administrative Agent or
any of its Affiliates.
10.7 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign at any time by giving notice
thereof to the Lenders and the Credit Parties. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor, such successor Administrative Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Agent shall be discharged from
its duties and obligations as Administrative Agent, as appropriate, under this
Credit Agreement and the other Credit Documents and the provisions of this
Section 10.7 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Credit Agreement. If no
successor Administrative Agent has accepted appointment as Administrative Agent
within sixty (60) days after the retiring Administrative Agent's giving notice
of resignation, the retiring Administrative Agent's resignation shall
nevertheless become effective and the Lenders shall perform all duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided for above. Subject to the
foregoing terms of this Section 10.7, there shall at all times be a Person or
Persons serving as Administrative Agent hereunder.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via
81
83
telecopy (or other facsimile device) to the number set out below, (c) the
Business Day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (d) the third Business Day
following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case to the respective parties at the address, in the
case of the Credit Parties and the Administrative Agent, set forth below, and,
in the case of the Lenders, set forth on Schedule 2.1(a), or at such other
address as such party may specify by written notice to the other parties hereto:
if to any Credit Party:
Unifi, Inc.
7201 West Friendly Avenue
Greensboro, North Carolina 27410
Attn: Willis C. Moore, III
Telephone: (336) 316-5664
Telecopy: (336) 294-4751
with a copy to:
Unifi, Inc.
7201 West Friendly Avenue
Greensboro, North Carolina 27410
Attn: Charles McCoy
Telephone: (336) 316-5660
Telecopy: (336) 856-4364
if to the Administrative Agent:
Bank of America, N.A.
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 386-6837
Telecopy: (704) 409-0012
82
84
with a copy to:
Bank of America, N.A.
Bank of America Corporate Center
100 North Tryon Street, 17th Floor
Charlotte, North Carolina 28255
Attn: Deirdre B. Doyle
Telephone: (704) 386-0783
Telecopy: (704) 386-1270
11.2 RIGHT OF SET-OFF; ADJUSTMENTS.
Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand under
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
11.3 BENEFIT OF AGREEMENT.
(a) This Credit Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that none of the Credit Parties
may assign or transfer any of its interests and obligations without
prior written consent of the Lenders; provided further that the rights
of each Lender to transfer, assign or grant participations in its
rights and/or obligations hereunder shall be limited as set forth in
this Section 11.3.
(b) Each Lender may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this
Credit Agreement (including, without limitation, all or a portion of
its Loans, its Notes, and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to
another Lender or an assignment of all of a Lender's rights
and obligations under this Credit Agreement, any such partial
assignment shall be in an amount at least equal to
83
85
$5,000,000 (or, if less, the remaining amount of the
Commitment being assigned by such Lender) or an integral
multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of
a constant, and not varying, percentage of all of its rights
and obligations under this Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute
and deliver to the Administrative Agent for its acceptance an
Assignment and Acceptance in the form of Exhibit 11.3(b)
hereto, together with any Note subject to such assignment and
a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits
of a Lender hereunder and the assigning Lender shall, to the extent of
such assignment, relinquish its rights and be released from its
obligations under this Credit Agreement. Upon the consummation of any
assignment pursuant to this Section 11.3(b), the assignor, the
Administrative Agent and the Credit Parties shall make appropriate
arrangements so that, if required, new Notes are issued to the assignor
and the assignee. If the assignee is not a United States person under
Section 7701(a)(30) of the Code, it shall deliver to the Credit Parties
and the Administrative Agent certification as to exemption from
deduction or withholding of Taxes in accordance with Section 3.11.
(c) The Administrative Agent shall maintain at its
address referred to in Section 11.1 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender
from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and
the Credit Parties, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Credit Agreement. The Register shall
be available for inspection by the Credit Parties or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, the Administrative Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit 11.3(b) hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the
parties thereto.
(e) Each Lender may sell participations to one or more
Persons in all or a portion of its rights, obligations or rights and
obligations under this Credit Agreement (including all or a portion of
its Commitment or its Loans); provided, however, that
84
86
(i) such Lender's obligations under this Credit Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participant shall be entitled to the benefit of the yield protection
provisions contained in Sections 3.7 through 3.12, inclusive, and the
right of set-off contained in Section 11.2, and (iv) the Credit Parties
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Credit
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Credit Parties relating to the Credit Party
Obligations owing to such Lender and to approve any amendment,
modification, or waiver of any provision of this Credit Agreement
(other than amendments, modifications, or waivers decreasing the amount
of principal of or the rate at which interest is payable on such Loans
or Notes, extending any scheduled principal payment date or date fixed
for the payment of interest on such Loans or Notes, or extending its
Commitment).
(f) Notwithstanding any other provision set forth in this
Credit Agreement, any Lender may at any time assign and pledge all or
any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the
Consolidated Parties in the possession of such Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.14
hereof.
(h) Notwithstanding anything to the contrary contained
herein, any Lender (a "Designating Lender") may grant to a special
purpose funding vehicle (a "SPV"), identified as such in writing from
time to time by the Designating Lender to the Administrative Agent and
the Borrower, the option to provide to the Borrower all or any part of
any Loan that such Designating Lender would otherwise be obligated to
make to the Borrower pursuant to this Credit Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPV to make any
Loan, (ii) if an SPV elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Designating Lender
shall be obligated to make such Loan pursuant to the terms hereof,
(iii) the Designating Lender shall remain liable for any indemnity or
other payment obligation with respect to its Commitment hereunder, (iv)
no SPV shall have any voting rights pursuant to Section 11.1, (v) with
respect to notices, payments and other matters hereunder, the Credit
Parties, the Administrative Agent and the Lenders shall not be
obligated to deal with a SPV, but may limit their communications and
other dealings relevant to such SPV to the applicable Granting Lender
and (vi) each such SPV would satisfy the requirements of Section
3.11(d) if such SPV were a Lender hereunder. The making of a Loan by an
SPV hereunder shall utilize the Commitment of the Designating Lender to
the same extent, and as if, such Loan were made by such Designating
Lender. No additional Note shall be required to evidence the Loans or
portion thereof made by an
85
87
SPV; and the related Designating Lender shall be deemed to hold its
Note as agent for such SPV to the extent of the Loans or portion
thereof funded by such SPV. In addition, any payments for the account
of any SPV shall be paid to its Designating Lender as agent for such
SPV. Each party hereto hereby agrees that no SPV shall be liable for
any indemnity or payment under this Credit Agreement for which a Lender
would otherwise be liable for so long as, and to the extent, the
Designating Lender provides such indemnity or makes such payment. In
furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Credit Agreement) that,
prior to the date that is one year and one day after the payment in
full of all outstanding prior indebtedness of any SPV, it will not
institute against, or join any other person in instituting against,
such SPV any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or similar proceedings under the laws of the
United States or any State thereof. In addition, notwithstanding
anything to the contrary contained in this Section 11.3 or otherwise in
this Credit Agreement, any SPV may (x) with notice to, but without the
prior written consent of, the Borrower and the Administrative Agent and
without paying any processing fee therefor, assign or participate all
or a portion of its interest in any Loans to the Designating Lender or
to any financial institutions (consented to by the Borrower and the
Administrative Agent) providing liquidity and/or credit support to or
for the account of such SPV to support the funding or maintenance of
Loans and (y) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or
liquidity enhancements to such SPV. This Section 11.3(h) may not be
amended without the written consent of any Designating Lender affected
thereby.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any other
Credit Document and no course of dealing between the Administrative Agent or any
Lender and any of the Credit Parties shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under any other Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies provided herein are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any Lender
would otherwise have. No notice to or demand on any Credit Party in any case
shall entitle the Credit Parties to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
11.5 EXPENSES; INDEMNIFICATION.
(a) The Credit Parties jointly and severally agree to pay on
demand all costs and expenses of the Administrative Agent in connection with the
syndication, preparation, execution, delivery, administration, modification, and
amendment of this Credit Agreement, the other Credit
86
88
Documents, and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for the Administrative
Agent (including the cost of internal counsel) with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities under the Credit Documents. The Credit Parties further jointly
and severally agree to pay on demand all costs and expenses of the
Administrative Agent and the Lenders, if any (including, without limitation,
reasonable attorneys' fees and expenses and the cost of internal counsel), in
connection with the enforcement (whether through negotiations, legal
proceedings, or otherwise) of the Credit Documents and the other documents to be
delivered hereunder.
(b) The Credit Parties jointly and severally agree to indemnify
and hold harmless the Administrative Agent and each Lender and each of their
Affiliates and their respective officers, directors, employees, agents, and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, reasonable attorneys' fees) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation, or proceeding or preparation of defense in
connection therewith) the Credit Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans (including any
of the foregoing arising from the negligence of the Indemnified Party), except
to the extent such claim, damage, loss, liability, cost, or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 11.5 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by any of
the Credit Parties, their respective directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated. The Credit Parties agree not to assert any claim against the
Administrative Agent, any Lender, any of their Affiliates, or any of their
respective directors, officers, employees, attorneys, agents, and advisers, on
any theory of liability, for special, indirect, consequential, or punitive
damages arising out of or otherwise relating to the Credit Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Loans.
(c) Without prejudice to the survival of any other agreement of
the Credit Parties hereunder, the agreements and obligations of the Credit
Parties contained in this Section 11.5 shall survive the repayment of the Loans,
LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
87
89
(i) without the consent of each Lender affected thereby,
neither this Credit Agreement nor any other Credit Document may be
amended to
(a) extend the final maturity of any Loan or of
any reimbursement obligation, or any portion thereof, arising
from drawings under Letters of Credit,
(b) reduce the rate or extend the time of
payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates)
thereon or Fees hereunder,
(c) reduce or waive the principal amount of any
Loan or of any reimbursement obligation, or any portion
thereof, arising from drawings under Letters of Credit,
(d) increase the Commitment of a Lender over the
amount thereof in effect (it being understood and agreed that
a waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in
the terms of any Commitment of any Lender),
(e) except as the result of or in connection
with a dissolution or merger permitted by Section 8.4, release
the Borrower or any Guarantor from its or their obligations
under the Credit Documents,
(f) amend, modify or waive any provision of this
Section 11.6 or 9.1(a), 11.2, 11.3, 11.5 or 11.9,
(g) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders, or
(h) consent to the assignment or transfer by the
Borrower or all or substantially all of the other Credit
Parties of any of its or their rights and obligations under
(or in respect of) the Credit Documents except as permitted
thereby;
(ii) without the consent of the Administrative Agent, no
provision of Section 10 may be amended; and
(iii) without the consent of the Issuing Lender, no
provision of Section 2.2 may be amended, and without the consent of the
Swingline Lender, no provision of Section 2.3 may be amended.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender
is entitled to vote as such Lender sees
88
90
fit on any bankruptcy reorganization plan that affects the Loans, and
each Lender acknowledges that the provisions of Section 1126(c) of the
Bankruptcy Code supersedes the unanimous consent provisions set forth
herein and (y) the Required Lenders may consent to allow a Credit Party
to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY
PROVIDED THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to
this Credit Agreement or any other Credit Document may be brought in
the courts of the State of North Carolina in Mecklenburg County, or of
the United States for the Western District of North Carolina, and, by
execution and delivery of this Credit Agreement, each of the Credit
Parties hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the nonexclusive jurisdiction
of such courts. Each of the Credit Parties
89
91
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such
mailing. Nothing herein shall affect the right of the Administrative
Agent or any Lender to serve process in any other manner permitted by
law or to commence legal proceedings or to otherwise proceed against
any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives
any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in
connection with this Credit Agreement or any other Credit Document
brought in the courts referred to in subsection (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE
ADMINISTRATIVE AGENT, THE LENDERS, EACH OF THE CREDIT PARTIES HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT,
ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 BINDING EFFECT; TERMINATION.
(a) This Credit Agreement shall become effective at such
time when all of the conditions set forth in Section 5.1 have been
satisfied or waived by the Lenders and it shall have been executed by
each Credit Party and the Administrative Agent, and the Administrative
Agent shall have received copies hereof (telefaxed or otherwise) which,
when taken together, bear the signatures of each Lender, and thereafter
this Credit
90
92
Agreement shall be binding upon and inure to the benefit of each Credit
Party, the Administrative Agent and each Lender and their respective
successors and assigns.
(b) The term of this Credit Agreement shall be until no
Loans, LOC Obligations or any other amounts payable hereunder or under
any of the other Credit Documents shall remain outstanding, no Letters
of Credit shall be outstanding, all of the Credit Party Obligations
have been irrevocably satisfied in full and all of the Commitments
hereunder shall have expired or been terminated.
11.14 CONFIDENTIALITY.
The Administrative Agent and each Lender (each, a "Lending Party")
agrees to keep confidential any information furnished or made available to it by
the Credit Parties pursuant to this Credit Agreement that is marked
confidential; provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, agent, or advisor of any
Lending Party or Affiliate of any Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any law, rule, or regulation, (d) upon the order of
any court or administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available to the public
or that is or becomes available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Credit Agreement, (g) in
connection with any litigation to which such Lending Party or any of its
Affiliates may be a party, (h) to the extent necessary in connection with the
exercise of any remedy under this Credit Agreement or any other Credit Document,
and (i) subject to provisions substantially similar to those contained in this
Section 11.14, to any actual or proposed participant or assignee.
11.15 USE OF SOURCES.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
course of funds to be used by such lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to
any separate account maintained by such lender in which any employee
benefit plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes
assets allocated to any separate account maintained by such lender,
such Lender has disclosed to the Borrower the name of each employee
benefit plan whose assets in such account exceed 10% of the total
assets of such account as of the date of such purchase (and, for
purposes of this subsection (b), all employee benefit plans maintained
by the same employer or employee organization are deemed to be a single
plan;
91
93
(c) to the extent that any part of such funds constitutes
assets of an insurance company's general account, such insurance
company has complied with all of the requirements of the regulations
issued under Section 401(e)(a)(A) of ERISA; or
(d) such funds constitute assets of one or more specific
benefit plans which such Lender has identified in writing to the
Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and
"separate account" shall have the respective meanings assigned to such terms in
Section 3 of ERISA.
11.16 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
92
94
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: UNIFI, INC.,
a New York corporation
By: Willis C. Moore, III
------------------------------------------------
Name: Willis C. Moore, III
----------------------------------------------
Title: Executive Vice President/CFO
---------------------------------------------
SUBSIDIARY GUARANTORS: UNIFI SALES & DISTRIBUTION, INC.,
a North Carolina corporation
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President/Secretary & General Counsel
---------------------------------------------
UNIFI MANUFACTURING, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: Vice President/Secretary & General Counsel
---------------------------------------------
UNIFI EQUIPMENT LEASING, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: Vice President/Secretary & General Counsel
---------------------------------------------
UNIFI MANUFACTURING VIRGINIA, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: Vice President/Secretary & General Counsel
---------------------------------------------
95
UNIFI EXPORT SALES, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President & Secretary
---------------------------------------------
UNIFI INTERNATIONAL SERVICE, INC.,
a North Carolina corporation
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President & Secretary
---------------------------------------------
UNIFI TECHNICAL FABRICS, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President & Secretary
---------------------------------------------
SPANCO INDUSTRIES, INC.,
a North Carolina corporation
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President & Secretary
---------------------------------------------
SPANCO INTERNATIONAL, INC.,
a North Carolina corporation
By: Charles F. McCoy
------------------------------------------------
Name: Charles F. McCoy
----------------------------------------------
Title: Vice President & Secretary
---------------------------------------------
96
LENDERS: BANK OF AMERICA, N.A.,
individually in its capacity as a Lender and in its
capacity as Administrative Agent
By: Deirdre B. Doyle
------------------------------------------------
Name: Deirdre B. Doyle
----------------------------------------------
Title: Principal
---------------------------------------------
CREDIT SUISSE FIRST BOSTON
By: William S. Lutkins
------------------------------------------------
Name: William S. Lutkins
----------------------------------------------
Title: Vice President
---------------------------------------------
WACHOVIA BANK, N.A.
By: Michael H. Trainor
------------------------------------------------
Name: Michael H. Trainor
----------------------------------------------
Title: Vice President
---------------------------------------------
CITIBANK N.A.
By: Henry J. Matthews
------------------------------------------------
Name: Henry J. Matthews
----------------------------------------------
Title: Vice President
---------------------------------------------
THE CHASE MANHATTAN BANK
By: James A. Knight
------------------------------------------------
Name: James A. Knight
----------------------------------------------
Title: Vice President
---------------------------------------------
97
FIRST UNION NATIONAL BANK
By: Lance Walton
------------------------------------------------
Name: Lance Walton
----------------------------------------------
Title: SVP
---------------------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: James W. Masters
------------------------------------------------
Name: James W. Masters
----------------------------------------------
Title: Vice President
---------------------------------------------
BANK HAPOALIM B.M.
By: Shaun Breidbart
------------------------------------------------
Name: Shaun Breidbart
----------------------------------------------
Title: Vice President
---------------------------------------------
EX-10.K
5
g71711ex10-k.txt
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
1
EXHIBIT (10k)
FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER dated as of August
14, 2001 (this "Amendment") is by and among UNIFI, INC., a New York corporation
(the "Borrower"), the Borrower's Domestic Subsidiaries party hereto
(individually a "Guarantor" and collectively the "Guarantors"), the Lenders
party hereto and BANK OF AMERICA, N.A., as Administrative Agent for the Lenders
(in such capacity, the "Administrative Agent"). All capitalized terms used
herein and not otherwise defined shall have the meanings provided in the Credit
Agreement (as defined below).
WITNESSETH:
WHEREAS, the Borrower, the Guarantors, the Lenders and the
Administrative Agent entered into that certain Credit Agreement dated as of
December 20, 2000 (as amended and modified from time to time, the "Credit
Agreement");
WHEREAS, the Borrower notified the Administrative Agent on July 24,
2001 of the existence of an Event of Default under the Credit Agreement as a
result of the failure of the Credit Parties to comply with the terms of Section
7.11(i) of the Credit Agreement as of the fiscal quarter ended June 24, 2001
(the "Acknowledged Event of Default");
WHEREAS, the Borrower has asked the Lenders to waive exercising their
rights and remedies arising under the Credit Agreement and the other Credit
Documents as a result of the Acknowledged Event of Default until October 31,
2001 (the "Waiver Termination Date"), including their right to accelerate the
full outstanding balance of the Credit Party Obligations. The Administrative
Agent and the Lenders have agreed to do so, but only upon the terms and
conditions set forth herein;
WHEREAS, the parties hereto have agreed to amend the Credit Agreement
as set forth herein;
NOW, THEREFORE, in consideration of the agreements contained herein and
other good and valuable consideration, the parties hereby agree as follows:
1. Reaffirmation of Existing Debt. The Credit Parties acknowledge
and confirm that (a) the Borrower's obligation to repay the outstanding
principal amount of the Loans and to reimburse the Issuing Lender for any
drawing on a Letter of Credit is unconditional and not subject to any offsets,
defenses or counterclaims, (b) the Administrative Agent and the Lenders have
performed fully all of their respective obligations under the Credit Agreement
and the other Credit Documents, and (c) by entering into this Amendment, the
Lenders do not waive or release (except as specifically provided herein) any
term or condition of
2
the Credit Agreement or any of the other Credit Documents or any of their rights
or remedies under such Credit Documents or applicable law or any of the
obligations of any Credit Party thereunder.
2. Waiver. Subject to the terms and conditions of this Amendment,
the Administrative Agent and the Lenders agree to waive exercising their rights
under the Credit Agreement and the other Credit Documents (other than this
Amendment), to the extent and only to the extent such rights arise exclusively
as a result of the Acknowledged Event of Default; provided, however, the
Administrative Agent and the Lenders shall be free to exercise any or all of
their rights and remedies arising on account of any Default or Event of Default
under the Credit Agreement or any other Credit Document, including without
limitation the Acknowledged Event of Default, at any time after the occurrence
of a Waiver Termination Event (as defined below) or the Waiver Termination Date.
The term "Waiver Termination Event" shall mean the existence or occurrence of
any Default or Event of Default under the Credit Agreement or any other Credit
Document (including a breach of any term of this Amendment) other than the
Acknowledged Event of Default.
3. Amended Definitions. The following definitions in Section 1.1
of the Credit Agreement are hereby amended as follows:
(a) The definition of "Applicable Percentage" is amended
and restated in its entirety to read as follows:
"Applicable Percentage" means, (i) with respect to
Eurodollar Loans, Swingline CD Loans and Letter of Credit
Fees, 2.0%, (ii) with respect to Base Rate Loans 0% and (iii)
with respect to Facility Fees, 0.5%.
(b) The definition of "Revolving Committed Amount" is
amended and restated in its entirety to read as follows:
"Revolving Committed Amount" means ONE HUNDRED FIFTY
MILLION DOLLARS ($150,000,000), as such amount may be reduced
pursuant to Section 3.4 or increased pursuant to Section
2.1(f).
(c) The definition of "Utilization Fee" is deleted in its
entirety.
4. Schedule 2.1(a). Schedule 2.1(a) is hereby amended and
replaced in its entirety with Schedule 2.1(a) attached hereto.
5. Conditions Precedent. This Amendment shall become immediately
effective (the "Effective Date") upon the receipt by the Administrative Agent of
the following, each in form and substance satisfactory to the Administrative
Agent and the Lenders:
(a) Executed Amendment. Receipt by the Administrative
Agent of a duly executed copy of this Amendment.
2
3
(b) Opinions of Counsel. The Administrative Agent shall
have received an opinion, or opinions, dated as of the Effective Date
from counsel to the Credit Parties.
(c) Amendment Fee. Payment by the Credit Parties to the
Administrative Agent, for the pro rata benefit of each Lender approving
this Amendment prior to August 14, 2001, an amendment fee of $150,000.
6. Miscellaneous.
(a) The term "Credit Agreement" as used in each of the
Credit Documents shall hereafter mean the Credit Agreement as amended
by this Amendment. Except as herein specifically agreed, the Credit
Agreement and the obligations of the Credit Parties thereunder and
under the other Credit Documents are hereby ratified and confirmed and
shall remain in full force and effect according to their terms.
(b) The Credit Parties represent and warrant to the
Lenders that (i) the representations and warranties of the Credit
Parties set forth in Section 6 of the Credit Agreement are true and
correct as of the date hereof, (ii) no event has occurred and is
continuing which constitutes a Default or an Event of Default (other
than the Acknowledged Event of Default) and (iii) no Credit Party has
any counterclaims, offsets, credits or defenses to the Credit Documents
and the performance of its obligations thereunder, or if any Credit
Party has any such claims, counterclaims, offsets, credits or defenses
to the Credit Documents or any transaction related to the Credit
Documents, the same are hereby waived, relinquished and released in
consideration of the Lenders' execution and delivery of this Amendment.
(c) This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same
instrument. It shall not be necessary in making proof of this Amendment
to produce or account for more than one such counterpart.
(d) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
(e) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
(f) Each Credit Party hereby represents and warrants as
follows:
(i) Each Credit Party has taken all necessary
action to authorize the execution, delivery and performance of
this Amendment.
(ii) This Amendment has been duly executed and
delivered by the Credit Parties and constitutes legal, valid
and binding obligations of the Credit
3
4
Parties, enforceable in accordance with its terms, except as
such enforceability may be subject to (A) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights
generally and (B) general principles of equity (regardless of
whether such enforceability is considered in a proceeding at
law or in equity).
(iii) No consent, approval, authorization or order
of, or filing, registration or qualification with, any court
or governmental authority or third party is required in
connection with the execution, delivery or performance by any
Credit Party of this Amendment.
(g) The Guarantors (i) acknowledge and consent to all of
the terms and conditions of this Amendment, (ii) affirm all of their
obligations under the Credit Documents and (iii) agree that this
Amendment and all documents executed in connection herewith do not
operate to reduce or discharge the Guarantors' obligations under the
Credit Agreement or the other Credit Documents.
(h) This Amendment, together with the other Credit
Documents, represents the entire agreement of the parties and
supersedes all prior agreements and understandings, oral or written, if
any, relating to the Credit Documents or the transactions contemplated
herein and therein.
[remainder of page intentionally left blank]
4
5
Each of the parties hereto has caused a counterpart of this Amendment
to be duly executed and delivered as of the date first above written.
BORROWER: UNIFI, INC., a New York corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP, Secretary & General Counsel
--------------------------------------
GUARANTORS: UNIFI SALES & DISTRIBUTION, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI MANUFACTURING, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI EQUIPMENT LEASING, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI MANUFACTURING VIRGINIA, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
6
UNIFI EXPORT SALES, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI INTERNATIONAL SERVICE, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI TECHNICAL FABRICS, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
SPANCO INDUSTRIES, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
SPANCO INTERNATIONAL, INC.,
a North Carolina corporation
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
UNIFI TEXTURED POLYESTER, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
7
GLENTOUCH YARN COMPANY, LLC,
a North Carolina limited liability company
By: Charles F. McCoy
-----------------------------------------
Name: Charles F. McCoy
---------------------------------------
Title: VP & Secretary
--------------------------------------
8
LENDERS: BANK OF AMERICA, N.A., individually in its
capacity as a Lender and in its capacity as
the Administrative Agent
By: E. Phifer Helms
-----------------------------------------
Name: E. Phifer Helms
---------------------------------------
Title: Managing Director
--------------------------------------
CREDIT SUISSE FIRST BOSTON
By: Bill O'Daly
-----------------------------------------
Name: Bill O'Daly
---------------------------------------
Title: Assistant Vice President
--------------------------------------
WACHOVIA BANK, N.A.
By: Michael H. Trainor
-----------------------------------------
Name: Michael H. Trainor
---------------------------------------
Title: Vice President
--------------------------------------
CITIBANK, N.A.
By: Dennis I. Bermack
-----------------------------------------
Name: Dennis I. Bermack
---------------------------------------
Title: Managing Director
--------------------------------------
THE CHASE MANHATTAN BANK
By: Thomas H. Bell
-----------------------------------------
Name: Thomas H. Bell
---------------------------------------
Title: VP
--------------------------------------
FIRST UNION NATIONAL BANK
By: David J.C. Silander
-----------------------------------------
Name: David J.C. Silander
---------------------------------------
Title: Vice President
--------------------------------------
9
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: James W. Masters
-----------------------------------------
Name: James W. Masters
---------------------------------------
Title: Senior Vice President
--------------------------------------
BANK HAPOALIM B.M.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
10
EXHIBIT I
DEFINITIONS
AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS (SUCH MEANINGS TO BE EQUALLY APPLICABLE TO BOTH THE SINGULAR
AND PLURAL FORMS OF THE TERMS DEFINED):
"ADJUSTED DILUTION RATIO" means, at any time, the rolling
average of the Dilution Ratio for the 12 Calculation Periods then most recently
ended.
"ADVERSE CLAIM" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person or any Subsidiary of such Person. A
Person shall be deemed to control another Person if the controlling Person owns
10% or more of any class of voting securities of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of stock, by contract or otherwise.
"AGENT" has the meaning set forth in the preamble to this
Agreement.
"AGENT'S ACCOUNT" means account #8735-098787 at Wachovia Bank,
N.A., ABA #053100494.
"AGGREGATE INVESTED AMOUNT" means, on any date of
determination, the aggregate Invested Amount of all Receivable Interests
outstanding on such date.
"AGGREGATE REDUCTION" has the meaning specified in Section
1.3.
"AGGREGATE UNPAIDS" means, at any time, an amount equal to the
sum of (i) the Aggregate Invested Amount, plus (ii) all Recourse Obligations
(whether due or accrued) at such time.
"AGREEMENT" means this Receivables Purchase Agreement, as it
may be amended or modified and in effect from time to time.
"ALTERNATE BASE RATE" means for any day, the rate per annum
equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of
one percent (0.50%) above the Federal Funds Rate. For purposes of determining
the Alternate Base Rate for any day, changes in the Prime Rate or the Federal
Funds Rate shall be effective on the date of each such change.
"AMORTIZATION DATE" means the earliest to occur of (i) the day
on which any of the conditions precedent set forth in Section 6.2 are not
satisfied, (ii) the Business Day
I-1
11
immediately prior to the occurrence of an Event of Bankruptcy with respect to
any Seller Party, (iii) the Business Day specified in a written notice from the
Agent following the occurrence of any other Amortization Event, and (iv) the
date which is 5 Business Days after the Agent's receipt of written notice from
Seller that it wishes to terminate the facility evidenced by this Agreement.
"AMORTIZATION EVENT" has the meaning specified in Article IX.
"APPROVED FACTORING OBLIGOR" means any of The CIT Group, Inc.,
GE Capital Corporation or HSBC Bank.
"APPROVED JURISDICTION" means (a) the United States or any
political subdivision thereof, or (b) Canada or any province thereof other than
Quebec or Newfoundland.
"AUTHORIZED OFFICER" means, with respect to any Person, its
president, corporate controller, treasurer or chief financial officer.
"BLUE RIDGE" has the meaning set forth in the preamble to this
Agreement.
"BLUE RIDGE'S PORTION" means, on any date of determination,
the sum of the percentages represented by the Receivable Interests.
"BROKEN FUNDING COSTS" means for any Receivable Interest
which: (i) has its Invested Amount reduced without compliance by Seller with the
notice requirements hereunder, except as otherwise specified in this Agreement
or (ii) does not become subject to an Aggregate Reduction following the delivery
of any Reduction Notice as a result of the Seller failing to pay any or all of
the amount of such Aggregate Reduction or (iii) is assigned by Blue Ridge to the
Liquidity Banks under the Liquidity Agreement or terminated prior to the date on
which it was originally scheduled to end; an amount equal to the excess, if any,
of (A) the CP Costs or Yield (as applicable) that would have accrued during the
remainder of the Tranche Periods or the tranche periods for Commercial Paper
determined by the Agent to relate to such Receivable Interest (as applicable)
subsequent to the date of such reduction, assignment or termination (or in
respect of clause (ii) above, the date such Aggregate Reduction was designated
to occur pursuant to the Reduction Notice) of the Invested Amount of such
Receivable Interest if such reduction, assignment or termination had not
occurred or such Reduction Notice had not been delivered, over (B) the sum of
(x) to the extent all or a portion of such Invested Amount is allocated to
another Receivable Interest, the amount of CP Costs or Yield actually accrued
during the remainder of such period on such Invested Amount for the new
Receivable Interest, and (y) to the extent such Invested Amount is not allocated
to another Receivable Interest, the income, if any, actually received during the
remainder of such period by the holder of such Receivable Interest from
investing the portion of such Invested Amount not so allocated. All Broken
Funding Costs shall be due and payable hereunder upon demand.
"BUSINESS DAY" means any day on which banks are not authorized
or required to close in New York, New York or Atlanta, Georgia, Greensboro,
North Carolina and The Depository Trust Company of New York is open for
business, and, if the applicable Business
I-2
12
Day relates to any computation or payment to be made with respect to the LIBO
Rate, any day on which dealings in dollar deposits are carried on in the London
interbank market.
"CALCULATION PERIOD" means each Fiscal Month or portion
thereof which elapses during the term of the Agreement. The first Calculation
Period shall commence on the date of the initial Purchase hereunder and the
final Calculation Period shall terminate on the Final Payout Date.
"CHANGE OF CONTROL" means (a) the acquisition by any Person,
or two or more Persons acting in concert (who are not as of the Closing Date,
beneficial owners of any voting Equity Interests of Unifi), of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of Unifi, or (b) Unifi ceases to own 100% of
the outstanding shares of voting stock of Seller.
"COLLECTION ACCOUNT" means each concentration account,
depositary account, lock-box account or similar account in which any Collections
are collected or deposited and which is listed on Exhibit IV.
"COLLECTION ACCOUNT AGREEMENT" means an agreement
substantially in the form of Exhibit VI among an Originator, Servicer, Seller,
the Agent and a Collection Bank.
"COLLECTION BANK" means, at any time, any of the banks holding
one or more Collection Accounts.
"COLLECTION NOTICE" means a notice, in substantially the form
of Annex A to Exhibit VI, from the Agent to a Collection Bank.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all Finance Charges or other related amounts accruing in
respect thereof and all cash proceeds of Related Security with respect to such
Receivable.
"COMMERCIAL PAPER" means promissory notes of Blue Ridge issued
by Blue Ridge in the commercial paper market.
"CONTINGENT OBLIGATION" of a Person means any agreement,
undertaking or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or liability of
any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or application for a letter of
credit.
"CONTRACT" means, (a) with respect to any Trade Receivable,
any and all instruments, agreements, invoices or other writings pursuant to
which such Trade Receivable
I-3
13
arises or which evidences such Trade Receivable, and (b) with respect to any
Factoring Receivable, any and all factoring agreements, instruments, invoices,
statements or other writings pursuant to which such Factoring Receivable arises
or which evidences such Factoring Receivable.
"CP COSTS" means, for each day, the sum of (i) discount or
interest accrued on Pooled Commercial Paper on such day, plus (ii) any and all
accrued commissions in respect of placement agents and Commercial Paper dealers,
and issuing and paying agent fees incurred, in respect of such Pooled Commercial
Paper for such day, plus (iii) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase or financing facilities
which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual
of income net of expenses received on such day from investment of collections
received under all receivable purchase or financing facilities funded
substantially with Pooled Commercial Paper, minus (v) any payment received on
such day net of expenses in respect of Broken Funding Costs related to the
prepayment of any investment of Blue Ridge pursuant to the terms of any
receivable purchase or financing facilities funded substantially with Pooled
Commercial Paper. In addition to the foregoing costs, if Seller shall request
any Purchase during any period of time determined by the Agent in its sole
discretion to result in incrementally higher CP Costs applicable to such
Purchase, the principal associated with any such Purchase shall, during such
period, be deemed to be funded by Blue Ridge in a special pool (which may
include capital associated with other receivable purchase or financing
facilities) for purposes of determining such additional CP Costs applicable only
to such special pool and charged each day during such period against such
principal.
"CREDIT AND COLLECTION POLICY" means Seller's credit and
collection policies and practices relating to Contracts and Trade Receivables
existing on the date hereof and summarized in Exhibit VII hereto, as modified
from time to time in accordance with this Agreement.
"CUT-OFF DATE" means the last day of a Calculation Period.
"DAYS SALES OUTSTANDING" means, as of any day, an amount equal
to the product of (x) 91, multiplied by (y) the amount obtained by dividing (i)
the aggregate outstanding balance of Receivables as of the most recent Cut-Off
Date, by (ii) the aggregate amount of Receivables created during the three (3)
Calculation Periods including and immediately preceding such Cut-Off Date.
"DEEMED COLLECTIONS" means Collections deemed received by
Seller under Section 1.4(a).
"DEFAULT HORIZON RATIO" means, as of any Cut-Off Date, the
ratio (expressed as a decimal) computed by dividing (i) the aggregate sales
generated by the Originators during the 4 Calculation Periods ending on such
Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-off Date.
"DEFAULT RATE" means a rate per annum equal to the sum of (i)
the Alternate Base Rate plus (ii) 2.00%, changing when and as the Alternate Base
Rate changes.
I-4
14
"DEFAULT RATIO" means, as of any Cut-Off Date, the ratio
(expressed as a percentage) computed by dividing (x) the total amount of
Eligible Receivables which became Defaulted Receivables during the Calculation
Period that includes such Cut-Off Date, by (y) the aggregate sales generated by
the Originators during the Calculation Period occurring 5 months prior to the
Calculation Period ending on such Cut-Off Date.
"DEFAULT TRIGGER RATIO" means, as of any Cut-Off Date, the
ratio (expressed as a percentage) computed by dividing (a) the total amount of
Defaulted Receivables as of such Cut-Off Date, by (b) the aggregate Outstanding
Balance of all Receivables as of such Cut-Off Date.
"DEFAULTED RECEIVABLE" means a Receivable: (i) as to which the
Obligor thereof has suffered an Event of Bankruptcy; (ii) which, consistent with
the Credit and Collection Policy, would be written off Seller's books as
uncollectible; or (iii) as to which any payment, or part thereof, remains unpaid
for 91 days or more from the original due date for such payment.
"DELINQUENCY RATIO" means, at any time, a percentage equal to
(i) the aggregate Outstanding Balance of all Receivables that were Delinquent
Receivables at such time divided by (ii) the aggregate Outstanding Balance of
all Receivables at such time.
"DELINQUENT RECEIVABLE" means a Receivable as to which any
payment, or part thereof, remains unpaid for 61-90 days from the original due
date for such payment.
"DEMAND ADVANCE" means any advance made by Seller to Unifi at
any time while it is acting as the Servicer, which advance (a) is payable upon
demand, (b) is not evidenced by an instrument, chattel paper or a certificated
security, (c) bears interest at a market rate determined by Seller and the
Servicer from time to time, (d) is not subordinated to any other Indebtedness or
obligation of the Servicer, and (e) may not be offset by Unifi against amounts
due and owing from Seller to it under its Subordinated Note; PROVIDED, HOWEVER,
that no Demand Advance may be made after the Facility Termination Date or on any
date prior to the Facility Termination Date on which an Amortization Event or an
Unmatured Amortization Event exists and is continuing.
"DILUTION" means the amount of any reduction or cancellation
of the Outstanding Balance of a Receivable as described in Section 1.4(a).
"DILUTION HORIZON RATIO" means, as of any Cut-off Date, a
ratio (expressed as a decimal), computed by dividing (i) the aggregate sales
generated by the Originators during the 2 Calculation Periods ending on such
Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-Off Date.
"DILUTION RATIO" means, as of any Cut-Off Date, a ratio
(expressed as a percentage), computed by dividing (i) the total amount of
decreases in Outstanding Balances due to Dilutions during the Calculation Period
ending on such Cut-Off Date, by (ii) the aggregate sales generated by the
Originators during the Calculation Period prior to the Calculation Period ending
on such Cut-Off Date.
I-5
15
"DILUTION RESERVE" means, for any Calculation Period, the
product (expressed as a percentage) of:
(a) the sum of (i) two (2) times the Adjusted Dilution Ratio
as of the immediately preceding Cut-Off Date, plus (ii) the Dilution
Volatility Component as of the immediately preceding Cut-Off Date,
TIMES
(b) the Dilution Horizon Ratio as of the immediately preceding
Cut-Off Date.
"DILUTION VOLATILITY COMPONENT" means the product (expressed
as a percentage) of (i) the difference between (a) the highest three (3)-month
rolling average Dilution Ratio over the past 12 Calculation Periods and (b) the
Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is equal to
the amount calculated in (i)(a) of this definition and the denominator of which
is equal to the amount calculated in (i)(b) of this definition.
"DOWNGRADED LIQUIDITY BANK" means a Liquidity Bank which has
been the subject of a Downgrading Event.
"DOWNGRADING EVENT" with respect to any Person means the
lowering of the rating with regard to the short-term securities of such Person
to below (i) A-1 by S&P, or (ii) P-1 by Moody's.
"ELIGIBLE ASSIGNEE" means a commercial bank having a combined
capital and surplus of at least $250,000,000 with a rating of its (or its parent
holding company's) short-term securities equal to or higher than (i) A-1 by S&P
and (ii) P-1 by Moody's.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:
(i) the Obligor of which is not an Affiliate of
any of the parties hereto;
(ii) the Obligor of which (a) if a natural
person, is a resident of an Approved Jurisdiction, or (b) if a
corporation or other business organization, is organized under
the laws of an Approved Jurisdiction and has its chief
executive office in an Approved Jurisdiction; PROVIDED,
HOWEVER, that in no event will Eligible Receivables owing from
Obligors which are residents of or organized under the laws of
Canada or any of its provinces other than Quebec and
Newfoundland exceed 10% of total Receivables;
(iii) the Obligor of which (a) is not a state or
local government, governmental subdivision or agency, and (b)
is not the Federal government, governmental subdivision or
agency unless Seller has complied with the Federal Assignment
of Claims Act and any other applicable statute or regulation
restricting the assignment of claims against such Obligor or
the direct enforcement by any assignee of the applicable
Originator against such Obligor,
I-6
16
(iv) the Obligor of which is an Approved
Factoring Obligor (if such Receivable is a Factoring
Receivable),
(v) which is not a Defaulted Receivable,
(vi) which, if such Receivable is a Trade
Receivable, constitutes an "account" or "chattel paper" under
Article 9 of the UCC of all applicable jurisdictions,
(vii) in which, the perfection of the Seller's
interest under the Receivables Sale Agreement, and the Agent's
interest, for the benefit of the Purchaser, under this
Agreement, is governed by the laws of a jurisdiction where the
Uniform Commercial Code - Secured Transactions is in force;
(viii) the Obligor of which is not the Obligor of
Receivables as to which not more than 25% of the aggregate
unpaid balance of all Receivables of such Obligor of which are
Defaulted Receivables;
(ix) the original term of which has not been
extended,
(x) which by its terms is due and payable within
30 days of the original billing date therefor,
(xi) which is denominated and payable only in
United States dollars in the United States,
(xii) which constitutes the legal, valid and
binding obligation of the related Obligor enforceable against
such Obligor in accordance with its terms subject to no
offset, counterclaim or other defense,
(xiii) which arises under a Contract which (A) does
not require the Obligor under such Contract to consent to the
transfer, sale, pledge or assignment of the rights and duties
of the applicable Originator or any of its assignees under
such Contract and (B) does not contain a confidentiality
provision that purports to restrict the ability of Blue Ridge
to exercise its rights under this Agreement, including,
without limitation, its right to review the Contract,
(xiv) which, if such Receivable is a Trade
Receivable, represents an obligation to pay a specified sum of
money, contingent only upon the sale of goods or the provision
of services by the applicable Originator, which sale or
provision has occurred,
(xv) which, together with the Contract related
thereto, does not contravene any law, rule or regulation
applicable thereto (including, without limitation, any law,
rule and regulation relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair
debt collection practices
I-7
17
and privacy) and with respect to which no part of the Contract
related thereto is in violation of any such law, rule or
regulation,
(xvi) which satisfies all applicable requirements
of the Credit and Collection Policy,
(xvii) which was generated in the ordinary course
of the applicable Originator's business,
(xviii) which, if such Receivable is a Trade
Receivable, arises solely from the sale of goods or the
provision of services to the related Obligor by the applicable
Originator,
(xix) which is not subject to any dispute,
counterclaim, right of rescission, set-off, counterclaim or
any other defense (including defenses arising out of
violations of usury laws) of the applicable Obligor against
the applicable Originator or any other Adverse Claim, and the
Obligor thereon holds no right as against such Originator to
cause such Originator to repurchase the goods or merchandise
the sale of which shall have given rise to such Receivable
(except with respect to sale discounts effected pursuant to
the Contract, or defective goods returned in accordance with
the terms of the Contract); PROVIDED, HOWEVER, that if such
dispute, offset, counterclaim or defense affects only a
portion of the Outstanding Balance of such Receivable, then
such Receivable may be deemed an Eligible Receivable to the
extent of the portion of such Outstanding Balance which is not
so affected, and PROVIDED, FURTHER, that Receivables of any
Obligor which has any accounts payable by the applicable
Originator or by a wholly-owned Subsidiary of such Originator
(thus giving rise to a potential offset against such
Receivables) may be treated as Eligible Receivables to the
extent that the Obligor of such Receivables has agreed
pursuant to a written agreement in form and substance
satisfactory to the Agent, that such Receivables shall not be
subject to such offset,
(xx) as to which the applicable Originator has
satisfied and fully performed all obligations on its part with
respect to such Receivable required to be fulfilled by it, and
no further action is required to be performed by any Person
with respect thereto other than payment thereon by the
applicable Obligor,
(xxi) as to which each of the representations and
warranties contained in Sections 5.1(g), (i), (j), (r), (s),
(t) and (u) is true and correct, and
(xxii) all right, title and interest to and in
which has been validly transferred by the applicable
Originator directly to Seller under and in accordance with the
Receivables Sale Agreement, and Seller has good and marketable
title thereto free and clear of any Adverse Claim (other than
as created under this Agreement).
I-8
18
"EQUITY INTERESTS" means, with respect to any Person, any and
all shares, interests, participations or other equivalents, including membership
interests (however designated, whether voting or non-voting), of capital of such
Person, including, if such Person is a partnership, partnership interests
(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership, whether outstanding on the date
hereof or issued after the date of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with Unifi within the meaning of Section
414(b) or (c) of the Tax Code (and Sections 414(m) and (o) of the Tax Code for
purposes of provisions relating to Section 412 of the Tax Code).
"EVENT OF BANKRUPTCY" shall be deemed to have occurred with
respect to a Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up,
or composition or readjustment of debts of such Person, the appointment
of a trustee, receiver, custodian, liquidator, assignee, sequestrator
or the like for such Person or all or substantially all of its assets,
or any similar action with respect to such Person under any law
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person
shall be entered in an involuntary case under the federal bankruptcy
laws or other similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization,
debt arrangement, dissolution or other similar law now or hereafter in
effect, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee (other than a trustee under a
deed of trust, indenture or similar instrument), custodian,
sequestrator (or other similar official) for, such Person or for any
substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall be adjudicated insolvent, or
admit in writing its inability to pay its debts generally as they
become due, or, if a corporation or similar entity, its board of
directors shall vote to implement any of the foregoing.
"FACILITY ACCOUNT" means Seller's account no. 8731051555 at
Wachovia.
"FACILITY TERMINATION DATE" means the earlier of (i) the
Liquidity Termination Date and (ii) the Amortization Date.
I-9
19
"FACTORING COMPANY RECEIVABLE" means all of an Originator's
rights to payment (whether of purchase price, proceeds of advances, or
otherwise) from any factor who has purchased or financed any indebtedness or
obligation that would meet the definition of a "Trade Receivable" but for the
first proviso in such definition.
"FEDERAL BANKRUPTCY CODE" means Title 11 of the United States
Code entitled "Bankruptcy," as amended and any successor statute thereto.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a
fluctuating interest rate per annum for each day during such period equal to (i)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (ii) if such rate is not so
published for any day which is a Business Day, the average rate of the
quotations at approximately 11:30 a.m. (New York time) for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"FEE LETTER" means that certain letter agreement dated as of
December 19, 2000 among Seller, Unifi and the Agent, as it may be amended,
restated or otherwise modified and in effect from time to time.
"FINAL PAYOUT DATE" means the date on which all Aggregate
Unpaids have been paid in full and the Purchase Limit has been reduced to zero.
"FINANCE CHARGES" means, with respect to a Contract, any
finance, interest, late payment charges or similar charges owing by an Obligor
pursuant to such Contract.
"FISCAL MONTH" means the fiscal months of the Seller as set
forth on Schedule B attached hereto.
"FUNDING AGREEMENT" means (i) this Agreement, (ii) the
Liquidity Agreement and (iii) any other agreement or instrument executed by any
Funding Source with or for the benefit of Blue Ridge.
"FUNDING SOURCE" means (i) any Liquidity Bank or (ii) any
insurance company, bank or other funding entity providing liquidity, credit
enhancement or back-up purchase support or facilities to Blue Ridge.
"GAAP" means generally accepted accounting principles in
effect in the United States of America as of the date of this Agreement.
"INCREMENTAL PURCHASE" means a purchase of one or more
Receivable Interests which increases the total outstanding Aggregate Invested
Amount hereunder.
I-10
20
"INDEBTEDNESS" of a Person means such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized lease obligations, (vi) net liabilities under
interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and
(viii) liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA.
"INDEMNIFIED AMOUNTS" has the meaning specified in Section
10.1.
"INDEMNIFIED PARTY" has the meaning specified in Section 10.1.
"INDEPENDENT DIRECTOR" shall mean a member of the Board of
Directors of Seller who is not at such time, and has not been at any time during
the preceding five (5) years: (A) a director, officer, employee or affiliate of
Unifi, any Originator or any of their respective Subsidiaries or Affiliates
(other than Seller), or (B) the beneficial owner (at the time of such
individual's appointment as an Independent Director or at any time thereafter
while serving as an Independent Director) of any of the outstanding common
shares of Seller, any Originator, or any of their respective Subsidiaries or
Affiliates, having general voting rights.
"INVESTED AMOUNT" of any Receivable Interest means, at any
time, (A) the Purchase Price of such Receivable Interest, minus (B) the sum of
the aggregate amount of Collections and other payments received by the Agent
which in each case are applied to reduce such Invested Amount in accordance with
the terms and conditions of this Agreement; PROVIDED THAT such Invested Amount
shall be restored (in accordance with Section 2.5) in the amount of any
Collections or other payments so received and applied if at any time the
distribution of such Collections or payments are rescinded, returned or refunded
for any reason.
"LIBO RATE" means, for any Tranche Period, the rate per annum
determined on the basis of the offered rate for deposits in U.S. dollars of
amounts equal or comparable to the Invested Amount offered for a term comparable
to such Tranche Period, which rates appear on a Bloomberg L.P. terminal,
displayed under the address "US0001M [Index] Q [Go]" effective as of 11:00 A.M.,
London time, two Business Days prior to the first day of such Tranche Period,
PROVIDED that if no such offered rates appear on such page, the LIBO Rate for
such Tranche Period will be (a) the arithmetic average (rounded upwards, if
necessary, to the next higher 1/100th of 1%) of rates quoted by not less than
two major banks in New York, New York, selected by the Agent, at approximately
10:00 a.m.(New York time), two Business Days prior to the first day of such
Tranche Period, for deposits in U.S. dollars offered by leading European banks
for a period comparable to such Tranche Period in an amount comparable to the
Invested Amount, divided by (b) one minus the maximum aggregate reserve
requirement (including all basic, supplemental, marginal or other reserves)
which is imposed against the Agent in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of the Federal
I-11
21
Reserve System as in effect from time to time (expressed as a decimal),
applicable to such Tranche Period. The LIBO Rate shall be rounded, if necessary,
to the next higher 1/16 of 1%.
"LIQUIDITY AGREEMENT" means that certain Liquidity Asset
Purchase Agreement dated as of December 19, 2000, by and among Blue Ridge, the
Agent and the banks from time to time party thereto, as the same may be amended,
restated and/or otherwise modified from time to time in accordance with the
terms thereof.
"LIQUIDITY BANK" means each bank from time to time party to
the Liquidity Agreement (other than the Agent acting in its capacity as the
Agent thereunder).
"LIQUIDITY COMMITMENT" means, as to each Liquidity Bank, its
commitment under the Liquidity Agreement. The Liquidity Commitments, in the
aggregate, shall equal 102% of the Purchase Limit hereunder.
"LIQUIDITY FUNDING" means a purchase by any Liquidity Bank
pursuant to its Liquidity Commitment of all or any portion of, or any undivided
interest in, a Receivable Interest.
"LIQUIDITY TERMINATION DATE" means the earlier to occur of the
following:
(a) the date on which the Liquidity Banks' Liquidity
Commitments expire, cease to be available to Blue Ridge or otherwise
cease to be in full force and effect; or
(b) the date on which a Downgrading Event with respect to
a Liquidity Bank shall have occurred and been continuing for not less
than 30 days, and either (i) the Downgraded Liquidity Bank shall not
have been replaced by an Eligible Assignee pursuant to the Liquidity
Agreement, or (ii) the Liquidity Commitment of such Downgraded
Liquidity Bank shall not have been funded or collateralized in such a
manner that will avoid a reduction in or withdrawal of the credit
rating applied to the Commercial Paper to which such Liquidity
Agreement applies by any of the rating agencies then rating such
Commercial Paper.
"LOCK-BOX" means each locked postal box with respect to which
a bank who has executed a Collection Account Agreement has been granted
exclusive access for the purpose of retrieving and processing payments made on
the Receivables and which is listed on Exhibit IV.
"LOSS RESERVE" means, for any Calculation Period, the product
(expressed as a percentage) of (a) 2.0, times (b) the highest three-month
rolling average Default Ratio during the 12 Calculation Periods ending on the
immediately preceding Cut-Off Date, times (c) the Default Horizon Ratio as of
the immediately preceding Cut-Off Date.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the financial condition or operations of any Seller Party and its
Subsidiaries, (ii) the ability of any Seller Party to perform its obligations
under this Agreement or the Performance Guarantor to perform its obligations
under the Performance Undertaking, (iii) the legality, validity or
enforceability of this
I-12
22
Agreement or any other Transaction Document, (iv) the Agent's security interest,
for the benefit of the Secured Parties, in the Receivables generally or in any
significant portion of the Receivables, the Related Security or the Collections
with respect thereto, or (v) the collectibility of the Receivables generally or
of any material portion of the Receivables.
"MONTHLY REPORT" means a report, in substantially the form of
Exhibit VIII hereto (appropriately completed), furnished by the Servicer to the
Agent pursuant to Section 8.5.
"MONTHLY REPORTING DATE" means the 15th day of each month
after the date of this Agreement (or if any such day is not a Business Day, the
next succeeding Business Day thereafter).
"MOODY'S" means Moody's Investors Service, Inc.
"NET POOL BALANCE" means, at any time, the aggregate
Outstanding Balance of all Eligible Receivables at such time reduced by the
aggregate amount by which the Outstanding Balance of all Eligible Receivables of
each Obligor and its Affiliates exceeds the Obligor Concentration Limit for such
Obligor.
"OBLIGOR" means a Person obligated to make payments pursuant
to a Contract.
"OBLIGOR CONCENTRATION LIMIT" means, at any time, in relation
to the aggregate Outstanding Balance of Receivables owed by any single Obligor
and its Affiliates (if any), the applicable concentration limit shall be
determined as follows for Obligors who have short term unsecured debt ratings
currently assigned to them by S&P and Moody's (or in the absence thereof, the
equivalent long term unsecured senior debt ratings), the applicable
concentration limit shall be determined according to the following table:
Allowable % of Eligible
S&P Rating Moody's Rating Receivables
---------- -------------- -----------------------
A-1+ P-1 10%
A-1 P-1 8%
A-2 P-2 6%
A-3 P-3 3%
Below A-3 or Not Rated Below P-3 or Not
by either S&P or Rated by either S&P or 2.5%
Moody's Moody's
; PROVIDED, HOWEVER, that (a) if any Obligor has a split rating, the applicable
rating will be the lower of the two, (b) if any Obligor is not rated by either
S&P or Moody's, the applicable Obligor Concentration Limit shall be the one set
forth in the last line of the table above, and (c) subject to satisfaction of
the Rating Agency Condition and/or an increase in the percentage set forth in
clause (a)(i) of the definition of "REQUIRED RESERVE," upon Seller's request
from time to time, the Agent may agree to a higher percentage of Eligible
Receivables for a particular Obligor and its Affiliates (each such higher
percentage, a "SPECIAL CONCENTRATION LIMIT"), it being
I-13
23
understood that any Special Concentration Limit may be cancelled by the Agent
upon not less than five (5) Business Days' written notice to the Seller Parties.
"ORIGINATOR" means each of Unifi Sales & Distribution, Inc., a
North Carolina corporation, and Unifi Export Sales, LLC, a North Carolina
limited liability company, in its capacity as a seller under the Receivables
Sale Agreement.
"OUTSTANDING BALANCE" of any Receivable at any time means the
then outstanding principal balance thereof.
"PARTICIPANT" has the meaning set forth in Section 12.2.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Unifi sponsors or maintains,
or to which it makes, is making, or is obligated to make contributions, or in
the case of a multiple employer plan (as described in Section 4064(a) of ERISA)
has made contributions at any time during the immediately preceding five plan
years.
"PERFORMANCE GUARANTOR" means Unifi, Inc.
"PERFORMANCE UNDERTAKING" means that certain Performance
Undertaking, dated as of December 19, 2000 by Performance Guarantor in favor of
Seller, substantially in the form of Exhibit IX, as the same may be amended,
restated or otherwise modified from time to time.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Unifi or any of its ERISA Affiliates sponsors or maintains
or to which Unifi or any of its ERISA Affiliates makes, is making, or is
obligated to make contributions and includes any Pension Plan, other than a Plan
maintained outside the United States primarily for the benefit of Persons who
are not U.S. residents.
"POOLED COMMERCIAL PAPER" means Commercial Paper notes of Blue
Ridge subject to any particular pooling arrangement by Blue Ridge, but excluding
Commercial Paper issued by Blue Ridge for a tenor and in an amount specifically
requested by any Person in connection with any agreement effected by Blue Ridge.
"PRIME RATE" means a rate per annum equal to the prime rate of
interest announced from time to time by Wachovia (which is not necessarily the
lowest rate charged to any customer), changing when and as said prime rate
changes.
"PROPOSED REDUCTION DATE" has the meaning set forth in Section
1.3.
I-14
24
"PURCHASE" means an Incremental Purchase or a Reinvestment.
"PURCHASE DATE" means each Business Day on which a Purchase is
made hereunder.
"PURCHASE LIMIT" means $100,000,000.
"PURCHASE NOTICE" has the meaning set forth in Section 1.2.
"PURCHASE PRICE" means, with respect to any Incremental
Purchase of a Receivable Interest, the amount paid to Seller for such Receivable
Interest which shall not exceed the least of (i) the amount requested by Seller
in the applicable Purchase Notice, (ii) the unused portion of the Purchase Limit
on the applicable purchase date and (iii) the excess, if any, of the Net Pool
Balance (less the Required Reserve) on the applicable purchase date over the
aggregate outstanding amount of Aggregate Invested Amount determined as of the
date of the most recent Monthly Report, taking into account such proposed
Incremental Purchase.
"PURCHASED ASSETS" means all of Seller's right, title and
interest, whether now owned and existing or hereafter arising in and to all of
the Receivables, the Related Security, the Collections and all proceeds of the
foregoing.
"RATING AGENCY CONDITION" means that Blue Ridge has received
written notice from S&P and Moody's that an amendment, a change or a waiver will
not result in a withdrawal or downgrade of the then current ratings on Blue
Ridge's Commercial Paper.
"RECEIVABLE" means a Trade Receivable or a Factoring Company
Receivable.
"RECEIVABLE INTEREST" means, at any time, an undivided
percentage ownership interest (computed as set forth below) associated with a
designated amount of Invested Amount, selected pursuant to the terms and
conditions hereof in (i) each Receivable arising prior to the time of the most
recent computation or recomputation of such undivided interest, (ii) all Related
Security with respect to each such Receivable, and (iii) all Collections with
respect to, and other proceeds of, each such Receivable. Each such undivided
percentage interest shall equal:
IA + RR
----------------------
NPB
WHERE:
IA = the Invested Amount of such Receivable Interest.
NPB = the Net Pool Balance.
RR = the Required Reserve.
Such undivided percentage ownership interest shall be initially computed on its
date of purchase. Thereafter, until the Facility Termination Date, each
Receivable Interest shall be automatically
I-15
25
recomputed (or deemed to be recomputed) on each day prior to the Facility
Termination Date. The variable percentage represented by any Receivable Interest
as computed (or deemed recomputed) as of the close of the business day
immediately preceding the Facility Termination Date shall remain constant at all
times thereafter.
"RECEIVABLES SALE AGREEMENT" means that certain Receivables
Sale Agreement, dated as of December 19, 2000, among the Originators and Seller,
as the same may be amended, restated or otherwise modified from time to time.
"RECORDS" means, with respect to any Receivable, all Contracts
and other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
"RECOURSE OBLIGATIONS" has the meaning set forth in Section
2.1.
"REDUCTION NOTICE" has the meaning set forth in Section 1.3.
"REGULATORY CHANGE" has the meaning set forth in Section 10.2.
"REINVESTMENT" has the meaning set forth in Section 2.2.
"RELATED SECURITY" means, with respect to any Receivable:
(i) all of Seller's right, title and interest in and to the
Related Security (under and as defined in the Receivables Sale
Agreement),
(ii) all of Seller's right, title and interest in, to and
under the Receivables Sale Agreement in respect of such Receivable,
(iii) all of Seller's right, title and interest in and to the
Demand Advances, and
(iv) all proceeds of any of the foregoing.
"REQUIRED LIQUIDITY BANKS" means, at any time, Liquidity Banks
with Liquidity Commitments in excess of 50% of the aggregate amount of all
Liquidity Commitments.
"REQUIRED NOTICE PERIOD" means the number of days required
notice set forth below applicable to the Aggregate Reduction indicated below:
I-16
26
AGGREGATE REDUCTION REQUIRED NOTICE PERIOD
------------------- ----------------------
less than 25% of the Purchase Limit 2 Business Days
greater than 25% but less than 50% of
the Purchase Limit 5 Business Days
50% or more of the Purchase Limit 10 Business Days
"REQUIRED RESERVE" means, on any day during a Calculation
Period, the product of (a) the greater of (i) the Required Reserve Factor Floor
and (ii) the sum of the Loss Reserve, the Yield Reserve, the Dilution Reserve
and the Servicing Reserve, times (b) the Net Pool Balance as of the Cut-Off Date
immediately preceding such Calculation Period.
"REQUIRED RESERVE FACTOR FLOOR" means, for any Calculation
Period, the sum (expressed as a percentage) of (a) 10% plus (b) the product of
the Adjusted Dilution Ratio and the Dilution Horizon Ratio, in each case, as of
the immediately preceding Cut-Off Date.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of Seller now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock or in any junior class of stock of
Seller, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of capital stock of Seller now or hereafter outstanding, (iii) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to the Subordinated Loans (as defined in the Receivables Sale
Agreement), (iv) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of Seller now or hereafter
outstanding, and (v) any payment of management fees by Seller (except for
reasonable management fees to any Originator or its Affiliates in reimbursement
of actual management services performed).
"S&P" means Standard and Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc.
"SECURED PARTIES" means the Indemnified Parties.
"SELLER" has the meaning set forth in the preamble to this
Agreement.
"SELLER PARTIES" means, collectively, (a) Seller, and (b) at
any time while Unifi is acting as the Servicer or the Performance Guarantor,
Unifi.
I-17
27
"SERVICER" means at any time the Person (which may be the
Agent) then authorized pursuant to Article VIII to service, administer and
collect Receivables.
"SERVICING FEE" means, for each day in a Calculation Period:
(a) an amount equal to (i) the Servicing Fee Rate (or, at any
time while Unifi or one of its Affiliates is the Servicer, such lesser
percentage as may be agreed between Seller and the Servicer on an arms'
length basis based on then prevailing market terms for similar
services), TIMES (ii) the aggregate Outstanding Balance of all
Receivables at the close of business on the Cut-Off Date immediately
preceding such Calculation Period, TIMES (iii) 1/360; or
(b) on and after the Servicer's reasonable request made at any
time when Unifi or one of its Affiliates is no longer acting as
Servicer hereunder, an alternative amount specified by the successor
Servicer not exceeding (i) 110% of such Servicer's reasonable costs and
expenses of performing its obligations under this Agreement during the
preceding Calculation Period, DIVIDED BY (ii) the number of days in the
current Calculation Period.
"SERVICING FEE RATE" means 1.0% per annum.
"SERVICING RESERVE" means, for any Calculation Period, the
product (expressed as a percentage) of (a) the Servicing Fee Rate, TIMES (b) a
fraction, the numerator of which is the highest Days Sales Outstanding for the
most recent 12 Calculation Periods and the denominator of which is 360.
"SETTLEMENT DATE" means (A) the 2nd Business Day after each
Monthly Reporting Date, and (B) the last day of the relevant Tranche Period in
respect of each Receivable Interests funded through a Liquidity Funding.
"SETTLEMENT PERIOD" means (A) in respect of each Receivable
Interest funded through the issuance of Commercial Paper, the immediately
preceding Calculation Period, and (B) in respect of each Receivable Interest
funded through a Liquidity Funding, the entire Tranche Period of such Liquidity
Funding.
"SUBSIDIARY" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or by
one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, limited liability company,
joint venture or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.
"TAX CODE" means the Internal Revenue Code of 1986, as the
same may be amended from time to time.
"TERMINATING TRANCHE" has the meaning set forth in Section
4.3(b).
I-18
28
"TRADE RECEIVABLE" means all indebtedness and other
obligations owed to an Originator (at the times it arises, and before giving
effect to any transfer or conveyance under the Receivables Sale Agreement) or
Seller (after giving effect to the transfers under the Receivables Sale
Agreement) or in which such Originator or Seller has a security interest or
other interest, including, without limitation, any indebtedness, obligation or
interest constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the rendering of
services by such Originator and further includes, without limitation, the
obligation to pay any Finance Charges with respect thereto; PROVIDED, HOWEVER,
the term "TRADE RECEIVABLE" shall not include any such indebtedness or
obligations which have been factored by the applicable Originator. Indebtedness
and other rights and obligations arising from any one transaction, including,
without limitation, indebtedness and other rights and obligations represented by
an individual invoice, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other rights and obligations arising from any
other transaction; PROVIDED, FURTHER, that any indebtedness, rights or
obligations referred to in the immediately preceding sentence shall be a
Receivable regardless or whether the account debtor or such Originator treats
such indebtedness, rights or obligations as a separate payment obligation.
"TRANCHE PERIOD" means, with respect to any Receivable
Interest funded through a Liquidity Funding:
(a) if Yield for such Receivable Interest is calculated
on the basis of the LIBO Rate, a period of one, two, three or six
months, or such shorter period as may be mutually agreeable to the
Agent and Seller, commencing on a Business Day selected by Seller or
the Agent pursuant to this Agreement. Such Tranche Period shall end on
the day in the applicable succeeding calendar month which corresponds
numerically to the beginning day of such Tranche Period, PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such
succeeding month, such Tranche Period shall end on the last Business
Day of such succeeding month; or
(b) if Yield for such Receivable Interest is calculated
on the basis of the Alternate Base Rate, a period commencing on a
Business Day selected by Seller and agreed to by the Agent, PROVIDED
THAT no such period shall exceed one month.
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, PROVIDED, HOWEVER,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period which
commences before the Facility Termination Date and would otherwise end on a date
occurring after the Facility Termination Date, such Tranche Period shall end on
the Facility Termination Date. The duration of each Tranche Period which
commences after the Facility Termination Date shall be of such duration as
selected by the Agent.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
each Purchase Notice, the Receivables Sale Agreement, the Performance
Undertaking, each Collection Account Agreement, the Fee Letter, each
Subordinated Note (as defined in the Receivables Sale
I-19
29
Agreement) and all other instruments, documents and agreements executed and
delivered in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"UNIFI" has the meaning specified in the preamble to this
Agreement.
"UNMATURED AMORTIZATION EVENT" means an event which, with the
passage of time or the giving of notice, or both, would constitute an
Amortization Event.
"WACHOVIA" means Wachovia Bank, N.A. in its individual
capacity and its successors.
"YIELD" means for each Tranche Period relating to a Receivable
Interest funded through a Liquidity Funding, an amount equal to the product of
the applicable Yield Rate for such Receivable Interest multiplied by the
Invested Amount of such Receivable Interest for each day elapsed during such
Tranche Period, annualized on a 360 day basis.
"YIELD RATE" means, with respect to each Receivable Interest
funded through a Liquidity Funding, the LIBO Rate, the Alternate Base Rate or
the Default Rate, as applicable.
"YIELD RESERVE" means, for any Calculation Period, the product
(expressed as a percentage) of (i) 1.5 times (ii) the Alternate Base Rate as of
the immediately preceding Cut-Off Date times (iii) a fraction the numerator of
which is the highest Days Sales Outstanding for the most recent 12 Calculation
Periods and the denominator of which is 360.
ALL ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN SHALL BE
CONSTRUED IN ACCORDANCE WITH GAAP. ALL TERMS USED IN ARTICLE 9 OF THE UCC IN THE
STATE OF NEW YORK, AND NOT SPECIFICALLY DEFINED HEREIN, ARE USED HEREIN AS
DEFINED IN SUCH ARTICLE 9.
I-20
EX-10.L
6
g71711ex10-l.txt
RECEIVABLES PURCHASE AGREEMENT DATED 12/19/2000
1
EXHIBIT (10l)
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of December 19,
2000 is entered into by and among:
(a) Unifi Receivables, LLC, a Nevada limited liability
corporation ("SELLER"),
(b) Unifi, Inc., a New York corporation ("UNIFI"), as initial
Servicer,
(c) Blue Ridge Asset Funding Corporation, a Delaware
corporation ("BLUE RIDGE"), and
(d) Wachovia Bank, N.A., as agent for Blue Ridge and its
assigns under the Transaction Documents and under the Liquidity
Agreement (together with its successors and assigns in such capacity,
the "AGENT").
UNLESS DEFINED ELSEWHERE HEREIN, CAPITALIZED TERMS USED IN THIS AGREEMENT SHALL
HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN EXHIBIT I.
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Receivable Interests
from time to time.
Blue Ridge shall purchase Receivable Interests from Seller
from time to time either by issuing its Commercial Paper or by availing
itself of a Liquidity Funding to the extent available.
Wachovia Bank, N.A. has been requested and is willing to act
as Agent on behalf of Blue Ridge and its assigns in accordance with the
terms hereof.
ARTICLE I.
PURCHASE ARRANGEMENTS
Section 1.1 Purchase Facility.
(a) Upon the terms and subject to the conditions of this
Agreement (including, without limitation, Article VI), from time to time prior
to the Facility Termination Date, Seller may request that Blue Ridge purchase
from Seller undivided ownership interests in the Receivables and the associated
Related Security and Collections, and Blue Ridge shall make such Purchase;
PROVIDED THAT no Purchase shall be made by Blue Ridge if, after giving effect
thereto, either (i) the Aggregate Invested Amount would exceed the Purchase
Limit, or (ii) the aggregate of the Receivable Interests would exceed 100%. It
is the intent of Blue Ridge to fund the Purchases by the issuance of Commercial
Paper. If for any reason Blue Ridge is unable, or determines that it is
undesirable, to issue Commercial Paper to fund or maintain its investment in
2
the Receivable Interests, or is unable for any reason to repay such Commercial
Paper upon the maturity thereof, then Blue Ridge will avail itself of a
Liquidity Funding to the extent available. If Blue Ridge funds or refinances its
investment in a Receivable Interest through a Liquidity Funding, in lieu of
paying CP Costs on the Invested Amount pursuant to Article III hereof, Seller
will pay Yield thereon at the Alternate Base Rate or the LIBO Rate, selected in
accordance with Article IV hereof. Nothing herein shall be deemed to constitute
a commitment of Blue Ridge to issue Commercial Paper.
(b) Seller may, upon at least ten (5) Business Days prior
written notice to the Agent, terminate in whole or reduce in part, the unused
portion of the Purchase Limit; PROVIDED THAT each partial reduction of the
Purchase Limit shall be in an amount equal to $10,000,000 (or a larger integral
multiple of $1,000,000 if in excess thereof).
Section 1.2 Incremental Purchases. Seller shall provide the Agent
with at least two (2) Business Days' prior written notice in a form set forth as
Exhibit II hereto of each Incremental Purchase (each, a "PURCHASE NOTICE"). Each
Purchase Notice shall be subject to Section 6.2 hereof and, except as set forth
below, shall be irrevocable and shall specify the requested Purchase Price
(which shall not be less than $1,000,000 or a larger integral multiple of
$100,000) and the Purchase Date (which, in the case of any Incremental Purchase
after the initial Purchase hereunder, shall only be on a Settlement Date).
Following receipt of a Purchase Notice, the Agent will determine whether Blue
Ridge will fund the requested Incremental Purchase through the issuance of
Commercial Paper or through a Liquidity Funding. If Blue Ridge determines to
fund an Incremental Purchase through a Liquidity Funding, Seller may cancel the
Purchase Notice or, in the absence of such a cancellation, the Incremental
Purchase will be funded through a Liquidity Funding. On each Purchase Date, upon
satisfaction of the applicable conditions precedent set forth in Article VI,
Blue Ridge shall deposit to the Facility Account, in immediately available
funds, as soon as possible and in no event later than 2:00 p.m. (New York time),
an amount equal to the requested Purchase Price.
Section 1.3 Decreases. Seller shall provide the Agent with prior
written notice in conformity with the Required Notice Period (a "REDUCTION
NOTICE") of any proposed reduction of Aggregate Invested Amount. Such Reduction
Notice shall designate (i) the date (the "PROPOSED REDUCTION DATE") upon which
any such reduction of Aggregate Invested Amount shall occur (which date shall
give effect to the applicable Required Notice Period), and (ii) the amount of
Aggregate Invested Amount to be reduced which shall be applied ratably to all
Receivable Interests in accordance with the respective Invested Amounts thereof
(the "AGGREGATE REDUCTION"). Only one (1) Reduction Notice shall be outstanding
at any time.
Section 1.4 Deemed Collections; Purchase Limit.
(a) If on any day:
(i) the Outstanding Balance of any Receivable is reduced
or cancelled as a result of any defective or rejected goods or
services, any cash discount or any other adjustment by any Originator
or any Affiliate thereof, or as a result of any governmental or
regulatory action, or
3
(ii) the Outstanding Balance of any Receivable is reduced
or canceled as a result of a setoff in respect of any claim by the
Obligor thereof (whether such claim arises out of the same or a related
or an unrelated transaction), or
(iii) the Outstanding Balance of any Receivable is reduced
on account of the obligation of any Originator or any Affiliate thereof
to pay to the related Obligor any rebate or refund, or
(iv) the Outstanding Balance of any Receivable is less
than the amount included in calculating the Net Pool Balance for
purposes of any Monthly Report (for any reason other than receipt of
Collections or such Receivable becoming a Defaulted Receivable), or
(v) any of the representations or warranties of Seller
set forth in Section 5.1(i), (j), (r), (s), (t) or (u) were not true
when made with respect to any Receivable, or
(vi) any Obligor on a Factoring Company Receivable
exercises any recourse to the applicable Originator,
then, on such day, Seller shall be deemed to have received a Collection of such
Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such
reduction or cancellation or the difference between the actual Outstanding
Balance and the amount included in calculating such Net Pool Balance, as
applicable; (B) in the case of clause (v) above, in the amount of the
Outstanding Balance of such Receivable; and (C) in the case of clause (vi)
above, in the amount of the recourse exercised; and, in each of the foregoing
cases, effective as of the next succeeding Settlement Date shall pay to the
Agent's Account the amount of any such Collection deemed to have been received.
(b) Seller shall ensure that the Aggregate Invested
Amount at no time exceeds the Purchase Limit. If at any time the Aggregate
Invested Amount exceeds the Purchase Limit, Seller shall pay to the Agent not
later than within 2 Business Days after discovering such excess an amount to be
applied to reduce the Aggregate Invested Amount (as allocated by the Agent),
such that after giving effect to such payment the Aggregate Invested Amount is
less than or equal to the Purchase Limit.
(c) Seller shall also ensure that the Receivable
Interests shall at no time exceed in the aggregate 100%. If the aggregate of the
Receivable Interests exceeds 100%, Seller shall pay to the Agent within 2
Business Days after discovering such excess an amount to be applied to reduce
the Aggregate Invested Amount (as allocated by the Agent), such that after
giving effect to such payment the aggregate of the Receivable Interests equals
or is less than 100%.
Section 1.5 Payment Requirements and Computations. All amounts to
be paid or deposited by any Seller Party pursuant to any provision of this
Agreement shall be paid or deposited in accordance with the terms hereof no
later than 12:00 noon (New York time) on the day when due in immediately
available funds, and if not received before 12:00 noon (New York
4
time) shall be deemed to be received on the next succeeding Business Day. If
such amounts are payable to the Agent for the account of Blue Ridge, they shall
be paid to the Agent's Account, for the account of Blue Ridge until otherwise
notified by the Agent. Upon notice to Seller, the Agent may debit the Facility
Account for all amounts due and payable hereunder. All computations of CP Costs,
Yield, per annum fees calculated as part of any CP Costs, per annum fees
hereunder and per annum fees under the Fee Letter shall be made on the basis of
a year of 360 days for the actual number of days elapsed. If any amount
hereunder shall be payable on a day which is not a Business Day, such amount
shall be payable on the next succeeding Business Day.
Section 1.6 Broken Funding Costs. Any Broken Funding Costs
incurred due to a prepayment pursuant to Section 1.4(b) or (c) hereof shall be
reasonably allocated by the Agent taking into account similar Broken Funding
Costs incurred due to payments or prepayments made by any Person on the same day
as the Seller herein by other facilities utilizing the same Pooled Commercial
Paper utilized pursuant hereto.
ARTICLE II.
PAYMENTS AND COLLECTIONS
Section 2.1 Payments of Recourse Obligations. Seller hereby
promises to pay the following (collectively, the "RECOURSE OBLIGATIONS"):
(a) all amounts due and owing under Section 1.3 or 1.4 on
the dates specified therein;
(b) the fees set forth in the Fee Letter on the dates
specified therein;
(c) all accrued and unpaid Yield on the Receivable
Interests accruing Yield at the Alternate Base Rate or the Default Rate
on each Settlement Date applicable thereto;
(d) all accrued and unpaid Yield on the Receivable
Interests accruing Yield at the LIBO Rate on the last day of each
Tranche Period applicable thereto;
(e) all accrued and unpaid CP Costs on the Receivable
Interests funded with Commercial Paper on each Settlement Date; and
(f) all Broken Funding Costs and Indemnified Amounts upon
demand.
Section 2.2 Collections Prior to the Facility Termination Date;
Repayment of Certain Demand Advances.
(a) Prior to the Facility Termination Date, any Deemed
Collections received by the Servicer and Blue Ridge's Portion of any Collections
received by the Servicer shall be set aside and held in trust by the Servicer
for the payment of any accrued and unpaid Aggregate Unpaids or for a
Reinvestment as provided in this Section 2.2. If at any time any Collections are
5
received by the Servicer prior to the Facility Termination Date, Seller hereby
requests and Blue Ridge hereby agrees to make, simultaneously with such receipt,
a reinvestment (each, a "REINVESTMENT") with Blue Ridge's Portion of the balance
of each and every Collection received by the Servicer such that after giving
effect to such Reinvestment, the Invested Amount of such Receivable Interest
immediately after such receipt and corresponding Reinvestment shall be equal to
the Invested Amount immediately prior to such receipt.
(b) On each Settlement Date prior to the Facility
Termination Date, the Servicer shall remit to the Agent's Account the amounts
set aside during the preceding Settlement Period that have not been subject to a
Reinvestment and (after deduction of its Servicing Fee) apply such amounts (if
not previously paid in accordance with Section 2.1) to the Aggregate Unpaids in
the order specified:
FIRST, ratably to the payment of all accrued and unpaid CP
Costs, Yield and Broken Funding Costs (if any) on the Invested Amount
of the Receivable Interests to the extent that they are then due and
owing,
SECOND, ratably to the payment of all accrued and unpaid fees
under the Fee Letter (if any) that are then due and owing,
THIRD, if required under Section 1.3 or 1.4, to the ratable
reduction of the Aggregate Invested Amount, and
FOURTH, for the ratable payment of all other unpaid Recourse
Obligations, if any, that are then due and owing.
The balance, if any, shall be paid to Seller or otherwise in accordance with
Seller's instructions.
(c) If the Collections are insufficient to pay the
Servicing Fee and the Aggregate Unpaids specified above on any Settlement Date,
Seller shall make demand upon Unifi for repayment of any outstanding Demand
Advances in an aggregate amount equal to the lesser of (i) the amount of such
shortfall in Collections, and (ii) the aggregate outstanding principal balance
of the Demand Advances, together with all accrued and unpaid interest thereon,
and Unifi hereby agrees to pay such amount to the Agent's Account on such
Settlement Date.
Section 2.3 Repayment of Demand Advances on the Facility
Termination Date; Collections
(a) On the Facility Termination Date, Unifi hereby agrees
to repay the aggregate outstanding principal balance of all Demand Advances,
together with all accrued and unpaid interest thereon, to the Agent's Account,
without demand or notice of any kind, all of which are hereby expressly waived
by Unifi.
(b) On the Facility Termination Date and on each day
thereafter, the Servicer shall set aside and hold in trust, for the Secured
Parties, all Collections received on each such day. On and after the Facility
Termination Date, the Servicer shall, on each Settlement Date and
6
on each other Business Day specified by the Agent (after deduction of any
accrued and unpaid Servicing Fee as of such date): (i) remit to the Agent's
Account the amounts set aside pursuant to the preceding sentence, and (ii) apply
such amounts to reduce the Aggregate Unpaids as follows:
FIRST, to the reimbursement of the Agent's costs of collection
and enforcement of this Agreement,
SECOND, ratably to the payment of all accrued and unpaid CP
Costs, Yield and Broken Funding Costs (if any) on the Invested Amount
of the Receivable Interests to the extent that they are then due and
payable,
THIRD, ratably to the payment of all accrued and unpaid fees
under the Fee Letter,
FOURTH, to the ratable reduction of the Aggregate Invested
Amount,
FIFTH, for the ratable payment of all other Aggregate Unpaids,
and
SIXTH, after the Final Payout Date, to Seller.
Section 2.4 Payment Rescission. No payment of any of the
Aggregate Unpaids shall be considered paid or applied hereunder to the extent
that, at any time, all or any portion of such payment or application is
rescinded by application of law or judicial authority, or must otherwise be
returned or refunded for any reason. Seller shall remain obligated for the
amount of any payment or application so rescinded, returned or refunded, and
shall promptly pay to the Agent (for application to the Person or Persons who
suffered such rescission, return or refund) the full amount thereof, plus
interest thereon at the Default Rate from the date of any such rescission,
return or refunding.
Section 2.5 Clean Up Call. In addition to Seller's rights
pursuant to Section 1.3, Seller shall have the right (after providing written
notice to the Agent in accordance with the Required Notice Period), at any time
following the reduction of the Aggregate Invested Amount to a level that is less
than 10.0% of the original Purchase Limit, to repurchase all, but not less than
all, of the then outstanding Receivable Interests. The purchase price in respect
thereof shall be an amount equal to the Aggregate Unpaids through the date of
such repurchase, payable in immediately available funds to the Agent's Account.
Such repurchase shall be without representation, warranty or recourse of any
kind by, on the part of, or against Blue Ridge or the Agent other than a
representation and warranty by the Agent that such Receivables and the Related
Security are free and clear of any Lien created by or through the Agent.
ARTICLE III.
COMMERCIAL PAPER FUNDING
Section 3.1 CP Costs. Seller shall pay CP Costs with respect to
the Invested Amount of all Receivable Interests funded through the issuance of
Commercial Paper. Each Receivable
7
Interest that is funded substantially with Pooled Commercial Paper will accrue
CP Costs each day on a pro rata basis, based upon the percentage share that the
Invested Amount in respect of such Receivable Interest represents in relation to
all assets held by Blue Ridge and funded substantially with related Pooled
Commercial Paper.
Section 3.2 Calculation of CP Costs. Not later than the 3rd
Business Day immediately preceding each Monthly Reporting Date, Blue Ridge shall
calculate the aggregate amount of CP Costs applicable to its Receivable
Interests for the Calculation Period then most recently ended and shall notify
Seller and Servicer of such aggregate amount.
Section 3.3 CP Costs Payments. On each Settlement Date, Seller
shall, in accordance with the provisions of Article II hereof, pay to the Agent
(for the benefit of Blue Ridge) an aggregate amount equal to all accrued and
unpaid CP Costs in respect of the Invested Amount of all Receivable Interests
funded with Commercial Paper for the Calculation Period then most recently
ended.
Section 3.4 Default Rate. From and after the occurrence of an
Amortization Event, all Receivable Interests shall accrue Yield at the Default
Rate.
ARTICLE IV.
LIQUIDITY FUNDINGS
Section 4.1 Liquidity Fundings. Prior to the occurrence of an
Amortization Event, the outstanding Invested Amount of each Receivable Interest
funded with a Liquidity Funding shall accrue Yield for each day during its
Tranche Period at either the LIBO Rate or the Alternate Base Rate in accordance
with the terms and conditions hereof. Until Seller gives the required notice to
the Agent of another Yield Rate in accordance with Section 4.4, the initial
Yield Rate for any Receivable Interest funded with a Liquidity Funding shall be
the Alternate Base Rate (unless the Default Rate is then applicable). If any
portion of an undivided interest in a Receivable Interest initially funded with
Commercial Paper is sold to the Liquidity Banks pursuant to the Liquidity
Agreement, such portion of such undivided interest in such Receivable Interest
shall be deemed to have a Tranche Period commencing on the date of such sale.
Section 4.2 Yield Payments. On the Settlement Date for each
Receivable Interest that is funded with a Liquidity Funding, Seller shall pay to
the Agent (for the benefit of the Liquidity Banks) an aggregate amount equal to
the accrued and unpaid Yield thereon for the entire Tranche Period of each such
Liquidity Funding in accordance with Article II.
8
Section 4.3 Selection and Continuation of Tranche Periods.(a)
With consultation from (and approval by) the Agent, Seller shall from time to
time request Tranche Periods for the Receivable Interests funded with Liquidity
Fundings, PROVIDED THAT if at any time any Liquidity Funding is outstanding,
Seller shall always request Tranche Periods such that at least one Tranche
Period shall end on the date specified in clause (A) of the definition of
Settlement Date.
(b) Seller or the Agent, upon notice to and consent by
the other received at least three (3) Business Days prior to the end of a
Tranche Period (the "TERMINATING TRANCHE") for any Liquidity Funding, may,
effective on the last day of the Terminating Tranche: (i) divide any such
Liquidity Funding into multiple Liquidity Fundings, (ii) combine any such
Liquidity Funding with one or more other Liquidity Fundings that have a
Terminating Tranche ending on the same day as such Terminating Tranche or (iii)
combine any such Liquidity Funding with a new Liquidity Funding to be made by
the Liquidity Banks on the day such Terminating Tranche ends.
Section 4.4 Liquidity Funding Yield Rates. Seller may select the
LIBO Rate (subject to Section 4.5 below) or the Alternate Base Rate for each
Liquidity Funding. Seller shall by 12:00 noon (New York time): (i) at least
three (3) Business Days prior to the expiration of any Terminating Tranche with
respect to which the LIBO Rate is being requested as a Yield Rate with a new
Tranche Period and (ii) at least one (1) Business Day prior to the expiration of
any Terminating Tranche with respect to which the Alternate Base Rate is being
requested as a Yield Rate with a new Tranche Period, give the Agent irrevocable
notice of the new Yield Rate for the Liquidity Funding associated with such
Terminating Tranche. Until Seller gives notice to the Agent of another Yield
Rate, the initial Yield Rate for any Receivable Interest assigned or
participated to the Liquidity Banks pursuant to the Liquidity Agreement shall be
the Alternate Base Rate (unless the Default Rate is then applicable).
Section 4.5 Suspension of the LIBO Rate (a) If any Liquidity Bank
notifies the Agent that it has determined that funding its ratable share of the
Liquidity Fundings at a LIBO Rate would violate any applicable law, rule,
regulation, or directive of any governmental or regulatory authority, whether or
not having the force of law, or that (i) deposits of a type and maturity
appropriate to match fund its Liquidity Funding at such LIBO Rate are not
available or (ii) such LIBO Rate does not accurately reflect the cost of
acquiring or maintaining a Liquidity Funding at such LIBO Rate, then the Agent
shall suspend the availability of such LIBO Rate and require Seller to select
the Alternate Base Rate for any Liquidity Funding accruing Yield at such LIBO
Rate.
(b) If less than all of the Liquidity Banks give a notice
to the Agent pursuant to Section 4.5(a), each Liquidity Bank which gave such a
notice shall be obliged, at the request of Seller, Blue Ridge or the Agent, to
assign all of its rights and obligations hereunder to (i) another Liquidity Bank
or (ii) another funding entity nominated by Seller or the Agent that is an
Eligible Assignee willing to participate in the Liquidity Agreement through the
Liquidity Termination Date in the place of such notifying Liquidity Bank;
PROVIDED THAT (i) the notifying Liquidity Bank receives payment in full of all
Aggregate Unpaids owing to it (whether due or
9
accrued), and (ii) the replacement Liquidity Bank otherwise satisfies the
requirements of the Liquidity Agreement.
Section 4.6 Default Rate. From and after the occurrence of an
Amortization Event, all Liquidity Fundings shall accrue Yield at the Default
Rate.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of the Seller Parties.
Each Seller Party hereby represents and warrants to the Agent and Blue Ridge, as
to itself, as of the date hereof and as of the date of each Incremental Purchase
and the date of each Reinvestment that:
(a) Existence and Power. Such Seller Party's jurisdiction
of organization is correctly set forth in the preamble to this Agreement. Such
Seller Party is duly organized under the laws of that jurisdiction and no other
state or jurisdiction, and such jurisdiction must maintain a public record
showing the organization to have been organized. Such Seller Party is validly
existing and in good standing under the laws of its state of organization. Such
Seller Party is duly qualified to do business and is in good standing as a
foreign entity, and has and holds all organizational power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted except where
the failure to so qualify or so hold could not reasonably be expected to have a
Material Adverse Effect.
(b) Power and Authority; Due Authorization, Execution and
Delivery. The execution and delivery by such Seller Party of this Agreement and
each other Transaction Document to which it is a party, and the performance of
its obligations hereunder and thereunder and, in the case of Seller, Seller's
use of the proceeds of Purchases made hereunder, are within its corporate powers
and authority and have been duly authorized by all necessary corporate action on
its part. This Agreement and each other Transaction Document to which such
Seller Party is a party has been duly executed and delivered by such Seller
Party.
(c) No Conflict. The execution and delivery by such
Seller Party of this Agreement and each other Transaction Document to which it
is a party, and the performance of its obligations hereunder and thereunder do
not contravene or violate (i) its certificate or articles of incorporation or
by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or by which it or any of its property is bound, or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on assets of such Seller Party or its Subsidiaries (except as created hereunder)
except, in any case, where such contravention or violation could not reasonably
be expected to have a Material Adverse Effect; and no transaction contemplated
hereby requires compliance with any bulk sales act or similar law.
10
(d) Governmental Authorization. Other than the filing of
the financing statements required hereunder, no authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such Seller
Party of this Agreement and each other Transaction Document to which it is a
party and the performance of its obligations hereunder and thereunder.
(e) Actions, Suits. There are no actions, suits or
proceedings pending, or to the best of such Seller Party's knowledge,
threatened, against or affecting such Seller Party, or any of its properties, in
or before any court, arbitrator or other body, that could reasonably be expected
to have a Material Adverse Effect. Such Seller Party is not in default with
respect to any order of any court, arbitrator or governmental body which default
would reasonably be expected to have a Material Adverse Effect.
(f) Binding Effect. This Agreement and each other
Transaction Document to which such Seller Party is a party constitute the legal,
valid and binding obligations of such Seller Party enforceable against such
Seller Party in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore
furnished by such Seller Party or any of its Affiliates to the Agent or Blue
Ridge for purposes of or in connection with this Agreement, any of the other
Transaction Documents or any transaction contemplated hereby or thereby is true
and accurate in every material respect on the date such information is stated or
certified and does not, as of such date, contain any material misstatement of
fact or omit to state a material fact or any fact necessary to make the
statements contained therein not misleading.
(h) Use of Proceeds. No proceeds of any Purchase
hereunder will be used (i) for a purpose that violates, or would be inconsistent
with, (A) Section 7.2(e) of this Agreement or (B) Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Good Title. Seller is the legal and beneficial owner
of the Receivables and Related Security with respect thereto, free and clear of
any Adverse Claim, except as created by the Transaction Documents (and with
respect to any Related Security in which the Seller's rights therein are a
security interest, the rights of the owner of such Related Security). There have
been duly filed all financing statements or other similar instruments or
documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Seller's ownership interest (or security interest in
the case of certain Related Security) in each Receivable, its Collections and
the Related Security.
(j) Perfection. This Agreement is effective to create a
valid security interest in favor of the Agent for the benefit of the Secured
Parties in the Purchased Assets to secure payment of the Aggregate Unpaids, free
and clear of any Adverse Claim except as created by the
11
Transactions Documents (and with respect to any Related Security in which the
Seller's rights therein are a security interest, the rights of the owner of such
Related Security). There have been duly filed all financing statements or other
similar instruments or documents necessary under the UCC (or any comparable law)
of all appropriate jurisdictions to perfect the Agent's (on behalf of the
Secured Parties) security interest in the Purchased Assets.
(k) Places of Business and Locations of Records. The
principal places of business and chief executive office of such Seller Party and
the offices where it keeps all of its Records are located at the address(es)
listed on Exhibit III or such other locations of which the Agent has been
notified in accordance with Section 7.2(a) in jurisdictions where all action
required by Section 13.3(a) has been taken and completed. Seller's Federal
Employer Identification Number is correctly set forth on Exhibit III.
(l) Collections. The conditions and requirements set
forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and
duly performed. The names, addresses and jurisdictions of organization of all
Collection Banks, together with the account numbers of the Collection Accounts
of Seller at each Collection Bank and the post office box number of each
Lock-Box, are listed on Exhibit IV. Seller has not granted any Person, other
than the Agent as contemplated by this Agreement, dominion and control of any
Lock-Box or Collection Account, or the right to take dominion and control of any
such Lock-Box or Collection Account at a future time or upon the occurrence of a
future event.
(m) Material Adverse Effect. (i) The initial Servicer
represents and warrants that since June 25, 2000, no event has occurred that
would have a material adverse effect on the financial condition or operations of
the initial Servicer and its Subsidiaries or the ability of the initial Servicer
to perform its obligations under this Agreement, and (ii) Seller represents and
warrants that since the date of this Agreement, no event has occurred that would
have a material adverse effect on (A) the financial condition or operations of
Seller, (B) the ability of Seller to perform its obligations under the
Transaction Documents, or (C) the collectibility of the Receivables generally or
any material portion of the Receivables.
(n) Names. The name in which Seller has executed this
Agreement is identical to the name of Seller as indicated on the public record
of its state of organization which shows Seller to have been organized. In the
past five (5) years or since its creation, whichever period is shorter, Seller
has not used any corporate names, trade names or assumed names other than the
name in which it has executed this Agreement.
(o) Ownership of Seller. Unifi owns, directly or
indirectly, 100% of the issued and outstanding capital stock of Seller, free and
clear of any Adverse Claim. Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of Seller.
(p) Not a Holding Company or an Investment Company. Such
Seller Party is not a "holding company" or a "subsidiary holding company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or any successor
12
statute. Such Seller Party is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or any successor statute.
(q) Compliance with Law. Such Seller Party has complied
in all respects with all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. Each Receivable, together with the Contract related
thereto, does not contravene any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy), and no part of such Contract is in
violation of any such law, rule or regulation, except where such contravention
or violation could not reasonably be expected to have a Material Adverse Effect.
(r) Compliance with Credit and Collection Policy. Such
Seller Party has complied in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract, and
has not made any change to such Credit and Collection Policy, except such
material change as to which the Agent has been notified in accordance with
Section 7.1(a)(vii).
(s) Payments to Applicable Originator. With respect to
each Receivable transferred to Seller under the Receivables Sale Agreement,
Seller has given reasonably equivalent value to the applicable Originator in
consideration therefor and such transfer was not made for or on account of an
antecedent debt. No transfer by any Originator of any Receivable under the
Receivables Sale Agreement is or may be voidable under any section of the
Bankruptcy Reform Act of 1978 (11 U.S.C.ss.ss.101 et seq.), as amended.
(t) Enforceability of Contracts. Each Contract with
respect to each Receivable is effective to create, and has created, a legal,
valid and binding obligation of the related Obligor to pay the Outstanding
Balance of the Receivable created thereunder and any accrued interest thereon,
enforceable against the Obligor in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the
Net Pool Balance as an Eligible Receivable on the date of any Monthly Report was
an Eligible Receivable on such date.
(v) Purchase Limit and Maximum Receivable Interests.
Immediately after giving effect to each Incremental Purchase hereunder, the
Aggregate Invested Amount is less than or equal to the Purchase Limit and the
aggregate of the Receivable Interests does not exceed 100%.
(w) Accounting. The manner in which such Seller Party
accounts for the transactions contemplated by this Agreement and the Receivables
Sale Agreement does not jeopardize the true sale analysis.
13
(x) Plans. Such Seller Party does not have any Plans.
ARTICLE VI.
CONDITIONS OF PURCHASES
Section 6.1 Conditions Precedent to Initial Incremental Purchase.
The initial Incremental Purchase of a Receivable Interest under this Agreement
is subject to the conditions precedent that (a) the Agent shall have received on
or before the date of such Purchase those documents listed on Schedule A, (b)
Seller shall have been capitalized with the Initial Contribution Receivables and
(c) the Agent shall have received all fees and expenses required to be paid on
such date pursuant to the terms of this Agreement and the Fee Letter.
Section 6.2 Conditions Precedent to All Purchases and
Reinvestments. Each Incremental Purchase and each Reinvestment shall be subject
to the further conditions precedent that (a) in the case of each such Purchase:
(i) the Servicer shall have delivered to the Agent on or prior to the date of
such Purchase, in form and substance satisfactory to the Agent, all Monthly
Reports as and when due under Section 8.5 and (ii) upon the Agent's request, the
Servicer shall have delivered to the Agent at least three (3) days prior to such
Purchase an interim Monthly Report showing the amount of Eligible Receivables;
(b) the Agent shall have received such other approvals, opinions or documents as
it may reasonably request and (c) on each Purchase Date, the following
statements shall be true (and acceptance of the proceeds of such Incremental
Purchase or Reinvestment shall be deemed a representation and warranty by Seller
that such statements are then true):
(i) the representations and warranties made by
it and set forth in Section 5.1 are true and correct on and as
of the date of such Incremental Purchase or Reinvestment as
though made on and as of such Purchase Date;
(ii) no event has occurred and is continuing, or
would result from such Incremental Purchase or Reinvestment,
that will constitute an Amortization Event, and no event has
occurred and is continuing, or would result from such
Incremental Purchase or Reinvestment, that would constitute an
Unmatured Amortization Event; and
(iii) the Aggregate Invested Amount does not
exceed the Purchase Limit and the aggregate Receivable
Interests do not exceed 100%.
It is expressly understood that each Reinvestment shall, unless otherwise
directed by the Agent or Blue Ridge, occur automatically on each day that the
Servicer shall receive any Collections without the requirement that any further
action be taken on the part of any Person and notwithstanding the failure of
Seller to satisfy any of the foregoing conditions precedent in respect of such
Reinvestment. The failure of Seller to satisfy any of the foregoing conditions
precedent in respect of any Reinvestment shall give rise to a right of the
Agent, which right may be exercised at any time on demand of the Agent, to
rescind the related Purchase and direct Seller to pay to the Agent's Account,
for the benefit of Blue Ridge, an amount equal to the
14
Collections prior to the Facility Termination Date that shall have been applied
to the affected Reinvestment.
ARTICLE VII.
COVENANTS
Section 7.1 Affirmative Covenants of the Seller Parties. Until
the date on which the Aggregate Unpaids have been indefeasibly paid in full and
this Agreement terminates in accordance with its terms, each Seller Party hereby
covenants, as to itself, as set forth below:
(a) Reporting. Unifi will maintain, for itself and each
of its Subsidiaries, a system of accounting established and administered in
accordance with GAAP, and furnish or cause to be furnished to the Agent:
(i) Annual Reporting. Within 90 days after the
close of its respective fiscal years, audited, unqualified consolidated
financial statements (which shall include balance sheets, statements of
income and retained earnings and a statement of cash flows) for Unifi
and its Subsidiaries for such fiscal year certified in a manner
acceptable to the Agent by independent public accountants reasonably
acceptable to the Agent.
(ii) Quarterly Reporting. Within 45 days after
the close of the first three (3) quarterly periods of each of its
fiscal year, consolidated balance sheets of Unifi and its Subsidiaries
as at the close of each such period and consolidated statements of
income and retained earnings and a consolidated statement of cash flows
for Unifi and its Subsidiaries for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its chief
financial officer.
(iii) Compliance Certificate. Together with the
financial statements required hereunder, a compliance certificate in
substantially the form of Exhibit V signed by Unifi's Authorized
Officer and dated the date of such annual financial statement or such
quarterly financial statement, as the case may be.
(iv) Shareholders Statements and Reports.
Promptly upon the furnishing thereof to the shareholders of such Seller
Party copies of all financial statements, reports and proxy statements
so furnished.
(v) S.E.C. Filings. Promptly upon the filing
thereof, copies of all registration statements and annual, quarterly,
monthly or other regular reports which any Seller Party or any of its
Affiliates files with the Securities and Exchange Commission.
(vi) Copies of Notices. Promptly upon its receipt
of any notice, request for consent, financial statements,
certification, report or other communication under or in connection
with any Transaction Document from any Person other than the Agent or
Blue Ridge, copies of the same.
15
(vii) Change in Credit and Collection Policy. At
least thirty (30) days prior to the effectiveness of any material
change in or material amendment to the Credit and Collection Policy, a
copy of the Credit and Collection Policy then in effect and a notice
(A) indicating such change or amendment, and (B) if such proposed
change or amendment would be reasonably likely to adversely affect the
collectibility of the Receivables or decrease the credit quality of any
newly created Receivables, requesting the Agent's consent thereto.
(viii) Fiscal Months. By no later than November 15
of each calendar year, an updated Schedule B setting forth the next 13
Fiscal Months.
(ix) Other Information. Promptly, from time to
time, such other information, documents, records or reports relating to
the Receivables or the condition or operations, financial or otherwise,
of such Seller Party as the Agent may from time to time reasonably
request in order to protect the interests of the Agent, for the benefit
of Blue Ridge, under or as contemplated by this Agreement.
(b) Notices. Such Seller Party will notify the Agent in
writing of any of the following promptly upon learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken with
respect thereto:
(i) Amortization Events or Unmatured
Amortization Events. The occurrence of each Amortization Event and each
Unmatured Amortization Event, by a statement of an Authorized Officer
of such Seller Party.
(ii) Material Adverse Effect. The occurrence of
any event or condition that has had, or could reasonably be expected to
have, a Material Adverse Effect.
(iii) Termination Date. The occurrence of the
"TERMINATION DATE" under and as defined in the Receivables Sale
Agreement.
(iv) Defaults Under Other Agreements. The
occurrence of a default or an event of default under any other
financing arrangement pursuant to which such Seller Party is a debtor
or an obligor PROVIDED, no notice shall be required with regard to
defaults or events of defaults occurring pursuant to any financing
arrangement that, when aggregated with all other defaulted financing
arrangement, for which no notice was delivered, aggregates less than
$50,000,000.
(v) Notices under Receivables Sale Agreement.
Copies of all notices delivered by any Originator or Seller under the
Receivables Sale Agreement.
(vi) Downgrade of Servicer. Any downgrade in the
rating of any Indebtedness of Servicer by S&P or Moody's, setting forth
the Indebtedness affected and the nature of such change.
16
(c) Compliance with Laws and Preservation of Corporate
Existence. Such Seller Party will comply in all respects with all applicable
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect. Such Seller Party
will preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
its business is conducted, except where the failure to so preserve and maintain
or qualify could not reasonably be expected to have a Material Adverse Effect.
(d) Audits. Such Seller Party will furnish to the Agent
from time to time such information with respect to it and the Receivables as the
Agent may reasonably request. Such Seller Party will, from time to time during
regular business hours as requested by the Agent upon reasonable notice and at
the sole cost of such Seller Party, permit the Agent, or its agents or
representatives (and shall cause each Originator to permit the Agent or its
agents or representatives): (i) to examine and make copies of and abstracts from
all Records in the possession or under the control of such Person relating to
the Purchased Assets, including, without limitation, the related Contracts, and
(ii) to visit the offices and properties of such Person for the purpose of
examining such materials described in clause (i) above, and to discuss matters
relating to such Person's financial condition or the Purchased Assets or any
Person's performance under any of the Transaction Documents or any Person's
performance under the Contracts and, in each case, with any of the officers or
employees of Seller or the Servicer having knowledge of such matters (each of
the foregoing examinations and visits described in clause (i) and (ii) above , a
"REVIEW"); PROVIDED, HOWEVER, that, so long as no Amortization Event has
occurred and is continuing, (A) the Seller Parties shall only be responsible for
the costs and expenses of one (1) Review in any one calendar year, and (B) the
Agent will not request more than four (4) Reviews in any one calendar year.
(e) Keeping and Marking of Records and Books.
(i) The Servicer will (and will cause each Originator to)
maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit
the immediate identification of each new Receivable and all Collections
of and adjustments to each existing Receivable). The Servicer will (and
will cause each Originator to) give the Agent notice of any material
change in the administrative and operating procedures referred to in
the previous sentence.
(ii) Such Seller Party will (and will cause each
Originator to): (A) on or prior to the date hereof, mark its master
data processing records and other books and records relating to the
Receivables with a legend, acceptable to the Agent, describing the
Agent's security interest in the Purchased Assets and (B) upon the
request of the Agent following
17
the occurrence of an Amortization Event: (x) mark each Contract with a
legend describing the Agent's security interest and (y) deliver to the
Agent all Contracts (including, without limitation, all multiple
originals of any such Contract constituting an instrument, a
certificated security or chattel paper) relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection
Policy. Such Seller Party will (and will cause each Originator to) timely and
fully (i) perform and comply with all provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
and (ii) comply in all respects with the Credit and Collection Policy in regard
to each Receivable and the related Contract.
(g) Performance and Enforcement of Receivables Sale
Agreement. Seller will, and will require each Originator to, perform each of
their respective obligations and undertakings under and pursuant to the
Receivables Sale Agreement, will purchase Receivables thereunder in strict
compliance with the terms thereof and will vigorously enforce the rights and
remedies accorded to Seller under the Receivables Sale Agreement. Seller will
take all actions to perfect and enforce its rights and interests (and the rights
and interests of the Agent, as Seller's assignee) under the Receivables Sale
Agreement as the Agent may from time to time reasonably request, including,
without limitation, making claims to which it may be entitled under any
indemnity, reimbursement or similar provision contained in the Receivables Sale
Agreement.
(h) Ownership. Seller will (or will cause each Originator
to) take all necessary action to (i) vest legal and equitable title to the
Purchased Assets purchased under the Receivables Sale Agreement irrevocably in
Seller, free and clear of any Adverse Claims (other than Adverse Claims in favor
of the Agent, for the benefit of the Secured Parties) including, without
limitation, the filing of all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Seller's interest in such Purchased Assets and such
other action to perfect, protect or more fully evidence the interest of Seller
therein as the Agent may reasonably request), and (ii) establish and maintain,
in favor of the Agent, for the benefit of the Secured Parties, a valid and
perfected first priority security interest in all Purchased Assets, free and
clear of any Adverse Claims, including, without limitation, the filing of all
financing statements or other similar instruments or documents necessary under
the UCC (or any comparable law) of all appropriate jurisdictions to perfect the
Agent's (for the benefit of the Secured Parties) security interest in the
Purchased Assets and such other action to perfect, protect or more fully
evidence the interest of the Agent for the benefit of the Secured Parties as the
Agent may reasonably request.
(i) Reliance. Seller acknowledges that the Agent and Blue
Ridge are entering into the transactions contemplated by this Agreement in
reliance upon Seller's identity as a legal entity that is separate from each
Originator and Unifi. Therefore, from and after the date of execution and
delivery of this Agreement, Seller shall take all reasonable steps, including,
without limitation, all steps that the Agent or Blue Ridge may from time to time
reasonably request, to maintain Seller's identity as a separate legal entity and
to make it manifest to third parties that Seller is an entity with assets and
liabilities distinct from those of each Originator, Unifi and any Affiliates
thereof (other than Seller) and not just a division of any Originator, Unifi
18
or any such Affiliate. Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, Seller will:
(A) conduct its own business in its own name and
require that all full-time employees of Seller, if any,
identify themselves as such and not as employees of any
Originator or Unifi (including, without limitation, by means
of providing appropriate employees with business or
identification cards identifying such employees as Seller's
employees);
(B) compensate all employees, consultants and
agents directly, from Seller's own funds, for services
provided to Seller by such employees, consultants and agents
and, to the extent any employee, consultant or agent of Seller
is also an employee, consultant or agent of any Originator,
Unifi or any Affiliate thereof, allocate the compensation of
such employee, consultant or agent between Seller and such
Originator, Unifi or such Affiliate, as applicable, on a basis
that reflects the services rendered to Seller and such
Originator, Unifi or such Affiliate, as applicable;
(C) clearly identify its offices (by signage or
otherwise) as its offices and, if such office is located in
the offices of any Originator or Unifi, Seller shall lease
such office at a fair market rent;
(D) have a separate telephone number, which will
be answered only in its name and separate stationery and
checks in its own name;
(E) conduct all transactions with each
Originator, Unifi and the Servicer (including, without
limitation, any delegation of its obligations hereunder as
Servicer) strictly on an arm's-length basis, allocate all
overhead expenses (including, without limitation, telephone
and other utility charges) for items shared between Seller and
such Originator or Unifi on the basis of actual use to the
extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use;
(F) at all times have a Board of Directors
consisting of three members, at least one member of which is
an Independent Director;
(G) observe all corporate formalities as a
distinct entity, and ensure that all corporate actions
relating to (A) the selection, maintenance or replacement of
the Independent Director, (B) the dissolution or liquidation
of Seller or (C) the initiation of, participation in,
acquiescence in or consent to any bankruptcy, insolvency,
reorganization or similar proceeding involving Seller, are
duly authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(H) maintain Seller's books and records separate
from those of each Originator, Unifi and any Affiliate thereof
and otherwise readily identifiable
19
as its own assets rather than assets of any Originator, Unifi
or any Affiliate thereof;
(I) prepare its financial statements separately
from those of each Originator and Unifi and insure that any
consolidated financial statements of any Originator, Unifi or
any Affiliate thereof that include Seller and that are filed
with the Securities and Exchange Commission or any other
governmental agency have notes clearly stating that Seller is
a separate corporate entity and that its assets will be
available first and foremost to satisfy the claims of the
creditors of Seller;
(J) except as herein specifically otherwise
provided, maintain the funds or other assets of Seller
separate from, and not commingled with, those of any
Originator, Unifi or any Affiliate thereof and only maintain
bank accounts or other depository accounts to which Seller
alone is the account party, into which Seller alone makes
deposits and from which Seller alone (or the Agent hereunder)
has the power to make withdrawals;
(K) pay all of Seller's operating expenses from
Seller's own assets (except for certain payments by any
Originator, Unifi or other Persons pursuant to allocation
arrangements that comply with the requirements of this Section
7.1(i));
(L) operate its business and activities such
that: it does not engage in any business or activity of any
kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking,
other than the transactions contemplated and authorized by
this Agreement and the Receivables Sale Agreement; and does
not create, incur, guarantee, assume or suffer to exist any
indebtedness or other liabilities, whether direct or
contingent, other than (1) as a result of the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (2) the
incurrence of obligations under this Agreement, (3) the
incurrence of obligations, as expressly contemplated in the
Receivables Sale Agreement, to make payment to the applicable
Originator thereunder for the purchase of Receivables from
such Originator under the Receivables Sale Agreement, and (4)
the incurrence of operating expenses in the ordinary course of
business of the type otherwise contemplated by this Agreement;
(M) maintain its corporate charter in conformity
with this Agreement, such that it does not amend, restate,
supplement or otherwise modify its Certificate of
Incorporation or By-Laws in any respect that would impair its
ability to comply with the terms or provisions of any of the
Transaction Documents, including, without limitation, Section
7.1(i) of this Agreement;
(N) maintain the effectiveness of, and continue
to perform under the Receivables Sale Agreement and the
Performance Undertaking, such
20
that it does not amend, restate, supplement, cancel, terminate
or otherwise modify the Receivables Sale Agreement or the
Performance Undertaking, or give any consent, waiver,
directive or approval thereunder or waive any default, action,
omission or breach under the Receivables Sale Agreement or the
Performance Undertaking or otherwise grant any indulgence
thereunder, without (in each case) the prior written consent
of the Agent;
(O) maintain its corporate separateness such
that it does not merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions, and except as
otherwise contemplated herein) all or substantially all of its
assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets of, any Person,
nor at any time create, have, acquire, maintain or hold any
interest in any Subsidiary;
(P) maintain at all times the Required Capital
Amount (as defined in the Receivables Sale Agreement) and
refrain from making any dividend, distribution, redemption of
capital stock or payment of any subordinated indebtedness
which would cause the Required Capital Amount to cease to be
so maintained; and
(Q) take such other actions as are necessary on
its part to ensure that the facts and assumptions set forth in
the opinion issued by Kilpatrick Stockton LLP, as counsel for
Seller, in connection with the closing or initial Purchase
under this Agreement and relating to substantive consolidation
issues, and in the certificates accompanying such opinion,
remain true and correct in all material respects at all times.
(j) Collections. Such Seller Party will cause (1) all
proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into
a Collection Account and (2) each Lock-Box and Collection Account to be subject
at all times to a Collection Account Agreement that is in full force and effect;
provided, however, that such Seller Party will obtain a Collection Account
Agreement with the Bank of Montreal within 30 days from the date hereof. In the
event any payments relating to the Purchased Assets are remitted directly to
Seller or any Affiliate of Seller, Seller will remit (or will cause all such
payments to be remitted) directly to a Collection Bank and deposited into a
Collection Account within two (2) Business Days following receipt thereof, and,
at all times prior to such remittance, Seller will itself hold or, if
applicable, will cause such payments to be held in trust for the exclusive
benefit of the Agent and Blue Ridge. Seller will maintain exclusive ownership,
dominion and control (subject to the terms of this Agreement) of each Lock-Box
and Collection Account and shall not grant the right to take dominion and
control of any Lock-Box or Collection Account at a future time or upon the
occurrence of a future event to any Person, except to the Agent as contemplated
by this Agreement.
21
(k) Taxes. Such Seller Party will file all tax returns
and reports required by law to be filed by it and will promptly pay all taxes
and governmental charges at any time owing, except any such taxes which are not
yet delinquent or are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books. Seller will pay when due any taxes payable in
connection with the Receivables, exclusive of taxes on or measured by income or
gross receipts of the Agent or Blue Ridge.
(l) Payment to Applicable Originator. With respect to any
Receivable purchased by Seller from any Originator, such sale shall be effected
under, and in strict compliance with the terms of, the Receivables Sale
Agreement, including, without limitation, the terms relating to the amount and
timing of payments to be made to such Originator in respect of the purchase
price for such Receivable.
Section 7.2 Negative Covenants of the Seller Parties. Until the
date on which the Aggregate Unpaids have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, each Seller Party hereby
covenants, as to itself, that:
(a) Name Change, Offices and Records. Such Seller Party
will not change its name, identity or structure (within the meaning of any
applicable enactment of the UCC), relocate its chief executive office at any
time while the location of its chief executive office is relevant to perfection
of the Agent's security interest, for the benefit of the Secured Parties, in the
Receivables, Related Security and Collections, or change any office where
Records are kept unless it shall have: (i) given the Agent at least forty-five
(45) days' prior written notice thereof and (ii) delivered to the Agent all
financing statements, instruments and other documents requested by the Agent in
connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. Except as
may be required by the Agent pursuant to Section 8.2(b), such Seller Party will
not add or terminate any bank as a Collection Bank, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box or
Collection Account, unless the Agent shall have received, at least ten (10) days
before the proposed effective date therefor, (i) written notice of such
addition, termination or change and (ii) with respect to the addition of a
Collection Bank or a Collection Account or Lock-Box, an executed Collection
Account Agreement with respect to the new Collection Account or Lock-Box;
PROVIDED, HOWEVER, that the Servicer may make changes in instructions to
Obligors regarding payments if such new instructions require such Obligor to
make payments to another existing Collection Account.
(c) Modifications to Contracts and Credit and Collection
Policy. Such Seller Party will not, and will not permit any Originator to, make
any change to the Credit and Collection Policy that could adversely affect the
collectibility of the Receivables or decrease the credit quality of any newly
created Receivables. Except as provided in Section 8.2(d), the Servicer will
not, and will not permit any Originator to, extend, amend or otherwise modify
the terms of any Trade Receivable or any Contract related thereto other than in
accordance with the Credit and Collection Policy. Such Seller Party will not,
and will not permit any Originator to,
22
enter into any amendment to the Contracts governing any Factoring Receivable
without prior notice to the Agent.
(d) Sales, Liens. Seller will not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any of the Purchased Assets, or assign any right to receive income with respect
thereto (other than, in each case, the creation of a security interest therein
in favor of the Agent as provided for herein), and Seller will defend the right,
title and interest of the Secured Parties in, to and under any of the foregoing
property, against all claims of third parties claiming through or under Seller
or any Originator. Seller will not create or suffer to exist any mortgage,
pledge, security interest, encumbrance, lien, charge or other similar
arrangement on any of its inventory.
(e) Use of Proceeds. Seller will not use the proceeds of
the Purchases for any purpose other than (i) paying for Receivables and Related
Security under and in accordance with the Receivables Sale Agreement, including
without limitation, making payments on the Subordinated Notes to the extent
permitted thereunder and under the Receivables Sale Agreement, (ii) making
Demand Advances to Unifi at any time prior to the Facility Termination Date
while it is acting as Servicer and no Amortization Event or Unmatured
Amortization Event exists and is continuing, (iii) paying its ordinary and
necessary operating expenses when and as due, and (iv) making Restricted Junior
Payments to the extent permitted under this Agreement.
(f) Termination Date Determination. Seller will not
designate the Termination Date (as defined in the Receivables Sale Agreement),
or send any written notice to any Originator in respect thereof, without the
prior written consent of the Agent, except with respect to the occurrence of
such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale
Agreement.
(g) Restricted Junior Payments. Seller will not make any
Restricted Junior Payment if after giving effect thereto, Seller's Net Worth (as
defined in the Receivables Sale Agreement) would be less than the Required
Capital Amount (as defined in the Receivables Sale Agreement).
(h) Seller Indebtedness. Seller will not incur or permit
to exist any Indebtedness or liability on account of deposits except: (i) the
Aggregate Unpaids, (ii) the Subordinated Loans, (iii) other current accounts
payable arising in the ordinary course of business and not overdue, and (iv)
other Indebtedness permitted by the Transaction Documents.
(i) Prohibition on Additional Negative Pledges. No Seller
Party will enter into or assume any agreement (other than this Agreement and the
other Transaction Documents) prohibiting the creation or assumption of any
Adverse Claim upon the Purchased Assets except as contemplated by the
Transaction Documents, or otherwise prohibiting or restricting any transaction
contemplated hereby or by the other Transaction Documents, and no Seller Party
will enter into or assume any agreement creating any Adverse Claim upon the
Subordinated Notes.
23
ARTICLE VIII.
ADMINISTRATION AND COLLECTION
Section 8.1 Designation of Servicer.
(a) The servicing, administration and collection of the
Receivables shall be conducted by such Person (the "SERVICER") so designated
from time to time in accordance with this Section 8.1. Unifi is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms of this Agreement. The Agent may at any time
following the occurrence of an Amortization Event designate as Servicer any
Person to succeed Unifi or any successor Servicer; PROVIDED THAT the Rating
Agency Condition is satisfied.
(b) Unifi may delegate, and Unifi hereby advises the
Agent and Blue Ridge that it has delegated, to the Originators, as sub-servicers
of the Servicer, certain of its duties and responsibilities as Servicer
hereunder in respect of the Receivables originated by such Originator. Without
the prior written consent of the Agent and the Required Liquidity Banks, Unifi
shall not be permitted to delegate any of its duties or responsibilities as
Servicer to any Person other than (i) Seller, (ii) the Originators, and (iii)
with respect to certain Defaulted Receivables, outside collection agencies in
accordance with its customary practices. Neither Seller nor any Originator shall
be permitted to further delegate to any other Person any of the duties or
responsibilities of the Servicer delegated to it by Unifi. If at any time the
Agent shall designate as Servicer any Person other than Unifi, all duties and
responsibilities theretofore delegated by Unifi to Seller or the Originators
may, at the discretion of the Agent, be terminated forthwith on notice given by
the Agent to Unifi and to Seller and the Originators.
(c) Notwithstanding the foregoing subsection (b): (i)
Unifi shall be and remain primarily liable to the Agent and Blue Ridge for the
full and prompt performance of all duties and responsibilities of the Servicer
hereunder and (ii) the Agent and Blue Ridge shall be entitled to deal
exclusively with Unifi in matters relating to the discharge by the Servicer of
its duties and responsibilities hereunder. The Agent and Blue Ridge shall not be
required to give notice, demand or other communication to any Person other than
Unifi in order for communication to the Servicer and its sub-servicer or other
delegate with respect thereto to be accomplished. Unifi, at all times that it is
the Servicer, shall be responsible for providing any sub-servicer or other
delegate of the Servicer with any notice given to the Servicer under this
Agreement.
Section 8.2 Duties of Servicer.
(a) The Servicer shall take or cause to be taken all such
actions as may be necessary or advisable to collect each Receivable from time to
time, all in accordance with applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance with the Credit and Collection
Policy.
(b) The Servicer will instruct all Obligors to pay all
Collections directly to a Lock-Box or Collection Account. The Servicer shall
effect a Collection Account Agreement
24
substantially in the form of Exhibit VI with each bank party to a Collection
Account at any time. In the case of any remittances received in any Lock-Box or
Collection Account that shall have been identified, to the satisfaction of the
Servicer, to not constitute Collections or other proceeds of the Receivables or
the Related Security, the Servicer shall promptly remit such items to the Person
identified to it as being the owner of such remittances. From and after the date
the Agent delivers to any Collection Bank a Collection Notice pursuant to
Section 8.3, the Agent may request that the Servicer, and the Servicer thereupon
promptly shall instruct all Obligors with respect to the Receivables, to remit
all payments thereon to a new depositary account specified by the Agent and, at
all times thereafter, Seller and the Servicer shall not deposit or otherwise
credit, and shall not permit any other Person to deposit or otherwise credit to
such new depositary account any cash or payment item other than Collections.
(c) The Servicer shall administer the Collections in
accordance with the procedures described herein and in Article II. The Servicer
shall set aside and hold in trust for the account of Seller and Blue Ridge their
respective shares of the Collections in accordance with Article II. The Servicer
shall, upon the request of the Agent, segregate, in a manner acceptable to the
Agent, all cash, checks and other instruments received by it from time to time
constituting Collections from the general funds of the Servicer or Seller prior
to the remittance thereof in accordance with Article II. If the Servicer shall
be required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the Agent such
allocable share of Collections of Receivables set aside for Blue Ridge on the
first Business Day following receipt by the Servicer of such Collections, duly
endorsed or with duly executed instruments of transfer.
(d) The Servicer may, in accordance with the Credit and
Collection Policy, extend the maturity of any Receivable or adjust the
Outstanding Balance of any Receivable as the Servicer determines to be
appropriate to maximize Collections thereof; PROVIDED, HOWEVER, that such
extension or adjustment shall not alter the status of such Receivable as a
Delinquent Receivable or Defaulted Receivable or limit the rights of the Agent
or Blue Ridge under this Agreement. Notwithstanding anything to the contrary
contained herein, the Agent shall have the absolute and unlimited right to
direct the Servicer to commence or settle any legal action with respect to any
Receivable or to foreclose upon or repossess any Related Security.
(e) The Servicer shall hold in trust for Seller and the
Agent and Blue Ridge all Records that (i) evidence or relate to the Receivables,
the related Contracts and Related Security or (ii) are otherwise necessary or
desirable to collect the Receivables and shall, as soon as practicable upon
demand of the Agent, deliver or make available to the Agent all such Records, at
a place selected by the Agent. The Servicer shall, as soon as practicable
following receipt thereof turn over to Seller any cash collections or other cash
proceeds received with respect to Indebtedness not constituting Receivables. The
Servicer shall, from time to time at the request of the Agent or Blue Ridge,
furnish to Blue Ridge (promptly after any such request) a calculation of the
amounts set aside for Blue Ridge pursuant to Article II.
(f) Any payment by an Obligor in respect of any
indebtedness owed by it to Originator or Seller shall, except as otherwise
specified by such Obligor or otherwise required by
25
contract or law and unless otherwise instructed by the Agent, be applied as a
Collection of any Receivable of such Obligor (starting with the oldest such
Receivable) to the extent of any amounts then due and payable thereunder before
being applied to any other receivable or other obligation of such Obligor.
Section 8.3 Collection Notices. The Agent is authorized at any
time after the occurrence of an Amortization Event to date and to deliver to the
Collection Banks the Collection Notices. Seller hereby transfers to the Agent
for the benefit of Blue Ridge, effective when the Agent delivers such notice,
the exclusive ownership and control of each Lock-Box and the Collection
Accounts. In case any authorized signatory of Seller whose signature appears on
a Collection Account Agreement shall cease to have such authority before the
delivery of such notice, such Collection Notice shall nevertheless be valid as
if such authority had remained in force. Seller hereby authorizes the Agent, and
agrees that the Agent shall be entitled (i) at any time after delivery of the
Collection Notices, to endorse Seller's name on checks and other instruments
representing Collections, (ii) at any time after the occurrence of an
Amortization Event, to enforce the Receivables, the related Contracts and the
Related Security, and (iii) at any time after the occurrence of an Amortization
Event, to take such action as shall be necessary or desirable to cause all cash,
checks and other instruments constituting Collections of Receivables to come
into the possession of the Agent rather than Seller.
Section 8.4 Responsibilities of Seller. Anything herein to the
contrary notwithstanding, the exercise by the Agent, on behalf of Blue Ridge, of
the Agent's rights hereunder shall not release the Servicer, any Originator or
Seller from any of their duties or obligations with respect to any Receivables
or under the related Contracts. The Agent and Blue Ridge shall have no
obligation or liability with respect to any Receivables or related Contracts,
nor shall any of them be obligated to perform the obligations of Seller or any
Originator thereunder.
Section 8.5 Monthly Reports. The Servicer shall prepare and
forward to the Agent (i) on each Monthly Reporting Date, a Monthly Report and an
electronic file of the data contained therein and (ii) at such times as the
Agent shall reasonably request, a listing by Obligor of all Receivables together
with an aging of such Receivables.
Section 8.6 Servicing Fee. As compensation for the Servicer's
servicing activities on their behalf, the Servicer shall be paid the Servicing
Fee in arrears on each Settlement Date out of Collections.
ARTICLE IX.
AMORTIZATION EVENTS
Section 9.1 Amortization Events. The occurrence of any one or
more of the following events shall constitute an Amortization Event:
26
(a) Any Seller Party shall fail to make (i) any payment
or deposit in respect of principal required to be made by it under the
Transaction Documents when due, (ii) any payment or deposit required in respect
of interest to be made by it under the Transaction Documents when due and such
failure continues for 3 consecutive Business Days and (iii) any payment or
deposit required in respect of anything other than principal or interest and
such failure continues for 10 consecutive Business Days; PROVIDED, HOWEVER, that
no Amortization Event shall occur under this Section 9.1(a) as a result of any
late payment or deposit which is cured within one (1) Business Day if such late
payment was due to circumstances beyond such Seller Party's control.
(b) Any representation, warranty, certification or
statement made by any Seller Party in any Transaction Document to which it is a
party or in any other document delivered pursuant thereto shall prove to have
been incorrect in any material respect when made or deemed made; PROVIDED THAT
the materiality threshold in the preceding clause shall not be applicable with
respect to any representation or warranty which itself contains a materiality
threshold; and, PROVIDED FURTHER, that any misrepresentation or certification
for which the Agent has actually received a Deemed Collection shall not
constitute an Amortization Event hereunder.
(c) Any Seller Party shall fail to perform or observe any
covenant contained in (i) Section 7.2(d) through and including 7.2(i); (ii)
Section 7.2(a) and 7.2(e) and such failure shall continue for 10 consecutive
Business Days provided such failure can reasonably be cured or (iii) Section 8.5
when due and such failure to shall continue for 1 Business Day.
(d) Any Seller Party shall fail to perform or observe any
other covenant or agreement under any Transaction Documents and such failure
shall continue for thirty (30) consecutive days; PROVIDED, HOWEVER, that in the
case of a failure to perform or observe any such covenant or agreement of the
Servicer which the Servicer is unable to cure within such thirty (30) day period
after diligent efforts, the Servicer shall be permitted an additional thirty
(30) days to cure such nonperformance or nonobservance.
(e) Failure of Seller to pay any Indebtedness (other than
the Aggregate Unpaids) when due and such failure shall continue beyond any
applicable grace period with respect thereto, if any, or the default by Seller
in the performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is governed, the
effect of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of Seller shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the date of maturity thereof.
(f) Failure of Unifi or any of its Subsidiaries other
than Seller to pay Indebtedness in excess of $10,000,000 in aggregate principal
amount (hereinafter, "MATERIAL INDEBTEDNESS") when due and such failure shall
continue beyond any applicable grace period with respect thereto, if any; or the
default by Unifi or any of its Subsidiaries other than Seller in the performance
of any term, provision or condition contained in any agreement under which any
Material Indebtedness was created or is governed, the effect of which is to
cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material Indebtedness to become
27
due prior to its stated maturity; or any Material Indebtedness of Unifi or any
of its Subsidiaries other than Seller shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior to
the date of maturity thereof.
(g) An Event of Bankruptcy shall occur with respect to
any Seller Party or any of their respective Subsidiaries.
(h) As at the end of any Calculation Period:
(i) the three-month rolling average Delinquency
Ratio shall exceed 3.0%,
(ii) the three-month rolling average Default
Trigger Ratio shall exceed 2.9%, or
(iii) the three-month rolling average Dilution
Ratio shall exceed 4.0%.
(i) A Change of Control shall occur.
(j) (i) One or more final judgments for the payment of
money in an aggregate amount of $10,750 or more shall be entered against Seller
or (ii) one or more final judgments for the payment of money in an amount in
excess of $10,000,000, individually or in the aggregate, shall be entered
against Unifi or any of its Subsidiaries (other than Seller on claims not
covered by insurance or as to which the insurance carrier has denied its
responsibility, and such judgment shall continue unsatisfied and in effect for
sixty (60) consecutive days without a stay of execution.
(k) The "TERMINATION DATE" under and as defined in the
Receivables Sale Agreement shall occur under the Receivables Sale Agreement or
any Originator shall for any reason cease to transfer, or cease to have the
legal capacity to transfer, or otherwise be incapable of transferring
Receivables to Seller under the Receivables Sale Agreement.
(l) This Agreement shall terminate in whole or in part
(except in accordance with its terms), or shall cease to be effective or to be
the legally valid, binding and enforceable obligation of Seller, or any Obligor
shall directly or indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability, or the Agent for the benefit of Blue Ridge
shall cease to have a valid and perfected first priority security interest in
the Purchased Assets.
(m) On any Settlement Date, after giving effect to the
turnover of Collections by the Servicer on such date and the application thereof
to the Aggregate Unpaids in accordance with this Agreement, the Aggregate
Invested Amount shall exceed the Purchase Limit.
(n) The Internal Revenue Service shall file notice of a
lien pursuant to Section 6323 of the Tax Code with regard to any of the
Purchased Assets and such lien shall not have
28
been released within seven (7) days, or the PBGC shall, or shall indicate its
intention to, file notice of a lien pursuant to Section 4068 of ERISA with
regard to any of the Purchased Assets.
(o) Any event shall occur which (i) materially and
adversely impairs the ability of the Originators to originate Receivables of a
credit quality that is at least equal to the credit quality of the Receivables
sold or contributed to Seller on the date of this Agreement or (ii) has, or
could be reasonably expected to have a Material Adverse Effect.
(p) The Performance Undertaking shall cease to be
effective or to be the legally valid, binding and enforceable obligation of
Performance Guarantor, or Performance Guarantor shall directly or indirectly
contest in any manner such effectiveness, validity, binding nature or
enforceability of its obligations thereunder.
Section 9.2 Remedies. Upon the occurrence and during the
continuation of an Amortization Event, the Agent may, or upon the direction of
the Required Liquidity Banks shall, take any of the following actions: (i)
replace the Person then acting as Servicer, (ii) declare the Facility
Termination Date to have occurred, whereupon Reinvestments shall immediately
terminate and the Facility Termination Date shall forthwith occur, all without
demand, protest or further notice of any kind, all of which are hereby expressly
waived by each Seller Party; PROVIDED, HOWEVER, that upon the occurrence of an
Event of Bankruptcy with respect to any Seller Party, the Facility Termination
Date shall automatically occur, without demand, protest or any notice of any
kind, all of which are hereby expressly waived by each Seller Party, (iii)
deliver the Collection Notices to the Collection Banks, (iv) exercise all rights
and remedies of a secured party upon default under the UCC and other applicable
laws, and (v) notify Obligors of the Agent's security interest in the
Receivables and other Purchased Assets. The aforementioned rights and remedies
shall be without limitation, and shall be in addition to all other rights and
remedies of the Agent and Blue Ridge otherwise available under any other
provision of this Agreement, by operation of law, at equity or otherwise, all of
which are hereby expressly preserved, including, without limitation, all rights
and remedies provided under the UCC, all of which rights shall be cumulative.
ARTICLE X.
INDEMNIFICATION
Section 10.1 Indemnities by the Seller Parties. Without limiting
any other rights that the Agent or Blue Ridge may have hereunder or under
applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand to)
the Agent, Blue Ridge, each of the Liquidity Banks and each of the respective
assigns, officers, directors, agents and employees of the foregoing (each, an
"INDEMNIFIED PARTY") from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and for all other amounts payable, including
reasonable attorneys' fees actually incurred and disbursements (all of the
foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") awarded
against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, by Blue Ridge or
any of its Liquidity Banks of an interest in the Receivables, and (B) the
Servicer hereby agrees to indemnify (and pay
29
upon demand to) each Indemnified Party for Indemnified Amounts awarded against
or incurred by any of them arising out of the Servicer's activities as Servicer
hereunder EXCLUDING, HOWEVER, in all of the foregoing instances under the
preceding clauses (A) and (B):
(a) Indemnified Amounts to the extent a final judgment of
a court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(b) Indemnified Amounts to the extent the same includes
losses in respect of Receivables that are uncollectible on account of
the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
(c) taxes on or measured by the overall net income of
such Indemnified Party imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located and any
jurisdiction in which such Indemnified Party (i) is doing business
(except to the extent it is deemed to be doing business in such
jurisdiction based on the Agreement or any other Transaction Document)
and (ii) is paying such taxes, and, in any event, to the extent that
the computation of such taxes is consistent with the characterization
for income tax purposes of the acquisition by Blue Ridge of Receivables
as a loan or loans by Blue Ridge to Seller secured by the Receivables,
the Related Security, the Collection Accounts and the Collections;
PROVIDED, HOWEVER, that nothing contained in this sentence shall limit the
liability of any Seller Party or limit the recourse of Blue Ridge to any Seller
Party for amounts otherwise specifically provided to be paid by such Seller
Party under the terms of this Agreement. Without limiting the generality of the
foregoing indemnification, Seller shall indemnify the Agent and Blue Ridge for
Indemnified Amounts (including, without limitation, losses in respect of
uncollectible receivables, regardless of whether reimbursement therefor would
constitute recourse to Seller or the Servicer) relating to or resulting from:
(i) any representation or warranty made by any
Seller Party or any Originator (or any officers of any such
Person) under or in connection with this Agreement, any other
Transaction Document or any other information or report
delivered by any such Person pursuant hereto or thereto, which
shall have been false or incorrect when made or deemed made;
(ii) the failure by Seller, the Servicer or any
Originator to comply with any applicable law, rule or
regulation with respect to any Receivable or Contract related
thereto, or the nonconformity of any Receivable or Contract
included therein with any such applicable law, rule or
regulation or any failure of any Originator to keep or perform
any of its obligations, express or implied, with respect to
any Contract;
30
(iii) any failure of Seller, the Servicer or any
Originator to perform its duties, covenants or other
obligations in accordance with the provisions of this
Agreement or any other Transaction Document;
(iv) any products liability, personal injury or
damage suit, or other similar claim arising out of or in
connection with merchandise, insurance or services that are
the subject of any Contract or any Receivable;
(v) any dispute, claim, offset or defense (other
than discharge in bankruptcy of the Obligor) of the Obligor to
the payment of any Receivable (including, without limitation,
a defense based on such Receivable or the related Contract not
being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
service related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vi) the commingling of Collections of
Receivables at any time with other funds;
(vii) any investigation, litigation or proceeding
related to or arising from this Agreement or any other
Transaction Document, the transactions contemplated hereby,
the use of the proceeds of any Purchase, the Purchased Assets
or any other investigation, litigation or proceeding relating
to Seller, the Servicer or any Originator in which any
Indemnified Party becomes involved as a result of any of the
transactions contemplated hereby;
(viii) any inability to litigate any claim against
any Obligor in respect of any Receivable as a result of such
Obligor being immune from civil and commercial law and suit on
the grounds of sovereignty or otherwise from any legal action,
suit or proceeding;
(ix) any Amortization Event of the type described
in Section 9.1(g);
(x) any failure of Seller to acquire and
maintain legal and equitable title to, and ownership of any of
the Purchased Assets from the applicable Originator, free and
clear of any Adverse Claim (other than as created hereunder);
or any failure of Seller to give reasonably equivalent value
to any Originator under the Receivables Sale Agreement in
consideration of the transfer by such Originator of any
Receivable, or any attempt by any Person to void such transfer
under statutory provisions or common law or equitable action;
(xi) any failure to vest and maintain vested in
the Agent for the benefit of Blue Ridge, or to transfer to the
Agent for the benefit of the Secured Parties, a valid first
priority perfected security interests in the Purchased Assets,
free and clear of any Adverse Claim (except as created by the
Transaction Documents);
31
(xii) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Purchased Assets,
and the proceeds thereof, whether at the time of any Purchase
or at any subsequent time;
(xiii) any action or omission by any Seller Party
which reduces or impairs the rights of the Agent or Blue Ridge
with respect to any Purchased Assets or the value of any
Purchased Assets;
(xiv) any attempt by any Person to void any
Purchase or the Agent's security interest in the Purchased
Assets under statutory provisions or common law or equitable
action; and
(xv) the failure of any Receivable included in
the calculation of the Net Pool Balance as an Eligible
Receivable to be an Eligible Receivable at the time so
included.
Section 10.2 Increased Cost and Reduced Return. If after the date
hereof, any Funding Source shall be charged any fee, expense or increased cost
on account of the adoption of any applicable law, rule or regulation (including
any applicable law, rule or regulation regarding capital adequacy) or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency (a "REGULATORY CHANGE"): (i) that subjects any
Funding Source to any charge or withholding on or with respect to any Funding
Agreement or a Funding Source's obligations under a Funding Agreement, or on or
with respect to the Receivables, or changes the basis of taxation of payments to
any Funding Source of any amounts payable under any Funding Agreement (except
for changes in the rate of tax on the overall net income of a Funding Source or
taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems
applicable any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of a Funding
Source, or credit extended by a Funding Source pursuant to a Funding Agreement
or (iii) that imposes any other condition the result of which is to increase the
cost to a Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon demand by the
Agent, Seller shall pay to the Agent, for the benefit of the relevant Funding
Source, such amounts charged to such Funding Source or such amounts to otherwise
compensate such Funding Source for such increased cost or such reduction.
Section 10.3 Other Costs and Expenses. Seller shall pay to the
Agent and Blue Ridge on demand all costs and out-of-pocket expenses in
connection with the preparation, execution, delivery and administration of this
Agreement, the transactions contemplated hereby and the
32
other documents to be delivered hereunder, including without limitation, the
cost of Blue Ridge's auditors auditing the books, records and procedures of
Seller, reasonable fees and out-of-pocket expenses of legal counsel for Blue
Ridge and the Agent actually incurred with respect thereto and with respect to
advising Blue Ridge and the Agent as to their respective rights and remedies
under this Agreement. Seller shall pay to the Agent on demand any and all costs
and expenses of the Agent and Blue Ridge, if any, including reasonable counsel
fees actually incurred and expenses in connection with the enforcement of this
Agreement and the other documents delivered hereunder and in connection with any
restructuring or workout of this Agreement or such documents, or the
administration of this Agreement following an Amortization Event. Seller shall
reimburse Blue Ridge on demand for all other costs and expenses incurred by Blue
Ridge ("OTHER Costs"), including, without limitation, the cost of auditing Blue
Ridge's books by certified public accountants, the cost of rating the Commercial
Paper by independent financial rating agencies, and the reasonable fees and
out-of-pocket expenses of counsel for Blue Ridge or any counsel for any
shareholder of Blue Ridge with respect to advising Blue Ridge or such
shareholder as to matters relating to Blue Ridge's operations.
Section 10.4 Allocations. Blue Ridge shall allocate the liability
for Other Costs among Seller and other Persons with whom Blue Ridge has entered
into agreements to purchase interests in or finance receivables and other
financial assets ("OTHER CUSTOMERS"). If any Other Costs are attributable to
Seller and not attributable to any Other Customer, Seller shall be solely liable
for such Other Costs. However, if Other Costs are attributable to Other
Customers and not attributable to Seller, such Other Customer shall be solely
liable for such Other Costs. All allocations to be made pursuant to the
foregoing provisions of this Article X shall be made by Blue Ridge in its sole
discretion and shall be binding on Seller and the Servicer.
ARTICLE XI.
THE AGENT
Section 11.1 Authorization and Action. Blue Ridge, on behalf of
itself and its assigns, hereby designates and appoints Wachovia to act as its
agent under the Liquidity Agreement, this Agreement and under each other
Transaction Document, and authorizes the Agent to take such actions as agent on
its behalf and to exercise such powers as are delegated to the Agent by the
terms of the Liquidity Agreement, this Agreement and the other Transaction
Documents together with such powers as are reasonably incidental thereto,
including, without limitation, the power to perfect all security interests
granted under the Transaction Documents. The provisions of Article 6 of the
Liquidity Agreement are hereby incorporated by this reference with the same
force and effect as if fully set forth herein, and shall govern the relationship
between the Agent, on the one hand, and Blue Ridge, on the other.
33
ARTICLE XII.
ASSIGNMENTS AND PARTICIPATIONS
Section 12.1 Assignments and Participations by Blue Ridge. Each of
the parties hereto, on behalf of its successors and assigns, hereby agrees and
consents to the complete or partial sale by Blue Ridge of all or any portion of
its rights under, interest in, title to and obligations under this Agreement to
the Liquidity Banks pursuant to the Liquidity Agreement, regardless of whether
such sale constitutes an assignment or the sale of a participation in such
rights and obligations.
Section 12.2 Prohibition on Assignments by Seller Parties. No
Seller Party may assign any of its rights or obligations under this Agreement
without the prior written consent of the Agent and Blue Ridge and without
satisfying the Rating Agency Condition.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1 Waivers and Amendments.
(a) No failure or delay on the part of the Agent or Blue
Ridge in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any waiver of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing in accordance with the
provisions of this Section 13.1(b). Blue Ridge, Seller and the Agent, at the
direction of the Required Liquidity Banks, may enter into written modifications
or waivers of any provisions of this Agreement, PROVIDED, HOWEVER, that no such
modification or waiver shall:
(i) without the consent of Blue Ridge and each
affected Liquidity Bank, (A) extend the Liquidity Termination
Date or the date of any payment or deposit of Collections by
Seller or the Servicer, (B) reduce the rate or extend the time
of payment of Yield or any CP Costs (or any component of Yield
or CP Costs), (C) reduce any fee payable to the Agent for the
benefit of Blue Ridge, (D) change the Invested Amount of any
Receivable Interest, (E) amend, modify or waive any provision
of the definition of Required Liquidity Banks or this Section
13.1(b), (F) consent to or permit the assignment or transfer
by Seller of any of its rights and obligations under this
Agreement, (G) change the definition of "ELIGIBLE RECEIVABLE,"
"LOSS RESERVE," "DILUTION RESERVE," "YIELD RESERVE,"
"SERVICING RESERVE," "SERVICING FEE RATE," "REQUIRED RESERVE"
or "REQUIRED
34
RESERVE FACTOR FLOOR" or (H) amend or modify any defined term
(or any defined term used directly or indirectly in such
defined term) used in clauses (A) through (G) above in a
manner that would circumvent the intention of the restrictions
set forth in such clauses; or
(ii) without the written consent of the then
Agent, amend, modify or waive any provision of this Agreement
if the effect thereof is to affect the rights or duties of
such Agent,
AND ANY MATERIAL AMENDMENT, WAIVER OR OTHER MODIFICATION OF THIS AGREEMENT SHALL
REQUIRE SATISFACTION OF THE RATING AGENCY CONDITION.
Section 13.2 Notices. Except as provided in this Section 13.2, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages hereof or at such other
address or telecopy number as such Person may hereafter specify for the purpose
of notice to each of the other parties hereto. Each such notice or other
communication shall be effective (i) if given by telecopy, upon the receipt
thereof, (ii) if given by mail, three (3) Business Days after the time such
communication is deposited in the mail with first class postage prepaid or (iii)
if given by any other means, when received at the address specified in this
Section 13.2. Seller hereby authorizes the Agent to effect Purchases and Tranche
Period and Yield Rate selections based on telephonic notices made by any Person
whom the Agent in good faith believes to be acting on behalf of Seller. Seller
agrees to deliver promptly to the Agent a written confirmation of each
telephonic notice signed by an authorized officer of Seller; PROVIDED, HOWEVER,
the absence of such confirmation shall not affect the validity of such notice.
If the written confirmation differs from the action taken by the Agent, the
records of the Agent shall govern absent manifest error.
Section 13.3 Protection of Agent's Security Interest.(a) Seller
agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents, and take all actions, that may be
necessary or desirable, or that the Agent may reasonably request, to perfect,
protect or more fully evidence the Agent's security interest in the Purchased
Assets, or to enable the Agent or Blue Ridge to exercise and enforce their
rights and remedies hereunder. At any time after the occurrence of an
Amortization Event, the Agent may, or the Agent may direct Seller or the
Servicer to, notify the Obligors of Receivables, at Seller's expense, of the
ownership or security interests of Blue Ridge under this Agreement and may also
direct that payments of all amounts due or that become due under any or all
Receivables be made directly to the Agent or its designee. Seller or the
Servicer (as applicable) shall, at the Agent's request, withhold the identities
of the Agent and Blue Ridge in any such notification.
(b) If any Seller Party fails to perform any of its
obligations hereunder, the Agent or Blue Ridge may (but shall not be required
to) perform, or cause performance of, such obligations, and the Agent's or Blue
Ridge's costs and expenses incurred in connection therewith shall be payable by
Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes the
Agent at any time and from time to time in the sole discretion of the Agent, and
appoints the
35
Agent as its attorney-in-fact, to act on behalf of such Seller Party (i) to
execute on behalf of Seller as debtor and to file financing statements necessary
or desirable in the Agent's sole discretion to perfect and to maintain the
perfection and priority of the interest of Blue Ridge in the Receivables and
(ii) to file a carbon, photographic or other reproduction of this Agreement or
any financing statement with respect to the Receivables as a financing statement
in such offices as the Agent in its sole discretion deems necessary or desirable
to perfect and to maintain the perfection and priority of the Agent's security
interest in the Purchased Assets, for the benefit of the Secured Parties. This
appointment is coupled with an interest and is irrevocable. From and after July
1, 2001: (A) each of the Seller Parties hereby authorizes the Agent to file
financing statements and other filing or recording documents with respect to the
Receivables and Related Security (including any amendments thereto, or
continuation or termination statements thereof), without the signature or other
authorization of such Seller Party, in such form and in such offices as the
Agent reasonably determines appropriate to perfect or maintain the perfection of
the security interest of the Agent hereunder, (B) each of the Seller Parties
acknowledges and agrees that it is not authorized to, and will not, file
financing statements or other filing or recording documents with respect to the
Receivables or Related Security (including any amendments thereto, or
continuation or termination statements thereof), without the express prior
written approval by the Agent, consenting to the form and substance of such
filing or recording document, and (C) each of the Seller Parties approves,
authorizes and ratifies any filings or recordings made by or on behalf of the
Agent in connection with the perfection of the security interests in favor of
Seller or the Agent, PROVIDED, however, that Seller or Agent shall promptly
notify each Seller Party of, and provide a copy to each Seller Party of, any
such filing.
Section 13.4 Confidentiality.
(a) Each of the Seller Parties shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of this
Agreement and the other confidential or proprietary information with respect to
the Agent and Blue Ridge and their respective businesses obtained by it or them
in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that such Seller Party and its officers
and employees may disclose such information to such Seller Party's external
accountants and attorneys and as required by any applicable law or order of any
judicial or administrative proceeding.
(b) Anything herein to the contrary notwithstanding, each
Seller Party hereby consents to the disclosure of any nonpublic information with
respect to it (i) to the Agent, the Liquidity Banks or Blue Ridge by each other,
(ii) by the Agent or Blue Ridge to any prospective or actual assignee or
participant of any of them and (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Blue Ridge or any entity organized for the purpose of purchasing,
or making loans secured by, financial assets for which Wachovia acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, PROVIDED THAT each such
Person is informed of the confidential nature of such information and agrees to
maintain such information as confidential in accordance with the provisions of
this Agreement. In addition, Blue Ridge and the Agent may disclose any such
nonpublic information pursuant to
36
any law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).
Section 13.5 Bankruptcy Petition. Seller, the Servicer, the Agent
and each Liquidity Bank hereby covenants and agrees that, prior to the date that
is one year and one day after the payment in full of all outstanding senior
indebtedness of Blue Ridge, it will not institute against, or join any other
Person in instituting against, Blue Ridge any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
Section 13.6 Limitation of Liability. Except with respect to any
claim arising out of the willful misconduct or gross negligence of Blue Ridge,
the Agent or any Liquidity Bank, no claim may be made by any Seller Party or any
other Person against Blue Ridge, the Agent or any Liquidity Bank or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and each Seller Party hereby waives,
releases, and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
Section 13.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK without regard to
the principles of conflicts of laws thereof OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW (except in the case of the other Transaction Documents,
to the extent otherwise expressly stated therein) AND EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE OWNERSHIP INTEREST OF SELLER OR THE SECURITY INTEREST OF
THE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN ANY OF THE COLLATERAL IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 13.8 CONSENT TO JURISDICTION. EACH PARTY TO THIS AGREEMENT
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND EACH SUCH PARTY
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST
37
THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR ANY PURCHASER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER
PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK,
NEW YORK.
Section 13.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
TO THE MAXIMUM EXTENT PERMITTED BY LAW TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 13.10 Integration; Binding Effect; Survival of Terms.(a)
This Agreement and each other Transaction Document contain the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns (including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; PROVIDED, HOWEVER, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by any Seller
Party pursuant to Article V, (ii) the indemnification and payment provisions of
Article X, and Sections 13.4 and 13.5 shall be continuing and shall survive any
termination of this Agreement.
(c) Each of the Seller Parties, Blue Ridge and the Agent
hereby acknowledges and agrees that the Liquidity Banks are hereby made express
third party beneficiaries of this Agreement and each of the other Transaction
Documents.
Section 13.11 Counterparts; Severability; Section References. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of a signature page to this Agreement. Any provisions of
this Agreement which are prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to "ARTICLE," "SECTION," "SCHEDULE"
or "EXHIBIT" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.
38
Section 13.12 Characterization.
(a) It is the intention of the parties hereto that each
Purchase hereunder shall constitute and be treated as an absolute and
irrevocable sale, which Purchase shall provide the Blue Ridge with the full
benefits of ownership of the applicable Receivable Interest. Except as
specifically provided in this Agreement, each sale of a Receivable Interest
hereunder is made without recourse to Seller; PROVIDED, HOWEVER, that (i) Seller
shall be liable to Blue Ridge and the Agent for all representations, warranties,
covenants and indemnities made by Seller pursuant to the terms of this
Agreement, and (ii) such sale does not constitute and is not intended to result
in an assumption by Blue Ridge or the Agent or any assignee thereof of any
obligation of Seller or any Originator or any other person arising in connection
with the Receivables, the Related Security, or the related Contracts, or any
other obligations of Seller or any Originator.
(b) In addition to any ownership interest which the Agent
or Blue Ridge may from time to time acquire pursuant hereto, Seller hereby
grants to the Agent for the ratable benefit of Blue Ridge a valid and perfected
security interest in all of Seller's right, title and interest in, to and under
all Receivables now existing or hereafter arising, the Collections, each
Lock-Box, each Collection Account, all Related Security, all other rights and
payments relating to such Receivables, and all proceeds of any thereof prior to
all other liens on and security interests therein to secure the prompt and
complete payment of the Aggregate Unpaids. The Agent, on behalf of Blue Ridge,
shall have, in addition to the rights and remedies that it may have under this
Agreement, all other rights and remedies provided to a secured creditor under
the UCC and other applicable law, which rights and remedies shall be cumulative.
39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers or
attorneys-in-fact as of the date hereof.
UNIFI RECEIVABLES, LLC
By: Charles F. McCoy
---------------------------------------
Name: Charles F. McCoy
Title: V.P. & Secretary
Address: 7201 West Friendly Avenue
Greensboro, North Carolina 27410
UNIFI, INC.
By: Charles F. McCoy
---------------------------------------
Name: Charles F. McCoy
Title: V.P., Secretary & General Counsel
Address: 7201 West Friendly Avenue
Greensboro, North Carolina 27410
[Unifi RPA Signature Page]
40
BLUE RIDGE ASSET FUNDING CORPORATION
BY: WACHOVIA BANK, N.A., ITS ATTORNEY-IN-FACT
By: David Goodson
-----------------------------------
Name: David Goodson
Title: Assistant Vice President
Address:
--------------------
WACHOVIA BANK, N.A., as a Liquidity Bank and as Agent
By: Kevin T. McConnell
--------------------------------------
Name: Kevin T. McConnell
Title: Senior Vice President
Address:
-------------------------
[Blue Ridge/Wachovia RPA Signature Page]
EX-10.M
7
g71711ex10-m.txt
CHANGE OF CONTROL AGREEMENT / G. ALFRED WEBSTER
1
EXHIBIT (10m)
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT ("Agreement") between UNIFI, INC., a
New York Company (the "Company"), and G. ALFRED WEBSTER ("Executive") effective
the 26TH day of October, 2000.
WITNESSETH:
WHEREAS, The Executive is an Executive Vice President and a member of
the Board of Directors of the Company and is considered as an integral part of
the Company's Management; and
WHEREAS, the Company's Board of Directors considers the establishment
and maintenance of a sound and vital Management to be essential in protecting
and enhancing the best interests of the Company and its Shareholders, recognizes
that the possibility of a change in control exists and that such possibility,
and the uncertainty and questions which it may raise among Management, may
result in the departure or distraction of Management personnel to the detriment
of the Company and its Shareholders; and
WHEREAS, the Executive desires that in the event of any change in
control he will continue to have the responsibility and status he has earned;
and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
the Executive, as a member of the Company's Management, to his assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
NOW, THEREFORE, in order to induce the Executive to remain in the
employment of the Company and in consideration of the Executive agreeing to
remain in the employment of the Company, subject to the terms and conditions set
out below, the Company agrees it will pay such amount, as provided in Section 4
of this Agreement, to the Executive, if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
change in control of the Company, as herein defined.
SECTION 1. TERM: This Agreement shall terminate, except to the extent
that any obligation of the Company hereunder remains unpaid as of such time,
upon the earliest of (i) November 1, 2005 if a Change in Control of the Company
has not occurred within such period; (ii) the termination of the Executive's
employment with the Company based on Death, Disability (as defined in Section
3(b), Retirement (as defined in Section 3(c)), Cause (as defined in Section
3(d)) or by the Executive other than for Good Reason (as defined in Section
3(e)); and (iii) two years from the date of a
2
Change in Control of the Company if the Executive has not voluntarily terminated
his employment for Good Reason as of such time.
SECTION 2. CHANGE IN CONTROL: No compensation shall be payable under
this Agreement unless and until (a) there shall have been a Change in Control of
the Company, while the Executive is still an employee of the Company and (b) the
Executive's employment by the Company thereafter shall have been terminated in
accordance with Section 3. For purposes of this Agreement, a Change in Control
of the Company shall be deemed to have occurred if:(i) there shall be
consummated (x) any consolidation or merger of the Company in which the Company
is not the continuing or surviving legal entity ("company") or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock of the surviving company immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; or (ii) the shareholders of the Company approved
any plan or proposal for the liquidation or dissolution of the Company; or (iii)
any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of twenty percent (20%) or more of the Company's outstanding Common Stock; or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new Director was
approved by a vote of at least two-thirds of the Directors then still in office
who were Directors at the beginning of the period.
SECTION 3. TERMINATION FOLLOWING CHANGE IN CONTROL: (a) If a Change in
Control of the Company shall have occurred while the Executive is still an
employee of the Company, the Executive shall be entitled to the compensation
provided in Section 4 upon the subsequent termination of the Executive's
employment with the Company by the Executive voluntarily for Good Reason or by
the Company unless such termination by the Company is as a result of (i) the
Executive's Death, (ii) the Executive's Disability (as defined in Section (3)(b)
below); (iii) the Executive's Retirement (as defined in Section 3(c) below);
(iv) the Executive's termination by the Company for Cause(as defined in Section
3(d) below); or (v) the Executive's decision to terminate employment other than
for Good Reason (as defined in Section 3(e) below).
(b) Disability: If, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall
2
3
have been absent from his duties with the Company on a full-time basis for six
months (including months before and after the change of control) and within 30
days after written notice of termination is thereafter given by the Company the
Executive shall not have returned to the full- time performance of the
Executive's duties, the Company may terminate this Agreement for "Disability."
(c) Retirement: The term "Retirement" as used in this Agreement
shall mean termination in accordance with the Company's retirement policy or any
arrangement established with the consent of the Executive.
(d) Cause: The Company may terminate the Executive's employment
for Cause. For purposes of this Agreement only, the Company shall have "Cause"
to terminate the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive or malfeasance or
misfeasance by said Executive in performing the duties of his office, as
determined by the Board of Directors. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been a meeting of the Company's Board of Directors (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), and the
delivery to the Executive of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the entire membership of said Board of
Directors stating that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in the second sentence of this Section 3(d) and
specifying the particulars thereof in detail.
(e) Good Reason: The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company
of duties inconsistent with the Executive's position, duties,
responsibilities and status with the Company immediately
prior to a Change in Control of the Company; or a change in
the Executive's titles or offices as in effect immediately
prior to a Change in Control of the Company; or any removal
of the Executive from or any failure to reelect the Executive
to any of the positions held prior to the change of control,
except in connection with the termination of his employment
for Disability, Retirement, or Cause, or as a result of the
Executive's Death; or by the Executive other than for Good
Reason;
(ii) a reduction by the Company in the
3
4
Executive's base salary as in effect on the date hereof or as
the same may be increased from time to time during the term
of this Agreement or the Company's failure to increase
(within 12 months of the Executive's last increase in base
salary) the Executive's base salary after a Change in Control
of the Company in an amount which at least equals, on a
percentage basis, the average percentage increase in base
salary for all executive officers of the Company effected in
the preceding 12 months;
(iii) any failure by the Company to continue in
effect any benefit plan or arrangement (including, without
limitation, the Company's Profit Sharing Plan, group life
insurance plan and medical, dental, accident and disability
plans) in which the Executive is participating at the time of
a Change in Control of the Company (or any other plans
providing the Executive with substantially similar benefits)
(hereinafter referred to as "Benefit Plans"), or the taking
of any action by the Company which would adversely affect the
Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive
the Executive of any material fringe benefit enjoyed by the
Executive at the time of a Change in Control of the Company;
(iv) any failure by the Company to continue in
effect any plan or arrangement to receive securities of the
Company (including, without limitation, Stock Option Plans or
any other plan or arrangement to receive and exercise stock
options, restricted stock or grants thereof) in which the
Executive is participating at the time of a Change in Control
of the Company (or plans or arrangements providing him with
substantially similar benefits) (hereinafter referred to as
"Securities Plans") and the taking of any action by the
Company which would adversely affect the Executive's
participation in or materially reduce the Executive's
benefits under any such Securities Plan;
(v) any failure by the Company to continue in effect
any bonus plan, automobile allowance plan, or other incentive
payment plan in which the Executive is participating at the
time of a Change in Control of the Company, or said Executive
had participated in during the previous calendar year;
(vi) a relocation of the Company's principal
executive offices to a location outside of North Carolina, or
the Executive's relocation to any place
4
5
other than the location at which the Executive performed the
Executive's duties prior to a Change in Control of the
Company, except for required travel by the Executive on the
Company's business to an extent substantially consistent with
the Executive's business travel obligations at the time of a
Change in Control of the Company;
(vii) any failure by the Company to provide the
Executive with the number of paid vacation days to which the
Executive is entitled at the time of a Change in Control of
the Company;
(viii) any breach by the Company of any provision of
this Agreement;
(ix) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of
the Company; or
(x) any purported termination of the Executive's
employment which is not made pursuant to a Notice of
Termination satisfying the requirements of Section 3(f).
(f) Notice of Termination: Any termination by the Company pursuant
to Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination.
For purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in this
Agreement relied upon and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement, no
such purported termination by the Company shall be effective without such Notice
of Termination.
(g) Date of Termination: "Date of Termination" shall mean (a) if
Executive's employment is terminated by the Company for
Disability, 30 days after Notice of Termination is given to
the Executive (provided that the Executive shall not have
returned to the performance of the Executive's duties on a
full-time basis during such 30 day period) or (b) if the
Executive's employment is terminated by the Company for any
other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of
Termination is given to the Executive by the Company the
Executive notifies the Company that a dispute exists
concerning the termination, the Date of Termination shall be
the date the dispute is finally determined, whether by mutual
agreement by the parties or upon final judgment, order or
decree of a court of competent jurisdiction (the time for
appeal therefrom
5
6
having expired and no appeal having been perfected) or (c) the
date the Executive notifies the Company in writing that he is
terminating his employment and setting forth the Good Reason
(as defined in Section 3(e)).
SECTION 4. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. If
the Company shall terminate the Executive's employment other than pursuant to
Section 3(b), 3(c) or 3(d) or if the Executive shall voluntarily terminate his
employment for Good Reason, then the Company shall pay to the Executive as
severance pay in a lump sum, in cash, on the fifth day following the Date of
Termination, an amount equal to 2.99 times the annualized aggregate annual
compensation paid to the Executive by the Company or any of its subsidiaries
during the five calendar years preceding the Change in Control of the Company;
provided, however, that if the lump sum severance payment under this Section 4,
either alone or together with other payments which the Executive has the right
to receive from the Company, would constitute a "parachute payment" (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")),
such lump sum severance payment shall be reduced to the largest amount as will
result in no portion of the lump sum severance payment under this Section 4
being subject to the excise tax imposed by Section 4999 of the Code. The
determination of any reduction in the lump sum severance payment under this
Section 4 pursuant to the foregoing proviso shall be made by the Company's
Independent Certified Public Accountants, and their decision shall be conclusive
and binding on the Company and the Executive.
SECTION 5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS: (a) The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's rights under any employment agreement or other
contract, plan or employment arrangement with the Company.
(c) The Company shall, upon the termination of the Executive's
employment other than by Death, Disability (as defined in Section 3(b)),
Retirement (as defined in Section 3(c)) or Cause (as defined in Section 3(d)),
or the termination of the Executive's employment by the Executive without Good
Reason, maintain in full force and effect, for the Executive's continued benefit
until the earlier of
6
7
(a) two years after the Date of Termination or (b) Executive's commencement
of full time employment with a new employer, all life insurance, medical, health
and accident, and disability plans, programs or arrangements in which he was
entitled to participate immediately prior to the Date of Termination, provided
that his continued participation is possible under the general terms and
provisions of such plans and programs. In the event the Executive is ineligible
under the terms of such plans or programs to continue to be so covered, the
Company shall provide substantially equivalent coverage through other sources.
(d) The Executive's account and rights in and under any retirement
benefit or incentive plans, shall remain subject to the terms and conditions of
the respective plans as they existed at the time of the termination of the
Executive's employment.
SECTION 6. SUCCESSOR TO THE COMPANY: (a) The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement expressly, absolutely and unconditionally to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place. Any failure of the Company to obtain such agreement
prior to the effectiveness of any such succession or assignment shall be a
material breach of this Agreement and shall entitle the Executive to terminate
the Executive's employment for Good Reason. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law. If at any time
during the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4 and 10 hereof shall in addition include such
employer. In such event, the Company agrees that it shall pay or shall cause
such employer to pay any amounts owed to the Executive pursuant to Section 4
hereof.
(b) If the Executive should die while any amounts are still
payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive's
legatee, or other designee or, if there be no such designee, to the Executive's
estate. This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives or attorney-in-fact, executors or
administrators, heirs, distributees and legatees.
SECTION 7. NOTICE: For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be
7
8
in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company:
Unifi, Inc.
P. O. Box 19109
Greensboro, NC 27419-9109
ATTENTION: Mr. Charles F. McCoy
General Counsel
If to the Executive:
Mr. G. Alfred Webster
1026 Rockford Road
High Point, NC 27262
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
SECTION 8. MISCELLANEOUS: (a) The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(b) Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding (including
FICA tax), filing, making of reports and the like, and Company shall use its
best efforts to satisfy promptly all such requirements.
(c) Prior to the Change in Control of the Company, as herein defined,
this Agreement shall terminate if Executive shall resign, retire, become
permanently and totally disabled, or die. This Agreement shall also terminate if
Executive's employment as an executive officer of the Company shall have been
terminated for any reason by the Board of Directors of the Company as
constituted more than three (3) months prior to any Change in Control of the
Company, as defined in Section 2 of this Agreement.
SECTION 9. LEGAL FEES AND EXPENSES: The Company shall pay all legal
fees and expenses which the Executive may incur as a result of the Company's
contesting the validity, enforceability or the executive's interpretation of, or
determinations under, this Agreement.
8
9
SECTION 10. CONFIDENTIALITY: The Executive shall retain in confidence
any and all confidential information known to the Executive concerning the
Company and its business so long as such information is not otherwise publicly
disclosed.
IN WITNESS WHEREOF, Unifi, Inc. has caused this Agreement to be signed
by a member of the Company's Compensation Committee pursuant to resolutions duly
adopted by the Board of Directors and its seal affixed hereto and the Executive
has hereunto affixed his hand and seal effective as of the date first above
written.
UNIFI, INC.
BY: Donald F. Orr (SEAL)
----------------------------------------
Donald F. Orr
Compensation Committee
EXECUTIVE
G. Alfred Webster (SEAL)
-----------------------------------------
G. Alfred Webster
9
EX-21
8
g71711ex21.txt
SUBSIDIARIES OF UNIFI, INC.
1
(EXHIBIT 21)
UNIFI, INC.
SUBSIDIARIES
Name Address Incorporation Unifi Percentage of
Voting Securities Owned
--------------------------------------------------------------------------------------------------------
Unifi, FSC Ltd. Agana, Guam Guam 100%
Unifi Textured Yarns Letterkenny, Ireland Ireland 100%
Europe, Ltd.
Unifi Dyed Yarns, Manchester, England United Kingdom 100%
Ltd.
Unifi International Warwickshire, England North Carolina 100%
Services, Inc.
Unifi International Lyon, France France 100%
Services Europe
Unifi GmbH Oberkotzau, Germany Germany 100%
Unifi Italia, S.r.l. Viale Andreis, Italy Italy 100%
Unifi Manufacturing, Greensboro, NC North Carolina 100%
Inc. ("UMI")
Unifi Sales & Greensboro, NC North Carolina 100%
Distribution, Inc.
("USD")
Unifi Manufacturing Greensboro, NC North Carolina 95%
Virginia, LLC 5% - UMI
Unifi Export Sales, Greensboro, NC North Carolina 95%
LLC ("UES") 5% - UMI
Unifi Technical Mocksville, NC North Carolina 100%
Fabrics, LLC
Unifi Technology Charlotte, NC North Carolina 98.09% USD
Group, Inc. 1.91% Others
Unifi Textured Greensboro, NC North Carolina 85.42% - UMI
Polyester, LLC 14.58% - Burlington
Industries, Inc.
2
Unifi do Brasil, Ltda San Paulo, Brazil Brazil 100%
Spanco Industries, Greensboro, NC North Carolina 100% - UMI
Inc. ("SI")
[SI owns: 100% Spanco International, Inc., ("SII"), a North Carolina corporation]
[SII owns: 83% Unifi Latin America, S.A., a Columbian sociedad anonime;
the remainder of Spanco Latin America is presently owned by:
1% Unifi designees
16% Spanco - Panama, S.A. ]
GlenTouch Yarn Altamahaw, NC North Carolina 100% - UMI
Co., LLC
Unifi Receivables, Las Vegas, NV Nevada 80% - USD
LLC 20% - UES
EX-23
9
g71711ex23.txt
CONSENT OF ERNST & YOUNG LLP
1
EXHIBIT (23)
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-23201) pertaining to the Unifi, Inc. 1982 Incentive Stock Option Plan
and the 1987 Non-Qualified Stock Option Plan and the Registration Statement
(Form S-8 No. 33-53799) pertaining to the Unifi, Inc. 1992 Incentive Stock
Option Plan and Unifi Spun Yarns, Inc. 1992 Employee Stock Option Plan, and the
Registration Statement (Form S-8 No. 333-35001) pertaining to the Unifi, Inc.
1996 Incentive Stock Option Plan and the Unifi, Inc. 1996 Non-Qualified Stock
Option Plan and the Registration Statement (Form S-8 No. 333-43158) pertaining
to the Unifi, Inc. 1999 Long-Term Incentive Plan of our report dated July 19,
2001, with respect to the consolidated financial statements and schedule of
Unifi, Inc. included in this Annual Report (Form 10-K) for the year ended June
24, 2001.
/s/ Ernst & Young LLP
Greensboro, North Carolina
September 19, 2001