EXHIBIT 4(d)(13)
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT is made as of February 25, 1999 by and among
TEXFI INDUSTRIES, INC., a Delaware corporation (the "Borrower"), BANKBOSTON,
N.A. and THE CIT GROUP/COMMERCIAL SERVICES, INC. (the "Lenders") and BANKBOSTON,
N.A., as the agent (the "Agent") for the Lenders, BANCBOSTON LEASING INC., a
Massachusetts corporation ("BBL"), and BACK BAY CAPITAL FUNDING LLC, a Delaware
limited liability company ("Back Bay").
Preliminary Statement
---------------------
The Borrower, the Lenders and the Agent are parties to a Loan and Security
Agreement dated as of August 28, 1998 (as amended and in effect on the date
hereof, the "Loan Agreement", terms defined therein and not otherwise defined
herein being used herein as therein defined). The Borrower and BBL are parties
to various equipment leases (the "Equipment Leases"). The Borrower and Back Bay
are parties to a Term Loan and Security Agreement dated as of August 28 1998 (as
amended, modified, supplemented or restated and in effect from time to time, the
"Back Bay Agreement").
Events of Default have occurred and are continuing under the Loan Agreement
as described on Schedule 1. The Borrower has failed to make timely payment of
February rentals due and owing under the Equipment Leases, which failure is a
default thereunder. "Events of Default" have also occurred and are continuing
under the Back Bay Agreement as described on Schedule 2 (the "Back Bay
Defaults"). All Events of Default and Back Bay Defaults referred to in this
paragraph and any continuation or repetition of such specified Events of Default
or Back Bay Defaults and the February payment default under the Equipment
Leases, are referred to hereinafter as the "Forbearance Defaults."
The Borrower has requested, and the Lenders and the Agent under the Loan
Agreement, BBL under the Equipment Leases and Back Bay under the Back Bay
Agreement have agreed, upon and subject to all of the terms, conditions and
provisions of this Agreement, to forbear for a specified period from exercising,
respectively, the various rights and remedies available to the Lenders and the
Agent when an Event of Default has occurred and is continuing under the Loan
Agreement, to BBL when payment default has occurred and is continuing under the
Equipment Leases and to Back Bay when an "Event of Default" has occurred and is
continuing under the Back Bay Agreement by reason of any Forbearance Default.
Accordingly, in consideration of the Loans, the Term Loan outstanding under
and as defined in the Back Bay Agreement, the Equipment Leases, the mutual
undertakings hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Section 1. Acknowledgments and Agreements by Borrower. The Borrower
------------------------------------------
acknowledges and agrees that:
(a) Events of Default under the Loan Documents, payment defaults under the
Equipment Leases and "Events of Default" under the Back Bay Agreement have
occurred and now exist and are continuing;
(b) The Loan Documents (as defined in each of the Loan Agreement and the
Back Bay Agreement) and the Equipment Leases executed and delivered by the
Borrower are the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their respective terms;
(c) The Security Interest granted by the Borrower to the Agent in the
Collateral and the Real Estate and the Liens granted by the Borrower to Back Bay
in the "Collateral" and the "Real Estate Collateral" (each as defined in the
Back Bay Agreement) are duly perfected Liens, subject only to Permitted Liens or
"Permitted Encumbrances" (as defined in the Back Bay Agreement), respectively;
and
(d) All of the Secured Obligations and Junior Secured Obligations are
absolutely due and owing by the Borrower to the Lenders, their Affiliates and
the Agent and all of the "Liabilities" (as defined in the Back Bay Agreement)
are absolutely due and owing by the Borrower to Back Bay, and all lease
payments, whether or not denominated as rental, due under the Equipment Leases
are absolutely due and owing by the Borrower to BBL, in each case without any
defense, deduction, offset or counterclaim.
Section 2. Agreement to Forbear. The Agent and the Lenders, BBL and Back
--------------------
Bay agree that during the Forbearance Period (as hereinafter defined) they will
not, solely by reason of the Forbearance Defaults, exercise any right or remedy
available to them upon default by the Borrower, other than as expressly set
forth in this Agreement. Further, during the Forbearance Period the Lenders may
continue in their discretion to make Revolving Credit Loans to the Borrower in
accordance with the provisions of the Loan Agreement except as modified as
follows:
(a) To the extent not reflected herein, the terms and conditions of the
letter of consent of even date herewith with respect to the MAI Loan (as
hereinafter defined) are incorporated by reference in the Loan Agreement;
(b) The definition "Borrowing Base" is amended by redesignating clause
(a)(ii) thereof as clause (a)(iii) and clause (b)(v)(B) thereof as clause
(b)(v)(C) and inserting new clauses (a)(ii) and (b)(v)(B), both to read as
follows:
( ) an amount equal to the amount of real property taxes on owned
Real Estate that are past due from time to time, less the amount then on
deposit in
2
any escrow or other account maintained for the benefit of BBC with respect
to such taxes, plus
(c) Section 11.1 is amended in its entirety to read as follows:
SECTION 11.1. Financial Ratios. Permit EBITDA for (i) February 1999
----------------
to be less than $200,000, (ii) February and March 1999 to be less than
$550,000, (iii) February, March and April 1999 to be less than $1,050,000
or (iv) February 1 through May 31, 1999 to be less than $2,050,000.
(c) In addition to the other reports and notices required by the Loan
Agreement, the Borrower shall provide to the Agent (i) before the close of
business on each Business Day, a report of sales and collections for the
preceding Business Day and (ii) not later that Tuesday of each week, a cash
budget for the 90-day period beginning on the preceding Monday including at
least budgeted sales, collections, cash receipts and disbursements, accounts
receivable and accounts payable balances, inventory, and Loan balance and
availability under the Revolving Credit Facility, on a weekly basis, such
reports to be in form satisfactory to the Agent.
"Forbearance Period" means the period beginning on the date hereof and ending on
the earlier of May 28, 1999, the date on which any Forbearance Condition (as
hereinafter defined) fails or ceases to be satisfied.
Section 3. Forbearance Conditions. The following conditions shall
----------------------
constitute the "Forbearance Conditions":
(a) The Borrower shall timely perform all of its obligations under this
Agreement;
(b) Other than the Forbearance Defaults, no Default, Event of Default, or
"Event of Default" under and as defined in the Back Bay Agreement shall occur or
be continuing;
(c) No payments shall have been made by the Borrower after the date of
this Agreement to any Affiliate of the Borrower or in respect of principal of or
interest on any Subordinated Debt;
(d) Contemporaneously with the execution and delivery of this Agreement
the Borrower shall have received $1.5 million in cash, being the net proceeds of
a subordinated loan made by Xxxxx Assets International Limited (registration no.
84998B), a company organized under the International Business Companies Act of
the Commonwealth of the Bahamas, pursuant to documentation substantially in the
form attached hereto as Exhibit A and otherwise in form and substance
satisfactory to the Agent (the "MAI Loan") and the proceeds of the MAI Loan
shall be applied upon receipt
3
to repayment of Revolving Credit Loans outstanding under the Loan Agreement (but
without any reduction in the Revolving Credit Facility);
(e) No payment of interest on or repayment or prepayment of principal of
the MAI Loan shall be made by the Borrower;
(f) The Borrower shall on or before March 31, 1999, pay any and all real
property taxes in respect of owned Real Estate that are past due or on such date
deposit in escrow with BankBoston or another escrow agent satisfactory to both
Back Bay and the Borrower an amount equal to the amount of real property taxes
due and unpaid on the Borrower's owned Real Estate (being approximately $400,000
on the date of this Agreement), pursuant to an escrow agreement that will
provide for the release of the escrowed funds (i) to pay such real property
taxes directly upon instruction to Back Bay from the Borrower, (ii) to the
Borrower upon presentation to Back Bay of evidence reasonably satisfactory to it
of payment in full of such real property taxes, or (iii) to pay such real
property taxes at any time after Back Bay has commenced enforcement actions
under the Back Bay Agreement or any of the Loan Documents (as defined therein)
or any governmental authority has commenced any adverse action against the
Borrower or the subject Real Estate arising out of the non-payment of such real
property taxes, and otherwise in form and substance satisfactory to Back Bay and
the escrow agent; and
(g) The representations and warranties contained in the Loan Agreement and
the Back Bay Agreement shall be correct in all material respects; and
(h) The Borrower shall, and shall demonstrate to the Agent's satisfaction
from time to time upon request by the Agent that the Borrower does, timely
deduct from the wages of its employees all payroll taxes and make timely and
proper deposits of all payroll and other "trust fund" taxes.
Section 4. Forbearance Terminated. If any one or more of the Forbearance
----------------------
Conditions is not satisfied, the agreements of the Lenders and the Agent and of
Back Bay to forbear as set forth in Section 2 shall, at the election of the
Required Lenders or Back Bay, as the case may be, terminate without notice to
the Borrower, and the Lenders and the Agent or Back Bay shall thereupon have and
may exercise from time to time all of the remedies available to them under the
Loan Documents (as defined in the Loan Agreement or the Back Bay Agreement, as
applicable) and Applicable Law by reason of the existence of continuing Events
of Default or "Events of Default" (under and as defined in the Back Bay
Agreement).
Section 5. Representations and Warranties of Borrower. The Borrower
------------------------------------------
hereby represents and warrants to the Agent and the Lenders and Back Bay that:
(a) The Borrower has no knowledge of any Defaults or Events of Default
existing under the Loan Documents or "Events of Default" existing under the Back
Bay
4
Agreement or the other "Loan Documents" as defined therein or defaults existing
under the Equipment Leases, other than the Forbearance Defaults;
(b) Subject to such existing Events of Default and "Events of Default,"
the representations and warranties of the Borrower set forth in the Loan
Documents (as defined in the Loan Agreement and the Back Bay Agreement) are true
and correct in all material respects on and as of the date of this Agreement;
(c) The Borrower has the power and authority and has taken all necessary
steps to authorize it to execute, deliver and perform its obligations under this
Agreement in accordance with its terms, this Agreement has been duly executed
and delivered by the Borrower and is the legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its terms; and
(d) The execution, delivery and performance by the Borrower of this
Agreement does not require any Governmental Approval, violate any Applicable
Law, conflict with or result in a breach of the Borrower's certificate of
incorporation or by-laws, or conflict with or result in a breach of or
constitute a default under any material provisions of any indenture, agreement
or other instrument to which the Borrower is a party or by which the Borrower or
any of its property may be bound or any Governmental Approval applicable to the
Borrower or its property.
Section 6. Application of Proceeds. The Borrower hereby agrees, any
-----------------------
provision of the Loan Agreement or any other Loan Document to the contrary
notwithstanding, that as between the Borrower, on one hand, and the Agent and
the Lenders on the other, the Agent shall have the right to apply and reapply
any and all Collateral, proceeds thereof, other amounts received by the Agent
for application to the Secured Obligations and any property of the Borrower at
any time in the possession of the Agent or any Lender or any Affiliate of the
Agent or any Lender to the payment of the Secured Obligations in any order that
the Agent in its sole and absolute discretion may determine from time to time.
Section 7. Governing Law; General Provisions. (a) This Agreement shall
---------------------------------
be governed by and construed in accordance with the laws of the State of Georgia
(without reference to conflict of laws principles). Each of the parties hereto
hereby submits to the nonexclusive jurisdiction of the federal court of the
Northern District of Georgia in any case arising out of a dispute hereunder and
agrees that service upon it may be made by mail addressed to the address
specified hereunder for giving of notices.
(b) This Agreement may be executed in any number of copies and by the
parties on separate copies, all of which taken together shall constitute a
single agreement.
(c) Captions of Sections, subsections, schedules or exhibits herein or
attached hereto are for convenience of reference only and shall not be
considered in interpreting or construing any provision of this Agreement and its
attachments.
5
(d) The parties to this Agreement do not intend to create, and no
provision hereof shall be deemed to have created, any rights in favor of any
Person not a party to this Agreement.
(e) This Agreement may not be amended or otherwise modified except in
writing, signed by the parties to this Agreement.
(f) All notices, demands and other communications provided for hereunder
shall be in writing and shall be deemed given to the addressee on the third
Business Day after deposit in the United States mail, first-class postage
prepaid, or upon confirmation during customary business hours of receipt of a
facsimile transmission, address to any party hereto at the address or facsimile
number appearing under such party's name on the signature pages of this
Agreement or to such other address and number as any party may specify for
itself by notice given to all other parties in the manner described in this
Section 7(f).
(g) This Agreement is not intended to be, and it shall not be construed to
be, a novation or accord and satisfaction and, except as expressly modified
hereby, the Loan Agreement, the Back Bay Agreement and the other Loan Documents
(as defined in both the Loan Agreement and the Back Bay Agreement) remain in
full force and effect and are hereby ratified and confirmed.
Section 8. No Waiver. (a) None of this Agreement, the forbearance by the
---------
Agent and the Lenders and Back Bay hereunder, the Lenders' continued Revolving
Credit Loans to the Borrower in accordance with the terms of the Loan Agreement
and this Agreement or the Agent's or the Lenders' or Back Bay's discussions or
negotiations with the Borrower or any Affiliate of the Borrower are intended to
be, nor are they nor shall they be deemed to be, a waiver of or consent to the
Events of Default or "Events of Default" (as defined in the Back Bay Agreement)
referred to herein or any other Default or Event of Default or "Event of
Default." The Borrower agrees that no Default or Event of Default or "Event of
Default" (as defined in the Back Bay Agreement) has been waived or released, or
shall be considered to have been cured by reason of the Agent and the Lenders or
Back Bay entering into this Agreement or performing the terms hereof, including,
without being limited to, forbearing from the exercise of available remedies and
making further Revolving Credit Loans to the Borrower.
(b) None of this Agreement, the forbearance by the Agent and the Lenders,
BBL, and Back Bay hereunder, the Lenders' continued Revolving Credit Loans to
the Borrower in accordance with the terms of the Loan Agreement and this
Agreement or the Agent's or the Lenders', BBL's or Back Bay's discussions or
negotiations with the Borrower or any Affiliate of the Borrower are intended to
be, nor are they nor shall they be deemed to be, a waiver or forbearance of any
of the rights, powers or remedies of The CIT Group/Commercial Services, Inc.
with respect to the ledger debt of the Borrower (which is indebtedness for goods
and services purchased by the Borrower from any party
6
whose accounts receivable are factored or financed by The CIT Group/Commercial
Services, Inc.).
Section 9. Release; Waiver of Jury Trial. (a) TO INDUCE THE LENDERS AND
-----------------------------
THE AGENT AND BACK BAY TO ENTER INTO THIS AGREEMENT, THE BORROWER HEREBY
RELEASES EACH LENDER AND THE AGENT AND BACK BAY, THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS AND ASSIGNS, FROM ANY AND ALL CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION AND OTHER LIABILITIES OF ANY KIND, WHETHER MATURED OR
UNMATURED OR CONTINGENT, LIQUIDATED OR UNLIQUIDATED, AT LAW OR IN EQUITY, THAT
THE BORROWER HAS OR HAS HAD AGAINST ANY LENDER OR THE AGENT OR BACK BAY.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its duly authorized officer(s) as of the date first
above written.
BORROWER:
[Corporate Seal] TEXFI INDUSTRIES, N.A.
Attest:
By: /s/ Xxxxxx X. Xxxxxx, Xx.
By: /s/Xxxxxx X. Xxxxxxxxx --------------------------
------------------------------ Name: Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxxxxx Title: CEO, President
Executive Vice President and
Chief Financial Officer
AGENT:
BANKBOSTON, N.A.
By: /s/ Xxxxxxxxx X. Xxxxxx
-------------------------
Xxxxxxxxx X. Xxxxxx
Managing Director
8
LENDERS:
BANKBOSTON, N.A.
By: /s/ Xxxxxxxxx X. Xxxxxx
--------------------------
Xxxxxxxxx X. Xxxxxx
Managing Director
Address:
000 Xxxxxxxxx Xxxxxx Xxxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
9
THE CIT GROUP/COMMERCIAL
SERVICES, INC.:
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
Address:
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
10
BANCBOSTON LEASING INC.:
By: /s/ Xxxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: Assistant Vice President
Address:
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Att: Xxxxxxxx X. Xxxxxxxx
Facsimile no.: (000) 000-0000
11
BACK BAY:
BACK BAY CAPITAL FUNDING LLC
By: /s/ Xxxxxx XxXxxxxxx
---------------------------
Name: Xxxxxx XxXxxxxxx
Title: Managing Director
Address:
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx XxXxxxxxx
Facsimile No.: (000) 000-0000
12
SCHEDULE 1
Existing Events of Default
--------------------------
Loan Agreement
--------------
1. Failure to furnish financial statements for Fiscal Year 1998 in accordance
with Section 10.1(a) of the Loan Agreement.
2. Failure to furnish timely financial reports for first Fiscal Quarter of
Fiscal Year 1999 in accordance with Section 10.1(b) of the Loan Agreement.
3. Noncompliance with the provisions of Section 11.1(b) (Minimum Capital
---------------
Funds).
-----
4. Noncompliance with the provisions of Section 11.1(a) (Debt Service Coverage
---------------------
Ratio).
-----
5. Event of Default pursuant to Section 12.1(e) of the Loan Agreement by
reason of the Back Bay Defaults.
6. Non-payment of 1997 real property taxes in State of North Carolina.
7. February payment default under the Equipment Leases.
13
SCHEDULE 2
Existing Events of Default
--------------------------
Back Bay Agreement
------------------
1. Failure to furnish financial statements for Fiscal Year 1998 in accordance
with Section 5-7 of the Back Bay Agreement.
2. Failure to furnish timely financial reports for first Fiscal Quarter of
Fiscal Year 1999 in accordance with Section 5-5 of the Back Bay Agreement.
3. Noncompliance with the provisions of Section 5-11 (maintenance of (Minimum
-------
Capital Funds and Debt Service Coverage Ratio).
------------- ---------------------------
4. Event of Default pursuant to Section 8-6 of the Back Bay Agreement by
reason of the Events of Default (as defined in the Loan Agreement).
5. Non-payment of real property taxes in State of North Carolina.
14
