Fifth Amendment and Waiver Agreement
Fifth Amendment and Waiver Agreement, dated as of November 20, 1996, to
the Credit Agreement, dated as of June 5, 1995 (as the same has heretofore or
may be hereafter amended, supplemented or modified from time to time in
accordance with its terms, the "Credit Agreement"), among Donnkenny Apparel,
Inc., a Delaware corporation and Xxxxxxx Industries Corporation, a Delaware
corporation (collectively, the "Borrowers"), the Guarantors named therein and
signatories thereto, the lenders named in Schedules 2.01(a) and (b) of the
Credit Agreement (collectively, the "Lenders"), and The Chase Manhattan Bank
(formerly known as Chemical Bank) as agent for the Lenders (in such capacity,
the "Agent"). Capitalized terms used herein but not otherwise defined herein
shall have the meanings attributed thereto in the Credit Agreement.
WHEREAS, Borrowers have informed the Agent of the existence of certain
Events of Default under the Credit Agreement; and
WHEREAS, Lenders have agreed to waive such Events of Default for a
limited period subject to Borrower's agreement to modify the Credit Agreement in
certain respects.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and subject to the fulfillment of the
conditions set forth below, the parties hereto agree as follows:
SECTION 1. WAIVERS UNDER CREDIT AGREEMENT
1.1 The Lenders hereby waive, solely for the period through February
27, 1997 ("Waiver Period"): (a) the provisions of Section 7.09 of the Credit
Agreement with respect to the Leverage Ratio for the fiscal quarter period ended
September 30, 1996 provided that the Leverage Ratio for such period was in no
event greater than 4.28:1.00, and (b) the other Defaults or Events of Default as
described in the letter from the Borrowers to the Lenders dated as of November
20, 1996, a copy of which is annexed hereto.
1.2 Except for the specific waivers set forth in Section 1.1 and then
only for the Waiver Period, nothing herein shall be deemed to be a waiver of any
covenant or agreement contained in the Credit Agreement, and the Borrowers
hereby agree that all of the covenants and agreements contained in the Credit
Agreement are ratified and confirmed in all respects.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT
2.1 The defined terms "Availability" and "Letter of Credit Usage"
contained in Section 1.01 of the Credit Agreement are amended to read as follows
and the defined terms "Debt Sublimit" and "Waiver Period" are added to Section
1.01 of the Credit Agreement in their alphabetical order to read as follows:
"Availability" shall mean at any time (i) the lesser at such
time of (x) the Total Revolving Credit Commitment less the Letter of
Credit Usage, (y) the Borrowing Base and (z) Debt Sublimit minus (ii)
the unpaid principal balance of, and past due interest and fees on the
Revolving Credit Loans.
"Debt Sublimit" shall mean $43,000,000 for the period November
20, 1996 to December 12, 1996; $41,500,000 from December 13, 1996 to
December 16, 1996; $38,500,000 from December 17, 1996 to December 19,
1996; $35,500,000 from December 20, 1996 to January 2, 1997; $33,000,000
from January 3, 1997 to February 6, 1997; $32,000,000 from February 7,
1997 to February 20, 1997; $31,000,000 from February 21, 1997 and
thereafter.
"Letter of Credit Usage" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such
time, together with letters of credit issued by Chemical Bank on behalf
of Xxxxxxx Industries Corporation outstanding on the Closing Date and
indemnities, if any, issued by the Agent to a financial institution
which has opened letters of credit relating to the assets being acquired
pursuant to the Asset Purchase Agreement plus (ii) the unreimbursed
drawings at such time under all such Letters of Credit; provided,
however, that during the Waiver Period the Letter of Credit Usage shall
not exceed $27,000,000 at any one time outstanding and Letters of Credit
may only be opened to support international purchases.
"Waiver Period" shall mean the period from November 20, 1996 to
February 28, 1997 with respect to existing Events of Default as waived
for such period pursuant to Fifth Amendment and Waiver Agreement dated
as of November 20, 1996 as the same may be extended with the consent of
the Required Lenders."
2.2 Subparagraph (b) of Section 2.01 of the Credit Agreement is amended
by changing the phrase "(C) $60,000,000" to "(C) the Debt Sublimit."
2.3 Section 2.05 of the Credit Agreement is amended by adding thereto a
new subsection (d) to read as follows:
"(d) Notwithstanding subsections (a) and (b) hereof, during the
Waiver Period, the Borrower shall not request Eurodollar Loans, each
Prime Rate Loan, which is a Term Loan, shall bear interest at a rate per
annum equal to the Prime Rate plus 1% and each Prime Rate Loan, which is
a Revolving Credit Loan, shall bear interest at a rate per annum equal
to the Prime Rate plus 1/2 of 1%."
2.4 Section 6.05(i) of the Credit Agreement is amended by adding the
following at the end thereof:
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"Notwithstanding the generality of the foregoing, the Borrowers shall
deliver to the Agent the following information or documents no later than the
dates indicated without the benefit of any grace period provided for in
subparagraph (d) of Article VIII hereof:
By November 22, 1996, a blocked account letter in the form
provided by the Agent executed by the Borrowers and Nationsbank, N.A.
By November 25, 1996, a list of all bank accounts not maintained
with the Lenders which shall include the account name, number, bank and
current balance.
By November 29, 1996, weekly cash flow and L/C usage budgets for
the period December 1, 1996 to January 4, 1997.
By December 31, 1996, weekly cash flow and L/C usage budgets for
the period January 5, 1997 to February 7, 1997.
By January 31, 1997, weekly cash flow and L/C usage budgets for
the period February 8, 1997 to February 28, 1997.
By January 6, 1997, the audited (without qualification) restated
financial statements for the 1994 and 1995 Fiscal Years.
By January 6, 1997, the August 31, 1996 audited financial
statements for Fashion Avenue Knits, Inc. and its subsidiaries for
the Fiscal Year then ended.
By December 20, 1996, monthly projected balance sheets, profit
and loss statements and cash flows for the 1997 Fiscal Year, and showing
projected Indebtedness, including, without limitation, Letters of
Credit, outstanding.
By December 16, 1996, a triparty lockbox agreement providing the
Agent with dominion and control over Borrowers' collections and
receivables in the form provided by the Agent.
By December 29, 1996, modification of any promissory notes in
excess of $100,000 coming due from Donnkenny Apparel, Inc. during the
Waiver Period extending the maturity thereof to no earlier than March 4,
1997.
Following receipt by the Borrower from the Agent of a revised
borrowing base formula based on the results and
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recommendations of an audit presently being conducted by The CIT Group,
a Borrowing Base compliance certificate based on such revised formula, in form
and substance satisfactory to the Lenders, is to be delivered no later than 20
days after the end of each month, without giving effect to any grace period."
2.5 Article VIII of the Credit Agreement is hereby amended by adding a
new subsection (o) to read in its entirety as follows:
"(o) if any information, statement or findings from whatever
source (including, without limitation, an audit conducted by CIT) with
respect to the Borrowers' financial condition for the 1994 and 1995
Fiscal Years or the first two fiscal quarters of 1996 shall vary in any
material respect from the preliminary restated financial statements for
such periods heretofore delivered to the Lenders or the other
information delivered to the Lenders as set forth on the Schedule
annexed to the Fifth Amendment and Waiver Agreement dated as of November
20, 1996."
SECTION 3. CONDITIONS PRECEDENT
Upon the execution and delivery of counterparts of this Amendment and
Waiver Agreement (the "Agreement") by the parties listed below and the
fulfillment of the following conditions, this Agreement shall be deemed to
have become effective as of the date hereof:
3.1 All representations and warranties contained in this Agreement, the
Credit Agreement or otherwise made in writing to the Agent or any Lender in
connection herewith shall be true and correct in all material respects after
giving effect to the waivers under this Agreement.
3.2 No unwaived event shall have occurred and be continuing which
constitutes a Default or an Event of Default.
3.3 The Agent shall have received an amendment fee for the ratable
benefit of the Lenders in the amount of $175,000.
SECTION 4. MISCELLANEOUS
4.1 Each of the Borrowers reaffirms and restates the representations and
warranties set forth in the Credit Agreement, as applicable, and all such
representations and warranties shall be true and correct on the date hereof
with the same force and effect as if made on such date after giving effect to
the waivers under this Agreement.
4.2 Except as herein expressly amended, the Credit Agreement and the
other documents executed and delivered in connection therewith are each ratified
and confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
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4.3 Except as specifically set forth herein, nothing herein contained
shall constitute a waiver or be deemed to be a waiver, of any existing
Defaults or Events of Default, and the Lenders and Agent reserve all rights
and remedies granted to them by the Credit Agreement, the other documents
executed and delivered in connection therewith, by law and otherwise.
4.4 This Agreement may be executed by the parties hereto individually
or in combination, in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement. A
facsimile signature page shall constitute an original for the purposes
hereof.
4.5 During the Waiver Period, Borrowers, in addition to paying the
reasonable fees and expenses of counsel to the Agent, shall also pay the
reasonable fees and expenses of counsel retained by any of the Lenders.
4.6 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
DONNKENNY APPAREL, INC.
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: President
XXXXXXX INDUSTRIES CORPORATION
By: /s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: President
FASHION AVENUE KNITS INC.
By: /s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: President
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THE SWEATER COMPANY, INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: President
CHRISTIANSBURG GARMENT
COMPANY INCORPORATED
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: President
MEGAKNITS, INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: President
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank),
as Agent and Lender
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
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FLEET BANK, N.A.
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
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