THIRD AMENDMENT TO CREDIT AGREEMENT, WAIVER AND CONSENT
THIRD AMENDMENT TO CREDIT AGREEMENT, WAIVER AND CONSENT, dated as of
February __, 2000 (this "Amendment"), to the Credit Agreement dated as of June
29, 1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among DONNKENNY APPAREL, INC. a Delaware corporation
("DKA"), XXXXXXX INDUSTRIES CORPORATION, a Delaware corporation ("BIC";
together with DKA, and severally, the "Borrowers"), the Guarantors party
thereto, the lenders party thereto (collectively, the "Lenders") and THE CIT
GROUP/COMMERCIAL SERVICES, INC. as agent for the Lenders (in such capacity, the
"Agent").
The Borrowers, the Guarantors, the Lenders and the Agent are parties to
the Credit Agreement.
The Borrowers have requested that (a) the Lenders waive certain existing
Events of Default under the Credit Agreement, (b) (i) Lenders consent to
certain action taken by Parent which is prohibited by the Credit Agreement and
(ii) Required Lenders consent to the closing by Borrowers of certain
manufacturing facilities, and (c) amend certain provisions of the Credit
Agreement.
The Lenders are willing to waive such existing Events of Default, give
such consent and make such amendments to the Credit Agreement upon the terms
and subject to the conditions set forth in this Amendment.
Accordingly, in consideration of the mutual agreements set forth herein,
and for good and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Initially capitalized terms used and not otherwise
defined herein shall have their respective meanings as defined in the Credit
Agreement.
2. Waiver of Events of Default. Borrowers have exceeded the Overadvance
Amount permitted under the terms of the Credit Agreement during the End of
Month Period for January 2000 and have defaulted under Sections 7.10 (Minimum
Interest Coverage Ratio), 7.11 (EBITDA) and 7.12(A) (Tangible Net Worth) of the
Credit Agreement (collectively, the "Subject Covenants"), as a result of their
breach of such financial covenants for the quarterly period ending December 31,
1999. As a result of the foregoing, Events of Default (collectively, the
"Covenant Defaults") have occurred under Article VIII(d) of the Credit
Agreement. In response to the Borrowers' request for a waiver of the Covenant
Defaults, Lenders hereby waive the Covenant Defaults, provided, however, that
nothing contained in this Amendment shall be construed to limit, impair or
otherwise affect any rights of Lenders in respect of future noncompliance with
respect to any Overadvance Amount, the Subject Covenants or any other covenant,
term or provision of the Credit Agreement or of any of the other Loan
Documents.
3. Consents. (a) Subsection (n) of Article VIII of the Credit Agreement
provides that an Event of Default shall have occurred if Xxxxxx Appelle ceases
to be the Chairman of the Parent (i.e. Donnkenny, Inc.), unless a replacement
reasonably satisfactory to the Required Lenders is found within 180 days. The
Borrowers have advised the Lenders that as of January 1, 2000, Xxxxxx Xxxx was
appointed Chairman of Donnkenny, Inc., succeeding Xxxxxx Appelle. The Lenders
hereby confirm that Xxxxxx Xxxx is satisfactory as Chairman of Donnkenny, Inc.
and, therefore, no Event of Default occurred as a result of such retirement by
Xxxxxx Appelle and such successor appointment.
(b) Borrowers have advised Lenders that Borrowers propose to close the
following three manufacturing facilities ("Subject Facilities") and to transfer
the manufacturing operations presently conducted at the Subject Facilities to
manufacturing facilities located outside of the United States that are owned by
Borrowers and/or other Persons (the "Subject Facilities Closing"):
(1) Fabric Cutters
000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
(2) Skyline
000 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
and
(3) Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
In response to Borrowers' request, Required Lenders hereby waive the
application of Sections 6.02 and 7.13 of the Credit Agreement and hereby
consent to the Subject Facilities Closing, provided that, (i) nothing contained
herein shall be deemed or constitute Required Lenders' consent to the sale,
lease or other disposition of the Subject Facilities and (ii) Borrowers shall
comply with all laws applicable to the Subject Facilities Closing, including,
without limitation, the Worker Adjustment and Retraining Notification Act, 29
U.S.C. ss. 2101 et. seq.
4. Amendment of Section 1.01. Section 1.01 of the Credit Agreement is
amended as follows:
(a) Interest Rate. The initial portion of the definition of "Interest
Rate" that precedes the parenthetical based on the Eurodollar Rate...)" is
hereby amended in its entirety to read as follows:
" 'Interest Rate' shall mean as to Prime Rate Loans, a rate of one
(1.00%) percent in excess of the Prime Rate and, as to Eurodollar Rate
Loans, a rate of three (3.00%) percent per annum in excess of the Adjusted
Eurodollar Rate..."
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(b) Overadvance Amount. The definition of "Overadvance Amount" is amended
and restated in its entirety to read as follows:
" 'Overadvance Amount' shall mean, during any Intramonth Period and
End of Month Period, the amounts set forth below as correspond to the
Intramonth Period and the End of Month Period during the months set forth
below:
OVERADVANCE AMOUNT
OVERADVANCE AMOUNT DURING THE DURING THE
MONTH INTRAMONTH PERIOD OF MONTH PERIOD
-------------------- ----------------------------- ---------------
January 2000 $ 8,200,000 $4,200,000
February 2000 $ 8,000,000 $4,000,000
March 2000 $ 7,800,000 $2,800,000
April 2000 $10,300,000 $5,300,000
May 2000 $13,700,000 $8,700,000
June 2000 $14,200,000 $9,200,000
July 2000 $13,300,000 $8,300,000
August 2000 $10,200,000 $5,200,000
September 2000 $ 8,000,000 $3,000,000
October 2000 $ 7,000,000 $2,000,000
November 2000 $ 7,000,000 $2,000,000
December 2000 $ 7,000,000 $2,000,000
; provided, however, that, if following receipt of a mutually acceptable
monthly operating plan by November 30, 2000 the Borrowers and the Lenders
have not agreed on Overadvance Amounts for January, 2001 and thereafter,
the Overadvance Amount during the End of Month Period and during the
Intramonth Period End for January, 2001 and thereafter shall be zero
dollars ($0); provided, further, that each of the foregoing amounts shall
be reduced by the aggregate amount of cash proceeds received by the Parent
and/or any of its Subsidiaries (i) as tax refunds
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and (ii) as proceeds (net of taxes due and any reasonable expenses of
sale) from the sale or other disposition of any assets of the Parent
and/or any of its Subsidiaries (excluding sales of inventory in the
ordinary course of business consistent with past practices). The foregoing
shall not be deemed to be a consent by the Agent or any Lender to any sale
of assets.
For purposes of this paragraph, (i) the term 'End of Month Period'
shall mean the period commencing on the last Business Day of a month and
ending on the fifth day of the immediately following month and (ii) the
term `Intramonth Period' shall mean the period commencing on the sixth day
of a month and ending on the day immediately preceding the last Business
Day of the same month."
5. Amendment of Section 2.01(b). Section 2.01(b) of the Credit Agreement
is hereby amended by inserting into the first paragraph thereof a new sentence,
which shall be the second to last sentence thereof and shall immediately follow
the sentence ending with "$75,000,000", as follows:
"In addition to and not in limitation of the foregoing limitations
with respect to Revolving Credit Loans outstanding at any time to
Borrowers, and notwithstanding anything to the contrary contained in this
Section 2.01(b), the aggregate principal amount of Revolving Credit Loans
outstanding at any time to Borrowers solely with respect to Eligible
Receivables and Eligible Inventory shall not exceed an amount equal to the
total amount of Revolving Credit Loans then available based upon the
immediately preceding clauses (B)(i) and (B)(ii)(I)."
6. Amendment of Section 7.10. Section 7.10 of the Credit Agreement is
amended in its entirety to read as follows:
"Section 7.10 Minimum Interest Coverage Ratio. Permit the Interest
Coverage Ratio of the Parent and its Subsidiaries on a Consolidated basis
for each four consecutive fiscal quarter period ending on the last day of
each of the fiscal quarters set forth below to be less than the ratio set
forth below opposite such fiscal quarter:
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Quarterly Period Ending Minimum Interest Coverage Ratio
----------------------- -------------------------------
March 31, 2000 .30 to 1.00
June 30, 2000 0 to 1.00
September 30, 2000 .40 to 1.00
December 31, 2000 1.50 to 1.00"
7. Amendment of Section 7.11. Section 7.11 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 7.11 EBITDA. Permit EBITDA of the Parent and its
Subsidiaries (in each case computed and calculated in accordance with
GAAP) on a Consolidated basis for each four consecutive fiscal quarter
period ending on the last day of each of the fiscal quarters set forth
below to be less than the amount set forth below opposite each such fiscal
quarter:
Quarterly Period Ending EBITDA
---------------- -------------
March 31, 2000 $1,109,000
June 30, 2000 $ 83,700
September 30, 2000 $1,445,000
December 31, 2000 $5,130,000"
8. Amendment of Section 7.12A. Section 7.12A of the the Credit Agreement
is hereby amended in its entirety to read as follows:
"Section 7.12A Tangible Net Worth. Permit the Tangible Net Worth of
the Parent and its Subsidiaries (in each case computed and calculated in
accordance with GAAP) on a Consolidated basis as of the end of each of the
fiscal quarters set forth below to be less than the amount set forth below
opposite each such fiscal quarter:
Quarterly Period Ending Tangible Net Worth
----------------------- ------------------
March 31, 2000 $10,000,000
June 30, 2000 $ 7,500,000
September 30, 2000 $ 9,450,000
December 31, 2000 $11,500,000"
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9. Overadvance Amount Clean-Up. Section 6.16 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"SECTION 6.16 Payment of Revolving Credit Loans with respect to
Overadvance Amount. Notwithstanding anything to the contrary otherwise
contained in this Agreement, including, without limitation, Section
2.01(b), during the quarterly period ending December 31, 2000, Borrowers
shall pay and satisfy in full, on any one (1) day as may be selected by
Borrowers during such quarterly period (such day, the "Overadvance
Clean-up Date"), Revolving Credit Loans in an aggregate amount equal to
(x) that amount of Revolving Credit Loans which would otherwise be
permitted to be outstanding under Section 2.01(b) on the Overadvance
Clean-up Date, less (y) the Overadvance Amount as of the Overadvance
Clean-up Date. Subject to the terms and conditions of this Agreement,
Borrowers may at any time after the Overadvance Clean-up Date re-borrow
such Revolving Credit Loans repaid to Lenders on the Overadvance Clean-up
Date."
1. Amendment Fee. In consideration of the waiver of the Covenant Defaults
and the amendments to the Credit Agreement as set forth herein, Borrowers shall
pay to Agent, for the benefit of Lenders, or Agent, at its option, may charge
the account(s) of Borrowers maintained by Agent an amendment fee in the amount
of $75,000, which fee is fully earned and payable as of the date hereof and
shall constitute part of the Obligations.
10. Representations and Warranties. Borrowers hereby represent and warrant
to Lenders that the representations and warranties set forth in Article IV of
the Credit Agreement are true on and as of the date hereof, as if made on and
as of the date hereof, after giving effect to this Amendment, except to the
extent that any such representation or warranty expressly relates to a prior
date, and breach of any of the representations and warranties made in this
paragraph 11 shall constitute and Event of Default under Article VIII(a) of the
Credit Agreement. Borrowers further represent and warrant that, after giving
effect to this Amendment, no Event of Default or event which, with the lapse of
time or the giving of notice or both, would become an Event of Default has
occurred and is continuing.
11. Effectiveness. This Amendment shall become effective on the date Agent
shall have received counterparts of this Amendment duly executed and delivered
by each of the parties hereto.
12. Continuing Effect of Credit Agreement. This Amendment shall not
constitute a waiver or amendment of any provision of the Credit Agreement not
expressly referred to herein and shall not be construed as a consent to any
further or future action on the part of either of the
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Borrowers that would require consent of Lenders. Except as expressly amended by
this Amendment, the provisions of the Credit Agreement are and shall remain in
full force and effect.
13. Applicable Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York (other than the conflicts of
law principles thereof).
14. Counterparts; Facsimile Signature. This Amendment may be executed in
counterparts, each of which shall constitute and original and all of which when
taken together shall constitute but one contract. Delivery of an executed
counterpart of the signature page of this Amendment by facsimile shall be
effective as delivery of a manually executed signature page hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective authorized officers as of the
day and year first above written.
DONNKENNY APPAREL, INC., as a Borrower and a Guarantor
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: Executive Vice President, Chief Financial Officer
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XXXXXXX INDUSTRIES CORPORATION, as a Borrower and a
Guarantor
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: Executive Vice President, Chief Financial Officer
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[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
CHRISTIANSBURG GARMENT COMPANY, INCORPORATED
as a Guarantor
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: Executive Vice President, Chief Financial Officer
-----------------------------------------------------
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H SQUARED DISPOSITIONS, INC., as a Guarantor
By: /s/ Xxxxxxx Xxxxxx
--------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: Executive Vice President, Chief Financial Officer
-----------------------------------------------------
THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent
By: /s/ Xxxx Xxxxxxxx
--------------------------------------------------------
Name: Xxxx Xxxxxxxx
------------------------------------------------------
Title: Vice President
-----------------------------------------------------
THE CIT GROUP/COMMERCIAL SERVICES, INC., as a Lender
By: /s/ Xxxx Xxxxxxxx
--------------------------------------------------------
Name: Xxxx Xxxxxxxx
------------------------------------------------------
Title: Vice President
-----------------------------------------------------
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