SECOND AMENDMENT TO
FORBEARANCE AGREEMENT
THIS SECOND AMENDMENT TO FORBEARANCE AGREEMENT (hereinafter, this
"Second Forbearance Agreement Amendment") is entered as of January 29, 1999
between PLUMA, INC., a North Carolina corporation (the "Borrower") and
NATIONSBANK, N.A., as Agent for and on behalf of the Lenders (the "Agent").
Capitalized terms used herein and not otherwise defined or designated herein
shall have the respective meanings given to them in the Credit Agreement
(defined below).
RECITALS
WHEREAS, the Borrower, the Agent and the Lenders are parties to that
certain Credit Agreement dated as of April 23, 1998, as amended by that certain
First Amendment to Credit Agreement and Waiver between the Borrower and the
Agent for and on behalf of the Lenders dated as of August 27, 1998, by that
certain Second Amendment to Credit Agreement between the Borrower and the Agent
for and on behalf of the Lenders dated as of September 30, 1998, by that Third
Amendment to Credit Agreement between the Borrower and the Agent for and on
behalf of the Lenders dated as of November 16, 1998, by that certain Fourth
Amendment to Credit Agreement between the Borrower and the Agent for and on
behalf of the Lenders dated as of December 11, 1998, and by that certain Fifth
Amendment to Credit Agreement between the Borrower and the Agent for and on
behalf of the Lenders dated as of December 31, 1998 (as further amended,
modified, supplemented, extended or restated from time to time, the "Credit
Agreement");
WHEREAS, the Borrower and the Agent on behalf of the Lenders are parties
to that certain Forbearance Agreement dated as of November 16, 1998, as amended
by an Amendment to Forbearance Agreement (as further amended, modified,
supplemented, extended or restated from time to time, the "Forbearance
Agreement");
WHEREAS, the Borrower has informed the Lenders that it believes that as
of the fiscal quarter ended December 31, 1998, in addition to the previously
identified Acknowledged Events of Default (as defined the Forbearance
Agreement), the following Events of Default have occurred and are continuing
under the Credit Agreement (collectively the "Additional Acknowledged Events of
Default"): (1) as of the fiscal quarter ended December 31, 1998, the
Consolidated Parties have exceeded the maximum Funded Indebtedness to
Capitalization Ratio required by Section 7.11(a) of the Credit Agreement, (2) as
of the fiscal quarter ended December 31, 1998, the Consolidated Parties have
failed to maintain the minimum Fixed Charge Coverage Ratio required by Section
7.11(b) of the Credit Agreement, (3) as of the fiscal quarter ended December 31,
1998, the Consolidated Parties have exceeded the maximum Leverage Ratio required
by Section 7.11(c) of the Credit Agreement, (4) as of the fiscal quarter ended
December 31, 1998, the Consolidated Parties have failed to maintain the minimum
Consolidated Net Worth required by Section 7.11(d) of the Credit Agreement, and
(5) as of the fiscal quarter ended December 31, 1998, the Consolidated Parties
have
failed to maintain the minimum Consolidated EBITDA required by Section 7.11(e)
of the Credit Agreement;
WHEREAS, the Borrower has requested that the Lenders agree to amend the
Forbearance Agreement to: (i) forbear exercising their rights and remedies
arising from the Additional Acknowledged Events of Default until the Forbearance
Termination Date (as defined in the Forbearance Agreement) and (ii) extend the
Forbearance Termination Date to March 1, 1999. The Agent, on behalf of the
Lenders, has agreed to do so, but only upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Forbearance Termination Date. The Forbearance Agreement is hereby
amended so that the Forbearance Termination Date is extended to March 1, 1999.
2. Acknowledged Events of Default. The Forbearance Agreement is hereby
amended so that the term "Acknowledged Events of Default" shall include the
Additional Acknowledged Events of Default.
3. Eurodollar Loans. Notwithstanding the Forbearance Agreement, while
the Acknowledged Events of Default are continuing, each Eurodollar Loan
outstanding as of the date of this Second Forbearance Agreement Amendment shall
be converted to a Base Rate Loan at the end of the applicable Interest Period.
From and after the date hereof, the Borrower shall not be entitled to draw
additional Eurodollar Loans, continue Eurodollar Loans or convert Base Rate
Loans to Eurodollar Loans.
4. Lenders' Consultant. The Borrower hereby acknowledges that the Agent
has given the Borrower reasonable notice that the Agent intends to exercise its
rights on behalf of the Lenders under Section 7.10 of the Credit Agreement to
appoint an independent agent to visit the Borrower's facilities and review the
financial records and operations of the Borrower during normal business hours on
any Business Day as may be chosen by the Agent.
5. Assignments. Notwithstanding the Forbearance Agreement, while the
Acknowledged Events of Default are continuing, no consent or approval of the
Borrower shall be required to for any Lender to assign all or a portion of its
rights under the Credit Agreement (including, without limitation, all or a
portion of its Loans, its Notes, and its Commitment).
6. Amendment to Credit Agreement. Simultaneously with the execution of
this Second Forbearance Agreement Amendment, the Borrower shall execute and
deliver to the Agent, on behalf of the Lenders, a Sixth Amendment to Credit
Agreement (the "Sixth Amendment") in form of that attached hereto as Exhibit A.
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7. Second Forbearance Agreement Amendment Fees. In consideration of the
willingness of the Agent, on behalf of the Lenders, to enter this Second
Forbearance Agreement Amendment, the Borrower, simultaneously with the execution
of this Agreement, shall pay to the Agent for the account of each Lender who
consents to this Second Forbearance Agreement Amendment and the Sixth Amendment
and delivers evidence of such consent to the Agent by the date hereof, a fee in
an amount equal to .10% of such Lender's Commitment immediately prior to the
execution hereof (collectively, the "Second Forbearance Agreement Fees").
8. Preliminary Year 2000 Plan. On or before February 8, 1999, the
Borrower shall deliver to the Agent on behalf of the Lenders a preliminary
business plan and budget of the Borrower for fiscal year 2000, which preliminary
business plan and budget shall be prepared with the material assistance of PwC.
9. Conditions Precedent. As conditions precedent to the effectiveness of
this Second Forbearance Agreement Amendment, on or before the date hereof:
(a) The Agent shall have received original duly executed
counterparts of this Second Forbearance Agreement Amendment duly
executed by the Credit Parties and the Agent;
(b) The Borrower shall have executed and delivered to the Agent
the Sixth Amendment;
(c) The Agent, on behalf of the Lenders, shall have received the
Forbearance Agreement Fees; and
(d) The Borrower shall have delivered to the Agent an opinion of
counsel to the Borrower in form and substance satisfactory to the Agent
as to the due authorization, execution, delivery and enforceability of
this Second Forbearance Agreement Amendment and the Sixth Amendment.
10. Limited Modification Only. Except as specifically modified hereby,
the terms and conditions of the Forbearance Agreement remain in full force and
effect.
11. Release. The Borrower hereby releases the Agent, the Lenders, and
the Agent's and the Lenders' respective officers, employees, representatives,
agents, counsel and directors from any and all actions, causes of action,
claims, demands, damages and liabilities of whatever kind or nature, in law or
in equity, now known or unknown, suspected or unsuspected to the extent that any
of the foregoing arises from any action or failure to act on or prior to the
date hereof.
12. Expenses. Upon demand therefor, the Borrower shall pay all
out-of-pocket expenses incurred by the Agent in connection with the negotiation,
drafting and execution of this Second
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Forbearance Agreement Amendment and the exhibits hereto, including without
limitation reasonable fees and expenses of the Agent's counsel.
13. Borrower's Representations. The Borrower hereby represents and
warrants as follows:
(a) The Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Second Forbearance Agreement
Amendment;
(b) This Second Forbearance Agreement Amendment has been duly
executed and delivered by the Borrower and constitutes the Borrower's
legal, valid and binding obligations, enforceable in accordance with its
terms, except as such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity); and
(c) 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 the Borrower of this Second Forbearance Agreement
Amendment.
14. Counterparts. This Second Forbearance Agreement 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. Delivery of an executed counterpart of this Second Forbearance
Agreement Amendment by telecopy shall be effective as an original and shall
constitute a representation that an executed original shall be delivered.
15. GOVERNING LAW. THIS SECOND FORBEARANCE AGREEMENT AMENDMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA.
[SIGNATURES CONTINUE ON FOLLOWING PAGE.]
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Each of the parties hereto has caused a counterpart of this Second
Forbearance Agreement Amendment to be duly executed and delivered as of the date
first above written.
PLUMA, INC.,
a North Carolina corporation
By:_________________________________
Name:_______________________________
Title:______________________________
NATIONSBANK, N.A.,
as Agent for and on behalf of
the Lenders
By:__________________________________
Name:________________________________
Title:_______________________________
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