FIRST AMENDMENT TO
------------------
CREDIT AGREEMENT AND WAIVER
---------------------------
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER (hereinafter, the
"Amendment") is entered into as of August 27, 1998 among 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 herein shall have the respective meanings given to them in the
Credit Agreement.
RECITALS
--------
WHEREAS, the Borrower, the Agent and the Lenders are parties to that
certain Credit Agreement dated as of April 23, 1998 (as amended, modified,
supplemented, extended or restated from time to time, the "Credit Agreement");
WHEREAS, Events of Default currently exist under the Credit Agreement (the
"Existing Defaults") as a result of the failure of the Credit Parties to comply
as of the fiscal quarter ending June 30, 1998 with the terms of Section 7.11(b)
of the Credit Agreement, Section 7.11(d) of the Credit Agreement and Section
7.11(e) of the Credit Agreement;
WHEREAS, the Borrower has requested that the Lenders provide a limited
waiver of the Existing Defaults and continue to make available to the Borrower
the Loans provided under the Credit Agreement; and
WHEREAS, the Lenders are willing to provide a limited waiver of the
Existing Defaults and continue to make available to the Borrower the Loans,
based upon and subject to the terms and conditions specified in this Amendment
and, in connection therewith, the Required Lenders have directed the Agent to
execute this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Reaffirmation of Existing Debt. The Credit Parties acknowledge and
confirm (a) that the Agent, on behalf of the Lenders, has a valid and
enforceable first priority perfected security interest in the Collateral, (b)
that the Borrower's obligation to repay the outstanding principal amount of the
Loans and reimburse the Issuing Lender for any drawing on a Letter of Credit is
unconditional and not subject to any offsets, defenses or counterclaims, (c)
that the Agent and the Lenders have performed fully all of their respective
obligations under the Credit Agreement and the other Credit Documents, and (d)
by entering into this Amendment, the Lenders do not waive (except for the
limited waiver of the Existing Defaults) or release any term or condition of 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. Limited Waiver. The Borrower acknowledges that it is not in compliance
with the financial covenants contained in Section 7.11(b), Section 7.11(d) and
Section 7.11(e) of the Credit Agreement (the "Existing Defaults"). The Lenders
hereby waive the Existing Defaults for the period from June 30, 1998 through
September 29, 1998, subject to the terms and conditions set forth herein. This
limited waiver shall not modify or affect (a) the Borrower's obligation to
comply with Section 7.11(b), Section 7.11(d) and Section 7.11(e) on and at all
times after September 30, 1998 and (b) the Borrower's obligation to comply fully
with any other duty, term, condition or covenant contained in the Credit
Agreement and the other Credit Documents. Nothing herein contained shall be
deemed to constitute a waiver of any rights or remedies the Agent or any Lender
may have under the Credit Agreement or any other Credit Documents or under
applicable law.
3. New Definition. The following definition is hereby added to Section 1.1
of the Credit Agreement:
"NEW CONSULTANT" SHALL HAVE THE MEANING PROVIDED SUCH TERM IN
SECTION 7.19 HEREOF.
4. Amended Definitions.
-------------------
(a) The definition of "Applicable Percentage" set forth in Section
1.1 of the Credit Agreement is amended and restated in its entirety to
read as follows:
"APPLICABLE PERCENTAGE" MEANS, FOR PURPOSES OF CALCULATING (I)
THE APPLICABLE INTEREST RATE FOR ANY REVOLVING LOAN OR ANY TERM
LOAN, (A) FOR EURODOLLAR LOANS, 3.75% THROUGH AND INCLUDING
SEPTEMBER 21, 1998 AND 3.50% AT ALL TIMES AFTER SEPTEMBER 21, 1998
AND (B) FOR BASE RATE LOANS, 1.00% THROUGH AND INCLUDING SEPTEMBER
21, 1998 AND .75% AT ALL TIMES AFTER SEPTEMBER 21, 1998, (II) THE
APPLICABLE RATE OF THE UNUSED FEE FOR ANY DAY FOR PURPOSES OF
SECTION 3.5(B), .375% AND (C) THE APPLICABLE RATE FOR THE LETTER OF
CREDIT FEE FOR ANY DAY, 3.50%.
(b) The definition of "Borrowing Base" set forth in Section 1.1 of
the Credit Agreement is hereby amended and restated in its entirety to
read as follows:
"BORROWING BASE" MEANS, AS OF ANY DAY, THE SUM OF (A) 85% OF
ELIGIBLE RECEIVABLES, (B) 60% OF ELIGIBLE INVENTORY, IN EACH CASE AS
SET FORTH IN THE MOST RECENT BORROWING BASE CERTIFICATE DELIVERED TO
THE AGENT AND THE LENDERS IN ACCORDANCE WITH THE TERMS OF SECTION
7.1(C) AND (C) DURING THE PERIOD (I) FROM AND INCLUDING AUGUST 27,
1998 THROUGH AND INCLUDING SEPTEMBER 11, 1998, $4,000,000, (II) FROM
AND INCLUDING SEPTEMBER 12, 1998 THROUGH AND INCLUDING SEPTEMBER 21,
1998, $2,000,000, AND (III) AFTER SEPTEMBER 21, 1998, $0.
2
5. Minimum Amounts. Section 2.1(b)(ii) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
"(II) MINIMUM AMOUNTS. EACH EURODOLLAR LOAN THAT IS A
REVOLVING LOAN SHALL BE IN A MINIMUM AGGREGATE PRINCIPAL AMOUNT OF
$2,000,000 AND INTEGRAL MULTIPLES OF $500,000 IN EXCESS THEREOF (OR
THE REMAINING AMOUNT OF THE REVOLVING COMMITTED AMOUNTS, IF LESS)
AND EACH BASE RATE LOAN THAT IS A REVOLVING LOAN SHALL BE IN A
MINIMUM AGGREGATE PRINCIPAL AMOUNT OF $500,000 AND INTEGRAL
MULTIPLES OF $100,000 IN EXCESS THEREOF (OR THE REMAINING AMOUNT OF
THE REVOLVING COMMITMENT, IF LESS).
6. Voluntary Prepayments. Section 3.3(a) of the Credit Agreement is hereby
amended to provide that partial prepayments of Loans (other than Swingline
Loans) shall be in a minimum principal amount of $2,000,000 and integral
multiples of $100,000 in excess thereof.
7. Year 2000 Compliance. A new Section 6.25 is hereby added to the Credit
Agreement and shall read as follows:
6.25 YEAR 2000 COMPLIANCE.
--------------------
EACH CREDIT PARTY HAS (I) INITIATED A REVIEW AND ASSESSMENT OF
ALL AREAS WITHIN ITS AND EACH OF ITS SUBSIDIARIES' BUSINESS AND
OPERATIONS THAT COULD REASONABLY BE EXPECTED TO BE ADVERSELY
AFFECTED BY THE "YEAR 2000 PROBLEM" (THAT IS, THE RISK THAT COMPUTER
APPLICATIONS USED BY SUCH CREDIT PARTY OR ANY OF ITS SUBSIDIARIES
MAY BE UNABLE TO RECOGNIZE AND PERFORM PROPERLY DATE-SENSITIVE
FUNCTIONS INVOLVING CERTAIN DATES PRIOR TO AND ANY DATE AFTER
DECEMBER 31, 1999), (II) DEVELOPED A PLAN AND TIMELINE FOR
ADDRESSING THE YEAR 2000 PROBLEM ON A TIMELY BASIS, AND (III) TO
DATE, IMPLEMENTED THAT PLAN IN ACCORDANCE WITH THE TIMETABLE. BASED
ON THE FOREGOING, EACH CREDIT PARTY BELIEVES THAT ALL COMPUTER
APPLICATIONS THAT ARE MATERIAL TO ITS AND ANY OF ITS SUBSIDIARIES'
BUSINESS AND OPERATIONS ARE REASONABLY EXPECTED ON A TIMELY BASIS TO
BE ABLE TO PERFORM PROPERLY DATE-SENSITIVE FUNCTIONS FOR ALL DATES
BEFORE AND AFTER JANUARY 1, 2000 (THAT IS, BE "YEAR 2000
COMPLIANT"), EXCEPT TO THE EXTENT THAT A FAILURE TO DO SO COULD NOT
REASONABLY BE EXPECTED TO HAVE MATERIAL ADVERSE EFFECT.
8. Financial Statements. Section 7.1(b) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
(B) MONTHLY FINANCIAL STATEMENTS. AS SOON AS AVAILABLE, AND IN ANY
EVENT WITHIN 30 DAYS AFTER THE CLOSE OF EACH CALENDAR MONTH (I) A
CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF THE CONSOLIDATED
PARTIES, AS OF THE END OF SUCH CALENDAR MONTH, TOGETHER WITH RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS AND OF
CASH FLOWS FOR SUCH CALENDAR MONTH IN EACH CASE SETTING FORTH IN
COMPARATIVE FORM CONSOLIDATED FIGURES FOR THE CORRESPONDING PERIOD
OF THE PRECEDING FISCAL YEAR AND (II) A CONSOLIDATING BALANCE SHEET
AND INCOME
3
STATEMENT OF THE BORROWER AND ITS MATERIAL SUBSIDIARIES, AS OF THE
END OF SUCH CALENDAR MONTH, TOGETHER WITH RELATED CONSOLIDATING
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS AND OF CASH FLOWS
FOR SUCH CALENDAR MONTH, IN EACH CASE SETTING FORTH IN COMPARATIVE
FORM CONSOLIDATING FIGURES FOR THE CORRESPONDING PERIOD OF THE
PRECEDING FISCAL YEAR, ALL SUCH FINANCIAL INFORMATION DESCRIBED
ABOVE TO BE IN REASONABLE FORM AND DETAIL AND REASONABLY ACCEPTABLE
TO THE AGENT, AND ACCOMPANIED BY A CERTIFICATE OF THE CHIEF
FINANCIAL OFFICER OF THE BORROWER TO THE EFFECT THAT SUCH MONTHLY
FINANCIAL STATEMENTS FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL CONDITION OF THE CONSOLIDATED PARTIES OR THE BORROWER
AND ITS MATERIAL SUBSIDIARIES, AS APPLICABLE, AND HAVE BEEN PREPARED
IN ACCORDANCE WITH GAAP, SUBJECT TO CHANGES RESULTING FROM AUDIT AND
NORMAL YEAR-END AUDIT ADJUSTMENTS. THE BORROWER ACKNOWLEDGES AND
AGREES THAT SUCH MONTHLY FINANCIAL STATEMENTS SHALL BE USED TO TEST
THE FINANCIAL COVENANTS CONTAINED IN SECTION 7.11.
9. Borrowing Base Certificate. The following sentence is hereby added at
the end of Section 7.1(e) of the Credit Agreement and shall read as follows:
FURTHERMORE, THE BORROWER AGREES TO PROVIDE ON EACH BUSINESS DAY TO
THE AGENT AND EACH OF THE LENDERS A BORROWING BASE CERTIFICATE AS OF
SUCH BUSINESS DAY SUBSTANTIALLY IN THE FORM OF EXHIBIT 7.1(E)(II)
AND CERTIFIED BY THE CHIEF FINANCIAL OFFICER OF THE BORROWER TO BE
TRUE AND CORRECT AS OF THE DATE THEREOF.
10. PLAN OF ACTION; CASH FORECAST. NEW SECTIONS 7.1(O) AND 7.1(P) ARE
HEREBY ADDED TO THE CREDIT AGREEMENT AND SHALL READ AS FOLLOWS:
(O) PLAN OF ACTION. ON OR BEFORE SEPTEMBER 21, 1998, THE BORROWER
SHALL PROVIDE THE AGENT WITH A DETAILED REPORT (IN FORM AND
SUBSTANCE SATISFACTORY TO THE AGENT) OUTLINING ITS PLAN OF ACTION
(INCLUDING A TIMETABLE FOR SUCH PLAN) FOR THOSE MATTERS IDENTIFIED
ON SCHEDULE 7.1(O) ATTACHED HERETO.
(P) CASH FORECAST. THE BORROWER WILL DELIVER EVERY OTHER WEEK (BY NO
LATER THAN WEDNESDAY OF SUCH WEEK) TO THE AGENT AND EACH OF THE
LENDERS A CASH FORECAST SUBSTANTIALLY IN THE FORM OF EXHIBIT 7.1(P).
THE PARTIES HERETO AGREE THAT THE BORROWER'S CASH FORECAST AS OF
AUGUST 24, 1998 IS AS ATTACHED HERETO AS EXHIBIT 7.1(P).
11. Audit/Inspections. The last sentence of Section 7.10 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
THE CREDIT PARTIES AGREE THAT THE AGENT, AND ITS REPRESENTATIVES, MAY
CONDUCT A QUARTERLY AUDIT OF THE COLLATERAL, AT THE EXPENSE OF THE
BORROWER. IT IS UNDERSTOOD AND AGREED THAT THE FIRST SUCH AUDIT SHALL BE
CONDUCTED IN SEPTEMBER, 1998.
4
12. Business Consultant. A new Section 7.19 is hereby added to the Credit
Agreement and shall read as follows:
7.19 BUSINESS CONSULTANT. THE BORROWER HAS PREVIOUSLY RETAINED
XXXXXXX AND COMPANY ("N&C") AS A BUSINESS AND FINANCIAL CONSULTANT FOR THE
BORROWER. IMMEDIATELY UPON OBTAINING APPROVAL FROM ITS BOARD OF DIRECTORS,
THE BORROWER WILL MAKE AVAILABLE TO THE LENDERS FROM TIME TO TIME
APPROPRIATE REPRESENTATIVES OF N&C TO REVIEW AND DISCUSS WITH THE LENDERS
THE RECOMMENDATIONS THAT HAVE BEEN MADE BY N&C TO THE BORROWER (INCLUDING
MAKING AVAILABLE TO THE LENDERS COPIES OF ALL WRITTEN MATERIALS PROVIDED
BY N&C TO THE BORROWER). THE LENDERS MAY ELECT TO ENGAGE, AT THE EXPENSE
OF THE BORROWER, A THIRD PARTY EXPERT TO REVIEW ON BEHALF OF THE LENDERS
THE INFORMATION PREPARED BY N&C. THE BORROWER COVENANTS AND AGREES THAT,
IF REQUESTED BY THE REQUIRED LENDERS, THE BORROWER WILL IMMEDIATELY HIRE
AN ADDITIONAL BUSINESS CONSULTANT SATISFACTORY TO THE AGENT IN THE AGENT'S
REASONABLE DISCRETION (THE "NEW CONSULTANT"). THE EXACT SCOPE OF THE NEW
CONSULTANT'S SERVICES SHALL BE AGREED UPON BY THE BORROWER AND THE NEW
CONSULTANT, BUT MUST BE SATISFACTORY TO THE AGENT IN THE AGENT'S
REASONABLE DISCRETION. IF REQUIRED TO BE RETAINED PURSUANT TO THE TERMS
HEREOF THE BORROWER SHALL CAUSE THE NEW CONSULTANT (I) TO MEET
PERIODICALLY WITH THE AGENT AT ITS REASONABLE REQUEST TO REPORT UPON THE
NEW CONSULTANT'S FINDINGS AND RECOMMENDATIONS AND (II) TO MEET WITH THE
LENDERS TO REPORT ON THE NEW CONSULTANT'S FINDINGS AND RECOMMENDATIONS.
THE BORROWER SHALL PAY ALL COSTS ASSOCIATED WITH ITS RETENTION OF THE NEW
CONSULTANT. THE BORROWER SHALL NOT TERMINATE THE NEW CONSULTANT'S
SERVICES, OR DENY THE NEW CONSULTANT ACCESS TO INFORMATION NECESSARY TO
PERFORM ITS SERVICES WITHIN THE SCOPE OF ITS ENGAGEMENT, PRIOR TO THE
EXPIRATION OF SUCH ENGAGEMENT. ALL REPORTS AND INFORMATION PROVIDED BY N&A
AND/OR THE NEW CONSULTANT TO THE AGENT OR THE LENDERS SHALL BE SUBJECT TO
THE CONFIDENTIALITY PROVISIONS OF SECTION 11.15 HEREOF.
13. Exhibit 7.1(e)(ii). New Exhibits 7.1(e)(ii) and 7.1(p) are hereby
added to the Credit Agreement and shall read as Exhibit 7.1(e)(ii) and Exhibit
7.1(p) attached hereto.
14. Schedule 7.1(o). A new Schedule 7.1(o) is hereby added to the Credit
Agreement and shall read as Schedule 7.1(o) attached hereto.
15. Conditions Precedent. The effectiveness of this Amendment is subject
to the satisfaction of each of the following conditions:
(a) The Agent shall have received original duly executed
counterparts of this Amendment duly executed by the Credit Parties and the
Agent.
(b) Payment by the Borrower (i) to the Agent for the pro rata
benefit of the Lenders an amendment fee in an amount equal to $115,000 and
(ii) of all other costs and expenses heretofore incurred by the Agent,
including without limitation legal fees and expenses, in connection with
the negotiation, administration, amendment and enforcement of any of the
Credit Documents.
5
(c) The Agent shall have received such other documents and
information as it deems reasonably necessary.
16. 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 Borrower hereby represents and warrants as follows:
(i) It 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 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).
(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 the Borrower of this Amendment.
(c) The Borrower represents and warrants to the Lenders that (i)
except for the representation contained in Section 6.2(a) with respect to
matters previously disclosed to the Lenders, 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 and (ii) no unwaived
event has occurred and is continuing which constitutes a Default or an
Event of Default.
(d) 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. Delivery of an
executed counterpart of this Amendment by telecopy shall be effective as
an original and shall constitute a representation that an executed
original shall be delivered.
(e) THIS 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.
6
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.
PLUMA, INC.
By:_____________________________________________
Name: __________________________________________
Title: _________________________________________
NATIONSBANK, N.A.,
as Agent for and on behalf of
the Lenders
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
