FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (hereinafter, this "Forbearance Agreement")
is entered into as of November __, 1998 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 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 and 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 (as further
amended, modified, supplemented, extended or restated from time to time, the
"Credit Agreement").
WHEREAS, the following Events of Default exist under the Credit
Agreement (collectively as the "Acknowledged Events of Default"): (1) as of the
fiscal quarter ended September 30, 1998, the Consolidated Parties have failed to
maintain the minimum Fixed Charge Coverage Ratio required by Section 7.11(b) of
the Credit Agreement, (2) as of the fiscal quarter ended September 30, 1998, the
Consolidated Parties have failed to maintain the minimum Consolidated Net Worth
required by Section 7.11(d) of the Credit Agreement, and (3) as of the fiscal
quarter ended September 30, 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 waive the
Acknowledged Events of Default, and the Lenders have refused that request.
WHEREAS, the Borrower now has asked the Lenders to: (1) forbear
exercising its rights and remedies arising from the Acknowledged Events of
Default until December 31, 1998 (the "Forbearance Termination Date") and
continue to make available to the Borrower the Loans provided under the Credit
Agreement and (2) release the Xxxxxxxx Indemnity Receivables (defined below).
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. The Agent hereby agrees, for and on behalf of the
Lenders, that it shall, subject to the terms and conditions set forth herein,
forbear exercising its and their rights and remedies arising exclusively as a
result of the Acknowledged Events of Default until the Forbearance Termination
Date; provided, however, that the Agent shall be free to exercise any or all of
its rights
and remedies arising on account of the Acknowledged Events of Default at any
time after the occurrence of a Forbearance Default (defined below).
2. Amendment to Credit Agreement. Simultaneously with the execution of
this Forbearance Agreement, the Borrower shall execute and deliver to the Agent,
on behalf of the Lenders, a Third Amendment to Credit Agreement (the "Third
Amendment") in form of that attached hereto as Exhibit A.
3. Assignment of Cash Collateral Account. Simultaneously with the
execution of this Forbearance Agreement, the Borrower, pursuant to Section 7.20
of the Credit Agreement, shall execute and deliver to the Agent, on behalf of
the Lenders, an Assignment of Cash Collateral Account (the "Assignment of Cash
Collateral Account") in form of that attached hereto as Exhibit B.
4. Consultant Authorization Letters. On or before November 16, 1998, the
Borrower shall have executed and delivered to each of the Borrower's Consultants
an authorization letter in substantially the form of that attached hereto as
Exhibit C, with copies thereof delivered to the Agent.
5. Inventory Appraisal. The Borrower hereby acknowledges that the Agent
has given the Borrower reasonable notice that the Agent intends to exercise its
rights under Section 7.10 of the Credit Agreement to appoint an independent
appraiser to visit Borrower's facilities and appraise the Borrower's inventory
during normal business hours on any business days between the date hereof and
the Forbearance Termination Date as may be chosen by the Agent.
6. October 29, 1998 Cash Flow Report Reconciliation. On or before
November 12, 1998, the Borrower shall supply to the Agent a true and accurate
reconciliation report, prepared by or with the material assistance of PwC,
reflecting a comparison between the Consolidated Parties' actual cash flow
computations through November 6, 1998 and that projected through such date on
that certain Projected 13 Week Cash Flow Analysis dated as of October 29, 1998
previously supplied by the Borrower to the Agent and the Lenders.
7. Forbearance Defaults. Nothing set forth herein or contemplated hereby
is intended to constitute an agreement by the Agent or the Lenders to forbear
the exercise of any of the rights and remedies available to the Agent and/or the
Lenders under the Credit Agreement and the other Credit Documents (all of which
rights and remedies are hereby expressly reserved by the Agent, on behalf of the
Lenders) upon and after the occurrence of a Forbearance Default. The term
"Forbearance Default" shall mean the existence or occurrence of any or all of:
(a) any Default or Event of Default under the Credit Agreement or any other
Credit Document other than the Acknowledged Events of Default or (b) a breach by
the Borrower of any term of this Forbearance Agreement. The Agent, on behalf of
the Lenders, shall be free to exercise any or all of its rights and remedies
arising on account of any Default or Event of Default under the Credit Agreement
or any
2
other Credit Document upon the earlier of: (x) the occurrence of a Forbearance
Default or (y) the Forbearance Termination Date.
8. Conditions Precedent. As conditions precedent to the effectiveness of
this Forbearance Agreement, on or before the date hereof:
(a) The Agent shall have received original duly executed
counterparts of this Forbearance Agreement duly executed by the Credit
Parties and the Agent;
(b) The Borrower shall have executed and delivered to the Agent
the Third Amendment;
(c) The Borrower shall have executed and delivered to the Agent
the Assignment of Cash Collateral Account; 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 enforceablility of
this Forbearance Agreement, the Third Amendment and the Assignment of
Cash Collateral Agreement.
9. 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.
10. 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 Forbearance Agreement and the exhibits hereto,
including without limitation reasonable fees and expenses of the Agent's
counsel.
11. 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 Forbearance Agreement.
(b) This Forbearance Agreement 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).
3
(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 Forbearance Agreement.
12. Counterparts. This Forbearance Agreement 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 Forbearance Agreement by telecopy
shall be effective as an original and shall constitute a representation that an
executed original shall be delivered.
13. GOVERNING LAW. THIS FORBEARANCE AGREEMENT 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.
Each of the parties hereto has caused a counterpart of this Forbearance
Agreement 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:__________________________________
4
