EXECUTION FINAL
ELEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
ELEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of March 26,
2004 (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 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 the Lenders (a) waive existing Events of
Default under the Credit Agreement, (b) amend certain financial covenants and
(c) agree to continue providing Overadvances to Borrowers during Borrowers' 2004
Fiscal Year.
The Lenders are willing to waive such existing Events of Default, make
such amendments to the Credit Agreement and continue providing Overadvances
during Borrowers' 2004 Fiscal Year, 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. The Borrowers have failed to perform the
covenants set forth in Sections 7.10 (Minimum Interest Coverage Ratio), 7.11
(EBITDA) and 7.12A (Tangible Net Worth) of the Credit Agreement for the
quarterly period ending December 31, 2003; as a result of which Events of
Default (collectively, the "Subject Defaults") have occurred and are continuing
under Article VIII(d)of the Credit Agreement. In response to the Borrowers'
request for a waiver of the Subject Defaults, Required Lenders hereby waive the
Subject 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 any covenant, term or provision of the
Credit Agreement or of any of the other Loan Documents, including, without
limitation, any such non-compliance with the financial covenants set forth in
Sections 7.10, 7.11 and 7.12A of the Credit Agreement.
3. Overadvances During 2004 Fiscal Year. Borrowers have previously
delivered to Agent Borrowers' budget for their 2004 Fiscal Year, dated March 9,
2004 (the "2004 Budget"), in contemplation of the making of this Amendment.
Borrowers have advised Agent that, in order to achieve the results of operations
projected by the 2004 Budget, Borrowers contemplate requesting Agent to make
Overadvances from time to time, as detailed in the 2004 Budget. Borrowers have
therefore requested that Agent and Lenders amend Section 2.01(c) to continue
providing Overadvances during Borrowers' 2004 Fiscal Year, based on the
Overadvance amounts set forth in the 2004 Budget, and Agent and Lenders have
agreed to amend Section 2.01(c) as set forth hereinbelow; provided, however,
that Borrowers understand and expressly acknowledge and agree that,
notwithstanding that the amendment and restatement of Section 2.01(c) set forth
hereinbelow is based on the Overadvance amounts contained in the 2004 Budget,
such amendment and restatement of Section 2.01(c) shall not be deemed and does
not in any manner constitute a commitment by Agent and/or Lenders to make any
Overadvances whatsoever. Subject to the foregoing, Section 2.01(c) of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
"(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, at the request of the
Borrowers at any time during Borrowers' 2004 Fiscal Year, the Agent may,
in its sole and absolute discretion, subject to the Total Revolving Credit
Commitment, make Revolving Credit Loans and issue Letter of Credit
Guarantees to the Borrowers on behalf of the Lenders in excess of the
Availability ("Overadvance"), which Overadvance shall be repayable on
demand; provided, however, if the Overadvance is not sooner demanded and
if Borrowers shall have failed to deliver to Agent on or before January 3,
2005 the summary of business plans and financial operations projections
that Borrowers are obligated to deliver to Agent for Borrowers' 2005
fiscal year pursuant to Section 6.05 of the Credit Agreement, then the
Overadvance shall be repayable without notice or demand no later than
January 3, 2005. Each Lender shall be obligated to pay the Agent the
amount of its ratable share of any such additional Revolving Credit Loans
or Letter of Credit Guaranties. Provided no Event of Default shall have
occurred and be continuing, notwithstanding anything to the contrary
contained in the Credit Agreement, Overadvances shall not bear interest at
the applicable Interest Rate set forth in clause (i) of the proviso in the
definition of Interest Rate (the "Default Rate"). Any Overadvance not
repaid on demand or when otherwise due and payable shall, however, without
waiving any Event of Default which has occurred thereby, bear interest at
the Default Rate. The making of an Overadvance by the Agent shall in no
way limit, waive or otherwise affect the Agent's and Lenders' rights with
respect to the making of any additional Overadvance."
4. Amendment of Section 7.10. Section 7.10 of the Credit Agreement is
amended and restated 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 the trailing four (4) fiscal quarters 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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Minimum Interest
Quarterly Period Ending Coverage Ratio
----------------------- --------------
March 31, 2004 0.12 to 1:00
June 30, 2004 0.10 to 1:00
September 30, 2004 0.70 to 1:00
December 31, 2004 1.45 to 1.00"
5. Amendment of Section 7.11. Section 7.11 of the Credit Agreement is
hereby amended and restated 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 the trailing four (4) fiscal quarters
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, 2004 $225,000
June 30, 2004 $200,000
September 30, 2004 $1,400,000
December 31, 2004 $3,000,000"
6. Amendment of Section 7.12A. Section 7.12A of the Credit Agreement is
hereby amended and restated 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, 2004 $1,200,000
June 30, 2004 -($120,000)
September 30, 2004 $800,000
December 31, 2004 $2,100,000"
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7. Future Amendment of Financial Covenants. Agent, Lenders and Borrowers
agree that, for each year for which financial covenants have been provided for
under the Credit Agreement, on or before March 15 of the year immediately
following such year, the parties will agree upon further amendment of Sections
7.10 (Minimum Interest Coverage Ratio), 7.11 (EBITDA) and 7.12A ( Tangible Net
Worth) of the Credit Agreement for Borrowers' next fiscal year, based upon the
summary of business plans and financial operations projections that Borrowers
are obligated to deliver to Agent for each such subsequent fiscal year pursuant
to Section 6.05 of the Credit Agreement. Such further amendments will be
calculated by Agent in a manner consistent with the calculation of the revisions
to such financial covenants provided for in this Amendment.
8. Waiver and Amendment Fee. In consideration of the waiver of the Subject
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 a waiver and
amendment fee in the amount of $100,000, which fee is fully earned and payable
as of the date hereof and shall constitute part of the Obligations.
9. 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 9
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.
10. 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.
11. 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 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.
12. 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).
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13. 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.
[Signature pages follow.]
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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 XXXXXXX INDUSTRIES CORPORATION,
Borrower and a Guarantor as a Borrower and a Guarantor
By: /s/ Xxxxxxx x. Xxxxxxxxxx By: /s/ Xxxxxxx x. Xxxxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxxx x. Xxxxxxxxxx Name: Xxxxxxx x. Xxxxxxxxxx
------------------------------- -------------------------------
Title: Vice President/Chief Financial Title: Vice President/Chief Financial
Officer Officer
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CHRISTIANSBURG GARMENT COMPANY, H SQUARED DISPOSITIONS, INC., as a
INCORPORATED, as a Guarantor Guarantor
By: /s/ Xxxxxxx x. Xxxxxxxxxx By: /s/ Xxxxxxx x. Xxxxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxxx x. Xxxxxxxxxx Name: Xxxxxxx x. Xxxxxxxxxx
------------------------------- -------------------------------
Title: Vice President/Chief Financial Title: Vice President/Chief Financial
Officer Officer
------------------------------ ------------------------------
THE CIT GROUP/COMMERCIAL THE CIT GROUP/COMMERCIAL
SERVICES, INC., as Agent SERVICES, INC., as a Lender
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxxxx Xxxxxxx
------------------------------- -------------------------------
Title: Vice President Title: Vice President
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