EXHIBIT (4q)
SECOND AMENDMENT TO 9.96% SENIOR SUBORDINATED
NOTES DUE FEBRUARY 1, 2010
This Amendment, effective as of December 26, 1998, shall constitute
the Second Amendment to the 9.96% Senior Subordinated Notes due February 1,
2010, by and between New York Life Insurance Company, or registered
assigns, and Xxxxx Yarns, Inc. dated February 6, 1990, in the aggregate
principal amount of $50,000,000 and the related Loan Agreement dated
February 6, 1990, by and between the same parties, which is incorporated
therein by reference (together the "NYL NOTES"). All defined terms herein
shall have the same meaning as in the NYL Notes unless a different meaning
is clearly set forth herein.
WHEREAS, Xxxxx Yarns, Inc. (the "COMPANY"), whose name has been
changed to The Xxxxx Group, Inc., and New York Life Insurance Company or
registered assigns (the "HOLDERS") have agreed to certain amendments to
the terms of the NYL Notes as set forth herein; and
WHEREAS, the parties hereto desire to amend the NYL Notes to reflect
the amendments agreed upon by them.
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be bound hereby, agree as follows:
1. Section 9, paragraph (A) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(A) FUNDED INDEBTEDNESS OF THE COMPANY. The Company will not
borrow or incur additional Funded Indebtedness if, immediately after giving
effect thereto, the aggregate principal amount of Funded Indebtedness would
exceed the percentage ratio set forth in the table below of the
Capitalization of the Company; except that nothing in this paragraph (A)
shall prohibit the renewal or refinancing of any Funded Indebtedness
heretofore or hereafter incurred or assumed in compliance with this
paragraph (A), provided such renewal or refinancing shall not result in an
increase in the outstanding principal amount of such Funded Indebtedness.
PERIOD RATIO
Fiscal year 1999 70.0%
Fiscal year 2000 and thereafter 67.5%
For the purpose of this paragraph only, Funded Indebtedness shall mean
as of any date of determination the sum of all indebtedness, whether senior
or subordinated indebtedness, (including the 7% Convertible Subordinated
Debentures due 2012), which would in accordance with generally accepted
accounting principles constitute long term or short term debt, any amount
of off-balance sheet financing that is not shown on the balance sheet as
debt, (including the 6.08% Trade Receivable-Backed Certificates, Series
1993-1), all reimbursement obligations under any letters of credit or
acceptances (excluding letters of credit incurred in the ordinay course by
another person other than with respect to Indebtedness of such person for
money borrowed, including, without limitation, letters of credit issued for
workers compensation and other insurance liabilities and trade letters of
credit), all guarantees of obligations of another person, whether direct or
indirect, contingent or otherwise, including but not limited to an
obligation of such other person to purchase or otherwise acquire, or
otherwise insure any creditor against loss in respect of, Indebtedness of
any other person for borrowed money, and any amount representing mandatory
dividend rights on capital stock or other equity of the Company.
Capitalization shall mean as of any date of determination Funded
Indebtedness plus Stockholders Equity (Net Worth) as reflected on the
consolidated balance sheet of the Company plus an amount of $31,400,000
incurred with respect to the write-down of assets of T-C Threads, Inc. and
its Subsidiaries.
2. Section 9, paragraph (F) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(F) DIVIDENDS. The Company will not declare or pay, or set apart
any funds for the payment of, any dividends (other than dividends paid or
payable in capital stock of the Company) on any shares of capital stock of
the Company, by reduction of the Company's capital surplus or otherwise,
or make any other distribution in respect of any shares of capital stock of
the Company (hereinafter defined as "DIVIDEND ACTION OR PAY DIVIDENDS"),
until (i) the Company's Interest Coverage Ratio for the Applicable Period
immediately preceding such Dividend Action is less than 1.50 to 1; and (ii)
the ratio of Total Debt to EBITDA is less than 3-to-1. From and after the
first date the ratio of Total Debt to EBITDA is less than 3-to-1, the
Company may Pay Dividends not to exceed in the aggregate an amount equal to
fifty percent (50%) of aggregate Consolidated net income accrued subsequent
to the end of the fiscal quarter when the Company first obtains a ratio of
Total Debt to EBITDA Less than 3-to-1. If at any time after the first date
in which the Company becomes eligible to Pay Dividends, the ratio of Total
Debt to EBITDA exceed 4-to-1, then the Company shall no longer be allowed
to Pay Dividends until and unless the ratio of Total Debt to EBITDA is
again less than 4-to-1. Thereafter the Company may Pay Dividends in an
aggregate amount not to exceed fifty percent (50%) of aggregate
Consolidated net income accrued subsequent to the end of the fiscal quarter
when the Company first obtained a ratio of Total Debt to EBITDA less than
3-to-1. The determination of the Interest Coverage Ratio and the ratio of
Total Debt to EBITDA as referenced herein shall be made from the financial
statements provided by the Company pursuant to the requirements of the NYL
Notes at the end of each fiscal quarter calculating the Interest Coverage
Ratio and the ratio of Total Debt to EBITDA for the period consisting of
the immediately preceding four fiscal quarters (the "Applicable Period").
For the purpose of determining the Company's compliance with these
obligations, Interest Coverage Ratio shall mean (I) Consolidated net income
as defined in the NYL Notes plus, to the extent deducted in determining
such Consolidated net income, interest expense of the Company and its
subsidiaries for the Applicable Period and any provision for taxes for such
period (whether paid or deferred), exclusive of any non-cash gains or
losses from the disposals of segments recorded in the fiscal year ended
December 26, 1998 ("EBIT"), to (ii) interest expense, of the Company and
its subsidiaries, for the Applicable Period and, the ratio of Total Debt to
EBITDA shall mean, with respect to the Applicable Period, the ratio of (I)
Consolidated Total Debt as defined in the NYL Notes divided by (ii)
EBITDA. EBITDA shall mean the Company's EBIT plus depreciation and
amortization for such Applicable Period. The calculation of EBIT and
EBITDA for any Applicable Period will include, in addition to the Company's
EBIT and EBITDA, the pre-acquisition EBIT and EBITDA of any business,
substantially all of the assets of which are acquired by the Company during
such Applicable Period, calculated on a trailing basis using audited
information where available.
3. Section 9, paragraph (G) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(G) MINIMUM NET WORTH. The Company will not permit its
consolidated Net Worth, measured at the end of each fiscal quarter, at any
time to be less than 90% of the amount of consolidated Net Worth measured
at the end of the Company's fiscal year ended December 26, 1998 (such
amount to be furnished by the Company in writing to the Holders as soon as
practicable after the Company determines such amount but, in any event, not
later than March 31, 1999), plus fifty percent (50%) of the aggregate
cumulative Consolidated net income (excluding losses), for any fiscal
quarter from and after December 26, 1998; provided however, that net losses
for any fiscal quarter during a fiscal year may be offset to the extent of
the net income during another fiscal quarter in the same fiscal year, but
net losses for any fiscal year shall not be offset against net income for
any other fiscal year and any such net losses shall not reduce the amount
of the minimum net worth requirements at the beginning of such fiscal year.
4. ADDITIONAL INTEREST. As consideration for the amendments of the
NYL Notes as herein provided for, the Company agrees to pay to the holders
as additional interest on the principal amount outstanding under the NYL
Notes, an amount determined by increasing the 9.96% per annum rate of
interest by the applicable amount determined from the chart set forth
below, which is based on the Company's ratio of Total Debt to EBITDA. The
applicable increase in the interest rate, if any, shall be effective the
first day of the calendar month following the end of the fiscal quarter for
which the ratio has been determined. The initial interest adjustment will
take place on the effective date of the Second Amendment and remain in
effect at least through the Company's first fiscal quarter 1999.
Ratio of Total Amount of Interest
Debt to EBITDA Rate Increase
>4.5 .65%
>4.0; <4.5 .50%
>3.5; <4.0 .35%
>3.0; <3.5 .20%
<3.0 0%
The ratio of Total Debt to EBITDA shall be determined using the same method
used in Section 9, Paragraph (F).
5. As consideration for the amendments of the NYL Notes as herein
provided for, the Company agrees to pay to the holders, to be divided
ratably between them, an additional fee in the amount of $250,000.
6. Notwithstanding the provisions of Section 9(B) and (D) of the NYL
Notes, all wholly owned subsidiaries of the Company that have assets of
$1,000,000 or more, except for Xxxxx Funding, Inc., shall guarantee the NYL
Notes and shall be permitted to guarantee the Senior Indebtedness of the
Company. All such guarantees of such Subsidiaries of the Company of the
NYL Notes shall be subordinated to the obligations of the subsidiaries
under the guarantee of the Senior Indebtedness in the same manner and to
the same extent as are the NYL Notes are subordinated to the Senior
Indebtedness, and such subordination provisions shall be expressly set
forth in any such guarantees of the NYL Notes.
7. The Company shall provide calculations of and a certificate of
compliance with the Dividends, Minimum Net Worth and Funded Indebtedness
requirements set forth herein and the Additional Interest payment required
herein as soon as reasonably possible, and in any event within 60 days
after the close of each of the first three fiscal quarters of the Company
in each fiscal year and within 90 days after the close of each fiscal year
of the Company.
This Second Amendment shall replace and supercede the previous Amendment to
the NYL Notes. In all other respects except as specifically amended
herein, the NYL Notes shall remain in effect as on the date hereof
unchanged. This amendment has been approved in accordance with the
provisons of Section 10 of NYL Notes and has been approved by 66-2/3% of
the NYL Note holders as evidenced by their signatures hereto.
The Xxxxx Group, Inc., formerly
Xxxxx Yarns, Inc.
By: Xxxx X. Xxxxxx
Its: Treasurer
New York Life Insurance New York Life Insurance
Company and Annuity Corporation
By: Xxxxxx X. Xxxxxxxxx By: Xxxxxx X. Xxxxxxxxx
Its: Director Its: Director
