[EXECUTION COPY]
SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of March 28,
2001 (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) extend the Final Maturity Date and
(c) amend certain other provisions of the Credit Agreement.
The Lenders are willing to (a) waive such existing Events of Default,
(b) extend the Final Maturity Date and (c) make such other amendments to the
Credit Agreement 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 comply
with the covenants set forth in Sections 7.11 (EBITDA), 7.10 (Minimum Interest
Coverage Ratio) and 7.12A (Tangible Net Worth) of the Credit Agreement for the
quarterly period ending December 31, 2000; 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, 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.
3. Extension of Final Maturity Date. The definition of Final Maturity
Date set forth in the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"Final Maturity Date" shall mean June 30, 2004."
4. Increase in Interest Rate. (a) The definition of Interest Rate set
forth in the Credit Agreement is hereby amended and restated in its entirety to
read as follows:
""Interest Rate" shall mean, from and after January 1, 2001, as to
Prime Rate Loans, a rate of two (2%) percent per annum in excess of the
Prime Rate and, as to Eurodollar Rate Loans, a rate of [N/A] percent
per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period selected by
Borrowers as in effect three (3) Business Days after the date of
receipt by Lender of the request of Borrowers for such Eurodollar Rate
Loans in accordance with the terms hereof, whether such rate is higher
or lower than any rate previously quoted to Borrowers); provided, that,
the Interest Rate shall be increased by two (2%) percent per annum in
excess of the Interest Rate otherwise in effect, at Agent's option,
without notice, (a) for
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the period on and after (i) the date of termination hereof and until
such time as all Obligations are paid in full (notwithstanding entry of
any judgment against Borrowers) or (ii) the date of the occurrence of
any Event of Default and for so long as such Event of Default is
continuing, and (b) on the Revolving Credit Loans at any time
outstanding in excess of the Availability (whether or not such
excess(es) arise or are made with or without Agent's knowledge or
consent and whether made before or after an Event of Default)."
(b) For the avoidance of doubt, and confirming and restating the
agreement of Borrowers, Lenders and Agent set forth in the Fourth Amendment to
Credit Agreement and Waiver, dated as of April 13, 2000, notwithstanding
anything to the contrary contained in the Credit Agreement or in any of the Loan
Documents, Borrowers have no right to request or receive, and Agent and Lenders
shall not make, any Eurodollar Rate Loans.
5. Overadvance. Section 1.01 is hereby amended to include the following
additional defined term:
"'Overadvance' shall have the meaning assigned to such term in
Section 2.01(c) hereof."
6. Revolving Credit Loans Sublimit. Section 1.01 is hereby amended to
include the following additional defined term:
"Revolving Credit Loans Sublimit" shall have the meaning assigned
to such term in Section 2.01(b) hereof."
7. Amendment of Revolving Loans Limitation. Section 2.01(b) of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
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"(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally
and not jointly, agrees to make Revolving Credit Loans to, and through
the Agent open Letters of Credit for the benefit of, the Borrowers, at
any time and from time to time from the date hereof to the Revolving
Credit Termination Date, in an aggregate principal amount at any time
outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment set forth opposite its name in Schedule 2.01(b) annexed
hereto. Notwithstanding the foregoing:
(1) The sum of the aggregate principal amount of Revolving Credit Loans
outstanding at any time to the Borrowers plus the Letter of Credit
Usage shall not exceed the lesser of (A) the Total Revolving Credit
Commitment and (B) an amount equal to the total of (i) up to ninety
percent (90%) of the Net Amount of Eligible Receivables plus (ii) the
sum of (I) up to sixty percent (60%) of the Net Amount of Eligible
Inventory plus (II) up to sixty percent (60%) of the undrawn amount of
all outstanding Letters of Credit for the importation of finished goods
inventory consigned to the Agent as of the date of determination (such
sum not to exceed $37,000,000 at any time) minus (iii) any Availability
Reserves (the amount determined pursuant to this clause (B) referred to
herein as the "Borrowing Base"); .
(2) The aggregate principal amount of Revolving Credit Loans
outstanding at any time to Borrowers shall not exceed one hundred ten
percent (110%) of the sum of (A) the amount calculated based upon the
immediately preceding clause (1)(B)(i) plus (B) up to sixty percent
(60%) of the aggregate value, computed at the lower of cost (on a FIFO
basis) and current market value, of all Inventory (including, without
limitation, all Inventory that is not Eligible Inventory), minus (i)
any Availability Reserves
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minus (ii) the Letter of Credit Usage at such time (such amount, the
"Revolving Credit Loans Sublimit");
(3) The Letter of Credit Usage shall in no event exceed $35,000,000 at
any time; and
(4) the sum of (i) the principal amount of the Term Loan outstanding at
any time plus (ii) the principal amount of the Supplemental Term Loan
outstanding at any time plus (iii) the aggregate principal amount of
Revolving Credit Loans outstanding shall in no event exceed $75,000,000
at any time.
The Borrowing Base will be computed daily and a compliance certificate
from a Responsible Officer of the Borrowers presenting its computation
will be delivered to the Agent in accordance with Section 6.05 hereof.
If the aggregate principal amount of Revolving Credit Loans outstanding
at any time to Borrowers exceeds the Revolving Credit Loans Sublimit,
such excess shall be repayable by Borrowers immediately upon demand
therefor by Agent.
Subject to the foregoing and within the foregoing limits, the
Borrowers may borrow, repay (or, subject to the provisions of Section
2.09 hereof, prepay) and reborrow Revolving Credit Loans, on and after
the date hereof and prior to the Revolving Credit Termination Date,
subject to the terms, provisions and limitations set forth herein,
including without limitation, the requirement that, except as set forth
in Section 2.01(c), no Revolving Credit Loan shall be made hereunder if
the amount thereof exceeds the Availability outstanding at such time."
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8. Overadvances During 2001 Fiscal Year. Borrowers have previously
delivered to Agent Borrowers' budget for their 2001 Fiscal Year, entitled "2001
Budget", dated January 17, 2001 (the "2001 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 2001 Budget, Borrowers contemplate
requesting Agent to make Overadvances in an aggregate amount outstanding in
certain months during Borrowers' 2001 Fiscal Year that, as detailed in the 2001
Budget, exceed the maximum amount of Overadvances that Agent, in its sole
discretion, may presently make to Borrowers pursuant to Section 2.01(c) without
the consent of Lenders. Borrowers have therefore requested that Agent and
Lenders amend Section 2.01(c), based on the monthly Overadvance amounts set
forth in the 2001 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 2001 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, including, without
limitation, Overadvances that would be within the limitations set forth in
Section 2.01(c), as amended hereby. 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' 2001 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 and, if not sooner demanded, no later than
January 4, 2002, provided, that, the aggregate amount of any such
Overadvance which the Agent may make without the consent of all of the
Lenders shall not exceed for each month during Borrowers' 2001 Fiscal
Year the
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amount set forth below opposite each such month. 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 the proviso in the definition of Interest
Rate (the "Default Rate"). Any Overadvance not repaid on demand 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 right with respect to the making of any additional
Overadvance:
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MAXIMUM
DISCRETIONARY
MONTH OVERADVANCE
----- -----------
January $10,956,000
February $11,828,000
March $11,478,000
April $12,795,000
May $13,392,000
June $12,568,000
July $10,359,000
August $8,090,000
September $4,676,000
October $3,598,000
November $3,970,000
December $4,611,000"
9. 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 each four consecutive fiscal quarter period 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:
Quarterly Period Ending Minimum Interest Coverage Ratio
----------------------- -------------------------------
March 31, 2001 0.51 to 1:00
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June 30, 2001 0.62 to 1:00
September 30, 2001 0.90 to 1:00
December 31, 2001 1.34 to 1.00"
10. 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 each four consecutive fiscal quarter
period 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, 2001 $2,392,000
June 30, 2001 $3,010,000
September 30, 2001 $4,510,000
December 31, 2001 $6,256,000"
11. 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:
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Quarterly Period Ending Tangible Net Worth
----------------------- ------------------
March 31, 2001 $2,364,000
June 30, 2001 $1,166,000
September 30, 2001 $2,579,000
December 31, 2001 $2,908,000"
12. Future Amendment of Financial Covenants. Agent, Lenders and
Borrowers agree that on or before December 15 of each year for which financial
covenants have been provided for under the Credit Agreement, the parties will
agree upon further amendment of Sections 7.11 (EBITDA), 7.10 (Minimum Interest
Coverage Ratio) 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.
13. 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 $200,000, which fee is fully earned and payable
as of the date hereof and shall constitute part of the Obligations.
14. 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
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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.
15. 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.
16. 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.
17. 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).
18. 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 Borrower and a Guarantor
By:
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Name:
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Title:
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XXXXXXX INDUSTRIES CORPORATION, as a Borrower and a
Guarantor
By:
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Name:
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Title:
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CHRISTIANSBURG GARMENT COMPANY, INCORPORATED,
as a Guarantor
By:
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Name:
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Title:
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H SQUARED DISPOSITIONS, INC., as a Guarantor
By:
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Name:
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Title:
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[SIGNATURES CONTINUE ON NEXT PAGE]
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[SIGNATURES CONTINUE FROM PREVIOUS PAGE]
THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent
By:
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Name:
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Title:
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THE CIT GROUP/COMMERCIAL SERVICES, INC., as a Lender
By:
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Name:
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Title:
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CENTURY BUSINESS CREDIT CORPORATION, as a Lender
By:
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Name:
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Title:
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