SECOND WAIVER AND AMENDMENT AGREEMENT
SECOND WAIVER AND AMENDMENT AGREEMENT, dated as of February
28, 1999, to the Credit Agreement, dated as of June 5, 1995, as amended and
restated as of November 13, 1998 (as the same has been amended pursuant to the
First Waiver and Amendment dated as of January 29, 1999, or may be further
amended, supplemented or modified from time to time in accordance with its
terms, the "Credit Agreement"), among Donnkenny Apparel, Inc., a Delaware
corporation ("DKA"), Megaknits, Inc., a New York corporation ("Megaknits"),
▇▇▇▇▇▇▇ Industries Corporation, a Delaware corporation ("BIC"; BIC, together
with DKA and Megaknits, the "Borrowers"), the Guarantors named therein and
signatories thereto, the lenders named in Schedules 2.01(a) and (b) of the
Credit Agreement (collectively, the "Lenders"), The CIT Group/Commercial
Services, Inc., as collateral agent for the Lenders (in such capacity, the
"Collateral Agent") and The Chase Manhattan Bank (formerly known as Chemical
Bank) as lead arranger and administrative agent for the Lenders (in such
capacity, the "Administrative Agent"). Capitalized terms used herein but not
otherwise defined herein shall have the meanings attributed thereto in the
Credit Agreement.
WHEREAS, the parties to the Credit Agreement have agreed to
waive certain provisions the Credit Agreement and to amend certain provisions of
the Credit Agreement.
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 The definition of "Inventory Amount" contained in Section 1.01 of
the Credit Agreement is hereby amended in its entirety to read as follows:
"Inventory Amount" shall mean, during any month, the amount
set forth below as corresponds to such amount:
Month Inventory Amount
----- ----------------
February 1999 $13,500,000
March 1999 12,300,000
April 1999 12,600,000
May 1999 14,500,000
June 1999 14,200,000
July 1999 14,700,000
August 1999 17,600,000
September 1999 16,800,000
October 1999 14,100,000
Month Inventory Amount
----- ----------------
November 1999 14,000,000
December 1999 13,700,000
January 2000 13,500,000
February 2000 13,500,000
March 2000 12,300,000
1.2 The definition of "Overadvance Amount" contained in Section 1.01 of
the Credit Agreement is hereby amended in its entirety to read as follows:
"Overadvance Amount" shall mean, during any End of Month
Period and Intramonth Period, the amounts set forth below as correspond
to the End of Month Period and the Intramonth Period during the months
set forth below:
Overadvance Overadvance
Month Amount during the Amount during the
----- End of Month Period Intramonth Period
------------------- -----------------
February 1999 $4,600,000 $9,000,000
March 1999 3,600,000 9,600,000
April 1999 3,000,000 8,600,000
May 1999 6,900,000 8,000,000
June 1999 6,600,000 11,900,000
July 1999 7,600,000 11,600,000
August 1999 6,900,000 12,600,000
September 1999 4,600,000 11,900,000
October 1999 2,900,000 9,600,000
November 1999 2,000,000 7,900,000
December 1999 3,600,000 7,000,000
January 2000 4,000,000 8,600,000
February 2000 4,600,000 9,000,000
March 2000 3,600,000 9,600,000
; provided, however, that each of the foregoing amounts shall be
reduced by the aggregate amount of cash proceeds received by the Parent
and/or any of its Subsidiaries (i) as tax refunds (other than (i) the
$1,537,000 tax refund received by the Borrowers in November 1998 and
(ii) the $275,000 tax refund received by the Borrowers from the State
of Virginia related to the 1997 tax year) and (ii) as proceeds (net of
taxes due and any reasonable expenses of sale) from the sale or other
disposition of any assets of the Parent and/or any of its Subsidiaries
(other than the sale of the ▇▇▇ County building and the Elkton County
building and land and excluding sales of inventory in the ordinary
course of business consistent with past practices and the potential
sale of the Christiansburg, Virginia real property ).
The foregoing shall not be deemed to be a consent by the Agent, the
Administrative Agent or any Lender to any sale of assets.
For purposes of this paragraph, (i) the term "End of Month Period"
shall mean the period commencing on the last Business Day of a month
and ending on the fifth day of the immediately following month and (ii)
the term "Intramonth Period" shall mean the period commencing on the
sixth day of a month and ending on the day immediately preceding the
last Business Day of the same month.
1.3 Section 2.05(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(a) Subject to the provisions of Section 2.05(b), Section 2.08
and 2.09(c) hereof, each Loan shall bear interest at a rate per annum
equal to the Prime Rate plus the Applicable Percentage then in effect.
In the event of any change in the Prime Rate, the rate of interest
hereunder shall change as of the first day of the month following any
change, so as to remain equal to the Applicable Percentage then in
effect above the Prime Rate. For the purposes hereof, the "Applicable
Percentage" shall initially be 2 1/2%, provided that (i) the Applicable
Percentage shall be increased by one-eighth of one percent (_ of 1%) on
each of July 1, 1999, August 1, 1999 and September 1, 1999 and (ii) the
Applicable Percentage shall be increased by one quarter of one percent
(1/4 of 1%) on the first day of each month thereafter, commencing
October 1, 1999.
1.4 Section 2.06(a) of the Credit Agreement is hereby amended by adding
the following proviso at the end of the first sentence thereof:
provided, further, that the Revolving Credit Commitment Fee shall be
increased by one-tenth of one percent (1/10 of 1%) on the first day of
each month, commencing July 1, 1999.
1.5 Section 6.15 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 6.15. Fee. If the Revolving Credit Termination Date
shall not have occurred by June 30, 1999, the Borrowers shall pay, on
June 30, 1999, a fee of $150,000 to the Administrative Agent for the
ratable benefit of the Lenders (based upon each Lender's Commitment).
1.6 Section 7.11 of the Credit Agreement is hereby amended by (x)
restating clauses (i) and (ii) in their entirety and (y) adding a new clause
(iii) thereto, in each case to read as follows:
(i) $1,800,000 for the fiscal quarters ending March 31, 1999
and June 30, 1999, (ii) $3,300,000 for the fiscal quarter
ending September 30, 1999 and (iii) $7,700,000 for each fiscal
quarter thereafter;
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1.7 Section 7.12 of the Credit Agreement is hereby amended by deleting
the amount "$19,500,000" and substituting the amount "$16,000,000" therefor.
SECTION 2. WAIVERS UNDER CREDIT AGREEMENT
2.1 The Lenders hereby waive any existing Default or Event of Default
that arose under Section 7.11 of the Credit Agreement solely as a result of the
Parent's and its Subsidiaries' failure to have EBITDA (on a Consolidated basis)
of at least $5,800,000 for the four fiscal quarter period ended December 31,
1998; provided, however, that EBITDA of the Parent and its Subsidiaries (on a
Consolidated basis) for such period shall not have been less than $2,200,000.
2.2 The Lenders hereby waive the provisions of Section 7.03 of the
Credit Agreement solely for the purpose of permitting the Parent to incur
Indebtedness of $880,000 to the selling shareholders of BIC, provided that such
Indebtedness constitutes Subordinated Indebtedness and is evidenced by a note
that is in form and substance satisfactory to the Lenders.
2.3 The Lenders hereby waive the provisions of Section 7.05 of the
Credit Agreement solely for the purpose of permitting the Borrowers to sell the
property described on Schedule I hereto, such sale to be in form and substance
satisfactory to the Lenders.
2.4 Except for the specific waivers set forth above, nothing herein
shall be deemed to be a waiver of any covenant or agreement contained in the
Credit Agreement.
SECTION 3. CONDITIONS PRECEDENT
Upon the execution and delivery of counterparts of this Second
Amendment Agreement (this "Agreement") by the parties listed below and the
fulfillment of the following conditions, this Agreement shall be deemed to have
become effective as of the date hereof:
3.1 All representations and warranties contained in this Agreement, the
Credit Agreement or otherwise made in writing to the Administrative Agent or any
Lender in connection herewith shall be true and correct in all material respects
after giving effect to the amendments contained in this Agreement.
3.2 No event shall have occurred and be continuing which constitutes a
Default or an Event of Default.
3.3 The Administrative Agent shall have received such other documents
as the Lenders or the Administrative Agent or Administrative Agent's counsel
shall reasonably deem necessary.
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SECTION 4. MISCELLANEOUS
4.1 Each of the Borrowers reaffirms and restates the representations
and warranties set forth in the Credit Agreement, as applicable, and all such
representations and warranties shall be true and correct on the date hereof with
the same force and effect as if made on such date after giving effect to the
amendments contained in this Agreement.
4.2 Except as herein expressly amended, the Credit Agreement and the
other documents executed and delivered in connection therewith are each ratified
and confirmed in all respects and shall remain in full force and effect in
accordance with their respective terms.
4.3 Except as specifically set forth herein, nothing herein contained
shall constitute a waiver or be deemed to be a waiver of any existing Defaults
or Events of Default, and the Lenders and Administrative Agent reserve all
rights and remedies granted to them by the Credit Agreement, the other documents
executed and delivered in connection therewith, by law and otherwise.
4.4 This Agreement may be executed by the parties hereto individually
or in combination, in one or more counterparts, each of which shall be an
original and all of which shall constitute one and the same agreement. A
facsimile signature page shall constitute an original for the purposes hereof.
4.5 Each of the Guarantors, by its signature below, (i) confirms in
favor of the Lenders that it consents to this Agreement, (ii) agrees that it has
no defense, offset, claim, counterclaim or recoupment with respect to any of its
obligations or liabilities with respect to its guarantee and (iii) hereby
irrevocably and unconditionally confirms to the Agent, the Administrative Agent
and the Lenders that its guarantee is and shall continue to be in full force and
effect in accordance with its terms and shall continue to be applicable to the
Credit Agreement, as amended hereby.
4.6 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DONNKENNY APPAREL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Appelle
-------------------------------
Name: ▇▇▇▇▇▇ ▇. Appelle
Title: Chairman of the Board of
Directors and Chief
Executive Officer
▇▇▇▇▇▇▇ INDUSTRIES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Appelle
-------------------------------
Name: ▇▇▇▇▇▇ ▇. Appelle
Title: Chairman of the Board of
Directors and Chief
Executive Officer
CHRISTIANSBURG GARMENT
COMPANY INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. Appelle
-------------------------------
Name: ▇▇▇▇▇▇ ▇. Appelle
Title: Chairman of the Board of
Directors and Chief
Executive Officer
MEGAKNITS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Appelle
-------------------------------
Name: ▇▇▇▇▇▇ ▇. Appelle
Title: Chairman of the Board of
Directors and Chief
Executive Officer
DONNKENNY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Appelle
-------------------------------
Name: ▇▇▇▇▇▇ ▇. Appelle
Title: Chairman of the Board of
Directors and Chief
Executive Officer
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THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank),
as Administrative Agent and Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Agent and Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
THE BANK OF NEW YORK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
FLEET BANK N.A.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
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