FOURTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
FOURTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of April 13,
2000 (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 waive existing Events of
Default under the Credit Agreement and amend certain provisions of the Credit
Agreement.
The Lenders are willing to waive such existing Events of Default and
make such 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: (a)
prepay, as required by Section 2.09(c) of the Credit Agreement, the amount by
which the Revolving Credit Loans exceeded Availability during the End of Month
Period for March 2000, and (b) perform the negative covenant set forth in
Sections 7.10 (Minimum Interest Coverage Ratio), 7.11 (EBITDA) and 712A
(Tangible Net Worth) of the Credit Agreement for the quarterly period ending
March 31, 2000; as a result of which Events of Default (collectively, the
"Subject Defaults") have occurred and are continuing under Articles VIII(b) and
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. Amendment of Section 1.01. Section 1.01 of the Credit Agreement is
amended as follows:
(a) Availability Reserves. The following is added as a defined
term:
"'Availability Reserves'" shall mean, as of any date of
determination, such amounts as Agent may from time to time
establish and revise in good faith reducing the amount of
Revolving Credit Loans and Letters of Credit which would
otherwise be available to Borrowers under the Borrowing Base
provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Agent in good
faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value,
(ii) the assets, business or prospects of either Borrower or
any other Loan Party or (iii) the security interests and other
rights of Lenders in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to
reflect Agent's good faith belief that any collateral report
or financial information furnished by or on behalf of
Borrowers is or may have been incomplete, inaccurate or
misleading in any material respect or (c) in respect of any
state of facts which Agent determines in good faith
constitutes a Default or an Event of Default."
(b) Interest Rate. The definition of "Interest Rate" is
amended as follows:
(i) the initial portion of the definition of
"Interest Rate" that precedes "and, as to Eurodollar Rate
Loans..." is hereby amended in its entirety to read as
follows:
""Interest Rate" shall mean as to Prime Rate Loans, a
rate of one and one-half (1.5%) percent in excess of the Prime
Rate...", and
(ii) the initial portion of the proviso contained in
such definition is hereby amended by adding thereto,
immediately after "provided that", the following:
"(x) if no Overadvance exists during the period
commencing November 1, 2000 through and including December 31,
2000, then, from and after January 1, 2000, the Interest Rate
shall mean as to Prime Rate Loans a rate of one (1.00%)
percent in excess of the Prime Rate, and (y)[the Interest Rate
shall be increased by two (2.00%) percent...]"
(c) Overadvance. "Overadvance" shall have the meaning assigned
to such term in Section 2.01(c) hereof.
(d) Overadvance Amount. The definition of "Overadvance Amount"
is deleted in its entirety.
4. Elimination of Eurodollar Rate Loan Option. Notwithstanding anything
to the contrary contained in the Credit Agreement or in any of the other Loan
Documents, from and after the date this Amendment becomes effective pursuant to
Section 14 below, Borrowers shall have no right to request or receive, and Agent
and Lenders shall not make, any Eurodollar Rate Loans.
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5. Amendment of Schedules 2.01(a) and 2.01(b). Schedule 2.01(a) Term
Loan Commitment and Schedule 2.01(b) Revolving Credit Commitments are hereby
amended and restated in their entirety effective October 6, 1999 as set forth in
the form of Schedule 2.01(a) and Schedule 2.01(b) attached hereto.
6. Amendment of Section 2.01(b). Section 2.01(b) of the Credit
Agreement is hereby amended as follows:
(a) The phrase "plus (iii) the Overadvance Amount as of the
date of determination" is deleted from the second sentences of the first
paragraph thereof.
(b) The phrase "except as otherwise set forth in Section
2.01(c)", is inserted in the fourth line of the second paragraph thereof after
"that" and before "no".
(c) As a result of the amendments to Section 2.01(b) made by
clauses (a) and (b) immediately above, Section 2.01(b) is amended and restated
in its entirety to read as follows:
"(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, the aggregate principal amount of Revolving Credit
Loans outstanding at any time to the Borrowers shall not
exceed (1) 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 (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"), minus (2) the
Letter of Credit Usage at such time (not to exceed $35,000,000
at any time). In no event, however, shall the sum of (i) the
principal amount of the Term Loan outstanding at any time plus
(ii) the aggregate principal amount of Revolving Credit Loans
outstanding at any time exceed $75,000,000. In addition to and
not in limitation of the foregoing limitations with respect to
Revolving Credit Loans outstanding at any time to Borrowers,
and notwithstanding anything to the contrary contained
in this Section 2.01(b), the aggregate principal amount of
Revolving
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Credit Loans outstanding at any time to Borrowers solely with
respect to Eligible Receivables and Eligible Inventory shall
not exceed an amount equal to the total amount of Revolving
Credit Loans then available based upon the immediately
preceding clauses (B)(i) and (B)(ii)(I). 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.
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."
The Agent has reviewed the business plan of Borrowers, dated April 6,
2000, as delivered by Borrowers to Agent in contemplation of the making of this
Amendment, including the amounts of the Overadvances detailed therein which are
necessary to achieve such business plan, and the Agent has been advised by
Borrowers that, in order to achieve the business plan, Borrowers will require
Overadvances pursuant to Section 2.01(c), as detailed in such business plan.
7. Addition of Section 2.01(c). The Credit Agreement is hereby amended
by adding Section 2.01(c) thereto immediately following Section 2.01(b), as
follows:
"(c) Notwithstanding anything to the contrary
contained in this Agreement or any of the other Loan Documents
(including, without limitation, the last paragraph of Section
6(c) of the Fourth Amendment and Waiver, dated as of April 3.
2000, executed among Borrowers, Guarantors, Agent and
Lenders), at the request of the Borrowers, the Agent may, in
its sole 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, that, the aggregate
amount of any such Overadvance which the Agent may make
without the consent of all of the Lenders shall not exceed
$9,700,000. 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. Any
Overadvance not repaid on demand shall, without waiving any
Event of Default which has
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occurred thereby, bear interest at the applicable Interest
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."
8. Amendment of Schedule 2.02. Schedule 2.02 Domestic Lending Offices
is hereby amended and restated in its entirety as set forth in the form of
Schedule 2.02 attached hereto.
9. Amendment of Section 2.09(c). The first sentence of Section 2.09(c)
is amended and restated in its entirety to read as follows:
"(c) In addition to and not in limitation of the
provisions contained in Section 2.01(c), upon demand by the
Agent, the Borrowers shall make prepayments of the Revolving
Credit Loans such that the Availability equals or exceeds
zero."
10. Amendment of Section 7.10. Section 7.10 of the Credit Agreement is
amended 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
----------------------- -------------------------------
June 30, 2000 N/A
September 30, 2000 0 to 1.00
December 31, 2000 1.35 to 1.00"
11. Amendment of Section 7.11. Section 7.11 of the Credit Agreement is
hereby amended 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
----------------------- ------
June 30, 2000 ($1,650,000)
September 30, 2000 $130,000
December 31, 2000 $4,330,000
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12. Amendment of Section 7.12A. Section 7.12A of the Credit Agreement
is hereby amended 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
----------------------- ------------------
June 30, 2000 $6,000,000
September 30, 2000 $8,000,000
December 31, 2000 $10,200,000
13. 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 an amendment
fee in the amount of $75,000, 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 13 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.
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).
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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: /s/ Xxxxxxx Xxxxxx
------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: EVP, CFO
------------------------------------------------------
XXXXXXX INDUSTRIES CORPORATION, as a Borrower and a
Guarantor
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: EVP, CFO
------------------------------------------------------
CHRISTIANSBURG GARMENT COMPANY, INCORPORATED
a Guarantor
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: EVP, CFO
------------------------------------------------------
H SQUARED DISPOSITIONS, INC., as a Guarantor
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------------------------------
Title: EVP, CFO
------------------------------------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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[SIGNATURES CONTINUE FROM PREVIOUS PAGE]
THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------------------------
Title: Vice President
------------------------------------------------------
THE CIT GROUP/COMMERCIAL SERVICES, INC., as a Lender
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------------------------
Title: Vice President
------------------------------------------------------
CENTURY BUSINESS CREDIT CORPORATION, as a Lender
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------------------------------
Title: Senior Vice President
------------------------------------------------------
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SCHEDULE 2.01(a)
Term Loan Commitments
Term Loan Percentage of Total Term
Lender Commitment(1) Loan Commitment
------ ---------- --------------------
The CIT Group/Commercial $2,200,000 73.33%
Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx
Century Business Credit Corporation $800,000 26.66%
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx
--------
1 Based on outstanding principal balance of the Term Loan as of the Closing
Date.
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SCHEDULE 2.01(b)
Revolving Credit Commitments
Percentage of Total
Revolving Credit Revolving Loan
Lender Commitment Commitment
------ ---------- ----------
The CIT Group/Commercial $55,000,000 73.33%
Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx
Century Business Credit Corporation $20,000,000 26.66%
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx
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SCHEDULE 2.02
Domestic Lending Offices
Lender Domestic Lending Office
------ -----------------------
The CIT Group/Commercial Service, Inc. The CIT Group/Commercial Service, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx
Century Business Credit Corporation Century Business Credit Corporation
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx
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