SECOND AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT is entered into as of March 30, 1996, between PILLOWTEX
CORPORATION, a Texas corporation ("Borrower"), the Lenders that have executed
this amendment, and NATIONSBANK OF TEXAS, N.A., as Agent for Lenders.
Borrower, the Lenders named on the signature pages below, and Agent are party
to the Credit Agreement (as renewed, extended, and amended and subject to
applicable consents and waivers, the "Credit Agreement") dated as of December 1,
1994, providing for a $90,000,000 Term Loan and a $150,000,000 Revolving
Facility. Upon and subject to the terms of this amendment, Borrower, Agent, and
Lenders have agreed, among other things, to change the calculation of the
Borrowing Base for March through August in 1996, to amend certain financial
covenants in the Credit Agreement, to add and amend certain provisions in the
Credit Agreement in response to a change in Borrower s accounting periods, and
to permit Borrower to create certain new Subsidiaries and transfer assets to
them subject to Lenders Liens that have been limited as described in this
amendment. Accordingly, for adequate and sufficient consideration, Borrower,
Lenders, and Agent agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a)
terms defined in the Credit Agreement have the same meanings when used in this
amendment and (b) references to "Sections," "Schedules," and "Exhibits" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENTS. The Credit Agreement is amended as follows effective as of
the date of this amendment.
(a) Section 1.1 is amended to entirely amend and replace the following
defined terms:
Borrowing Base means, at any time, the sum of (a) 80% of Eligible
Accounts plus (b) an amount equal to (i) 60% of Eligible Inventory for
fiscal months of March through August during 1996, or (ii) 50% of
Eligible Inventory for all other times.
Excess-Cash Flow means -- for any Person, for any period, and
without duplication -- the remainder of EBITDA minus (a) Taxes actually
paid in cash, minus (b) all Permitted-Capital Expenditures, minus (c)
cash dividends if permitted under Section 9.9, minus (d) the scheduled
current portion of principal (including, without limitation, the
principal component of Capital Leases) paid or due during that period on
the Companies' Funded Debt, minus (e) interest expense during that
period on the Companies' Debt (including, without limitation, the
interest component under Capital Leases), minus (f) increases (or plus
decreases) in Working Capital during that period, minus (g) net cash
proceeds of asset sales included in the calculation of EBITDA to the
extent those proceeds have been applied as mandatory prepayments of the
Term Loan under Section 3.2(f)(i), minus (h) voluntary prepayments of
the Term Loan under Section 3.2(e).
Loan Papers means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this
agreement, (b) all agreements, documents, and instruments in favor of
Agent or Lenders (or Agent on behalf of Lenders) ever delivered under
this agreement or otherwise delivered in connection with all or any part
of the Obligations other than Assignment and Assumption Agreements, (c)
any contract entered into between Borrower and any Lender or Affiliate
of any Lender under (whether or not in excess of the minimum dollar
requirements of) Section 8.12, (d) all LCs and LC Agreements, (e) the
letter agreement described in Section 4.2, and (f) all renewals,
extensions, and restatements of, and amendments and supplements to, any
of the foregoing.
Realmac means Realmac, Inc., a North Carolina corporation that was
merged into Buyer Beacon after the Closing Date.
(b) Section 1.1 is amended to add the following new defined terms:
fiscal month means (a) for any period before December 31, 1994, a
calendar month, and (b) thereafter, a period of four, five, or six weeks
having seven days in each week ending on a Saturday and that otherwise
approximates a calendar-monthly period. The fiscal-month ends for 1996
through 2001 are described on Schedule 1.1(c). Reference to a fiscal
month by the name of a calendar month means the fiscal month that
encompasses the most of that calendar month (e.g., the fiscal month of
January 1996 ends on February 3, 1996).
fiscal quarter means (a) for any period before December 31, 1994, a
calendar quarter, and (b) thereafter, any quarter of a fiscal year
ending on the last day of a fiscal month (e.g., the third fiscal quarter
in 1996 ends on September 26, 1996). The fiscal-quarter ends for 1996
through 2001 are indicated on Schedule 1.1(c) by asterisks.
fiscal year means (a) for any period before December 31, 1994, a
calendar year, and (b) thereafter, Borrower's fiscal year for accounting
and Tax purposes, which consists of 52- or 53-week period beginning on
the first day after the end of the immediately preceding fiscal year and
ending on the Saturday nearest to the December 31 following that first
day. References to a fiscal year with a number corresponding to any
calendar year means the fiscal year ending on the Saturday nearest to
December 31 during that calendar year (e.g., fiscal year 1999 ends on
January 1, 2000).
Holdco means Ptex Holding Company, a Delaware corporation and a
direct Subsidiary of Borrower.
Newco means Pillowtex, Inc., a Delaware corporation and a direct
Subsidiary of Borrower.
Operating Lease means a lease or sublease that is not a Capital
Lease.
Trustco means Pillowtex Management Services Company, a Delaware
business trust, a direct Subsidiary of Holdco, and an indirect
Subsidiary of Borrower.
(c) Section 3.2(d) is entirely amended as follows:
(d) Term Loan Principal. The Principal Debt under the Term Loan
is due and payable in installments on the last Business Day of each of
the fiscal months of March, June, September, and December -- commencing
September 30, 1995, and ending December 28, 2001 -- in accordance with
the following amortization table:
Fiscal Quarterly Annual
Year(s) Installment Amount
--------- ----------- -----------
1995 $2,500,000 $ 5,000,000
1996-1997 $2,500,000 $10,000,000
1998-2000 $3,750,000 $15,000,000
2001 $5,000,000 $20,000,000
(d) Section 4.4 is entirely amended as follows:
4.4 Commitment Fee. From and after the Closing Date, Borrower
shall pay to Agent a commitment fee for Lenders according to each
Lender's Commitment Percentage. The fee is payable as it accrues on the
last Business Day of each of the fiscal months of March, June,
September, and December -- commencing on the first of those dates that
follows the date of this agreement -- and on the
Revolving-Facility-Termination Date. Each payment of the fee is equal
to the following, determined for the fiscal quarter (or portion of a
fiscal quarter commencing on the date of this agreement or ending on the
Revolving-Facility-Termination Date) preceding and including the date it
is due: From the Closing Date until the Revolving-Facility-Termination
Date, the product of the Applicable Percentage multiplied by the amount
by which (i) the total Commitments for only the Revolving Facility
exceed (ii) the sum of the average-daily Principal Debt under only the
Revolving Notes plus the average-daily LC Exposure for standby LCs.
(e) Section 5.2(d) is entirely amended as follows:
(d) All of the other owned real property and plants and all of the
other equipment and fixtures of each other present and future (whether
under Sections 9.8 or 9.11 or otherwise) Company other than (i) in
respect of any foreign Company the granting of Lender Liens by which
would create a material Tax obligation for the Companies that would not
otherwise exist (ii) the assets currently encumbered by Permitted Liens
described as Items 7, 10, 11, and (to the extent the related documents
prohibit the Lender Liens) 12 on Schedule 9.5, and (iii) equipment and
fixtures in which that Company's interest arises solely under an
Operating Lease; and
(f) A new Section 5.5 is added as follows:
5.5 New Companies and Transfers of Assets. Contemporaneous with
entering into the second amendment of this agreement, Borrower has
formed Newco, Holdco, and Trustco for the purpose of, among other
things, the transfer of certain assets and operations.
(a) Transfers. As more particularly described in the documents
described on Annex A to the second amendment to this agreement, Borrower
has:
(i) Transferred to Buyer Beacon (A) Borrower s interest in
the plant and equipment at the Newton, North Carolina, yarn-
production facility that is subject to the lease from Sanwa General
Equipment Leasing, along with certain related receivables and
general intangibles, and (B) Borrower's ownership of the real
estate on which that facility is located;
(ii) Transferred to Newco Borrower's other non-Texas
manufacturing and sales assets and operations, along with certain
related receivables and general intangibles, and all of the capital
stock of Buyer Beacon, Manetta Home Fashions, Inc., and Tennessee
Woolen Mills, Inc., in each case subject to the pre-existing Lender
Liens (to the extent of those Lender Liens) already encumbering
those assets and capital stock;
(iii) Transferred to Trustco Borrower's Texas manufacturing
and sales assets and operations, along with certain related
receivables and general intangibles, in each case subject to the
pre-existing Lender Liens (to the extent of those Lender Liens)
already encumbering those assets; and
(iv) Retained ownership of its other assets.
(b) Additional Guaranties and Lender Liens. As required by
Section 5.1, 5.2, 8.11, and 9.8 and possible other provisions in the
Loan Papers (i) Newco, Holdco, and Trustco have all unconditionally
guaranteed the full payment and performance of the Obligations, (ii)
Borrower has created Lender Liens upon all of the issued and outstanding
capital stock of Newco and Holdco, (iii) Holdco has created Lender Liens
on all of the beneficial ownership of Trustco (which Agent and Lenders
agree was not subject to Lender Liens at any time when owned by
Borrower), and (iv) Buyer Beacon, Tennessee Woolen Mills, Inc., Newco,
Holdco, and Trustco have (A) acknowledged in writing that all assets --
limited, in the case of Trustco, as provided in Section 5.5(c) below --
and capital stock transferred to them as described in Section 5.5(a)
continue to be subject to pre-existing Lender Liens (to the extent of
those Lender Liens) already encumbering those assets and stock and (B)
have created Lender Liens upon all of their respective present and
future accounts receivable, inventory, equipment, fixtures, real
property, and plants.
(c) Lien Limitation. Schedule 5.5 is a list of assets transferred
by Borrower to Trustco. Notwithstanding any contrary provision in any
Loan Paper other than Section 5.5(d), the Lender Liens on each asset or
group of assets listed on Schedule 5.5 are limited -- effective as of
March 30, 1996, immediately before those transfers to Trustco by
Borrower -- so that they only secure an amount of the Obligations equal
to the amount corresponding to Borrower's tax basis in each asset being
transferred to Trustco, which tax basis is reflected on Schedule 5.5 by
asset or groups of assets. The limitation in this Section 5.5(c)
applies only to those assets and groups of assets and not to any other
present or future assets now or in the future created or owned by
Trustco.
(d) No Lien Limitation. Notwithstanding Section 5.5(c) or any
amounts described on Schedule 5.5, if at any time the second amendment
to this agreement fails to become effective or the ratio of the
Companies consolidated Funded Debt to EBITDA ever exceeds 4.50 to 1.00
or if a Default exists that has resulted in a termination of the
commitments of Lenders to extend credit under this agreement, then -- in
any of those three events and automatically without further action by
any Person -- the limitation of the Lender Liens in Section 5.5(c) no
longer is effective and the Lender Liens on the assets and groups of
assets described on Schedule 5.5 secure the full payment and performance
of the full Obligations.
(g) All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws
are modified in respect of Trustco to apply (to the extent applicable)
to its trust existence, certificate of trust, and declaration of trust.
(h) Section 7.2(a) is entirely amended as follows:
(a) is (and after the Beacon Acquisition will be) duly qualified to
transact business and is in good standing as a foreign corporation in
each jurisdiction where the nature and extent of its business and
properties require due qualification and good standing (each of which
jurisdictions is identified on Schedule 6 as modified by Schedule 7.1).
(i) Section 9.13 is entirely amended as follows:
9.13 Fiscal Year and Accounting Methods. No Company may change its
fiscal year for accounting purposes or any material aspect of its method
of accounting except (a) the Companies change, effective December 31,
1994, from having their fiscal months, quarters, and years as
corresponding calendar periods to become instead fiscal months, fiscal
quarters, and fiscal years, respectively, as defined in this agreement,
and (b) to conform any new Subsidiary's accounting methods to Borrower's
accounting methods.
(j) Section 9.16 is entirely amended as follows:
9.16 Contingent Liabilities. No Company may endorse, guarantee,
or otherwise become surety for, or contingently liable upon, the
obligations of any Person except (a) endorsements of negotiable
instruments in the ordinary course of business, (b) with respect to any
LCs, (c) guaranties of any Company of Debt or Operating Leases of any
Obligated Company, (d) contingent liabilities that exist on the Closing
Date and are fully described on Schedule 9.2, and (e) contingent
liabilities permitted in connection with a Permitted Acquisition.
(k) Section 9.17 is entirely amended as follows:
9.17 Operating Leases. No Company may become obligated under any
Operating Lease that would cause the total-Operating-Lease-payment
obligations of all of the Companies -- without duplication for
guaranties by any Company of another Company's Operating-Lease-payment
obligations -- to exceed $12,000,000 during any fiscal year.
(l) Section 10.3 is entirely amended as follows:
10.3 Funded Debt/EBITDA. The ratio of (a) the Companies'
consolidated Funded Debt on the last day of any fiscal quarter to (b)
their consolidated EBITDA for the 12-fiscal month period ending on that
last day to ever exceed the lesser of either 3.00 to 1.00 if the Release
Ratios are achieved or:
Period(s) Ratio
-------------------------------------- ------------
Fiscal quarter ending 3/31/95 5.10 to 1.00
Each fiscal quarter ending 6/30/95 5.25 to 1.00
or 09/30/95
Fiscal quarter ending 12/30/95 3.50 to 1.00
Fiscal quarter ending 3/30/96 4.00 to 1.00
Fiscal quarter ending 6/29/96 4.25 to 1.00
Fiscal quarter ending 9/28/96 4.00 to 1.00
Each fiscal quarter ending 12/28/96, 2.75 to 1.00
3/29/97, 6/28/97, or 9/27/97
Each subsequent fiscal quarter 2.50 to 1.00
(m) The table in Section 10.4 is entirely amended as follows:
Period(s) Ratio
-------------------------------------- ------------
Fiscal quarter ending 3/31/95 1.10 to 1.00
Two fiscal quarters ending 6/30/95 1.10 to 1.00
Three fiscal quarters ending 9/30/95 1.10 to 1.00
Four fiscal quarters ending 12/30/95 1.20 to 1.00
Four fiscal quarters ending each fiscal 1.10 to 1.00
quarter from 3/30/96 through 9/28/96
Four fiscal quarters ending each fiscal 1.20 to 1.00
quarter from 12/28/96 through 9/27/97
Four fiscal quarters ending each thereafter 1.25 to 1.00
(n) Item 6 on Schedule 9.8 is entirely amended as follows:
6. Loans or advances to, and investments in, another Obligated
Company.
(o) New Schedules 1.1(c), 5.5 , and 7.1 are added in the respective
forms of the attached Schedules 1.1(c), 5.5, and 7.1.
(p) Schedule 7.3 and Exhibits A-1 and D-3 are entirely amended in the
respective forms of -- and all references in the Credit Agreement to
Schedule 7.3 and Exhibits A-1 and D-3 are respectively changed to -- the
attached Amended Schedule 7.3 and Amended Exhibits A-1 and D-3.
3. CONDITIONS PRECEDENT. Paragraph 2 above is not effective unless Agent
receives (a) counterparts of this amendment executed by each Company listed
below and by Agent and by all Lenders, and (b) each document and other item
listed on the attached Annex A and indicated on that annex as being required
to be delivered by the Amendment-Closing Date (as defined on that annex), in
each case in form, substance, and number of counterparts as is reasonably
acceptable to Agent and its special counsel.
4. CONDITIONS SUBSEQUENT. Borrower covenants with Agent and Lenders to
deliver or cause to be delivered to Agent all documents and other items
listed on the attached Annex A and indicated on that annex as being required
to be delivered by the Post-Closing Date (as defined on that annex), in each
case by no later than that Post-Closing Date.
5. PRO FORMA AND FINAL TAX BASIS. The tax-basis amounts reflected on the
attached Schedule 5.5 are pro forma based upon Borrower s calculations as of
March 27, 1996. As soon as practicable after the date of this amendment but
by no later than April 15, 1996, Borrower shall recalculate all of the
applicable tax-basis amounts as of March 30, 1996, and prepare, initial, and
send to Agent to furnish to each Lender a replacement Schedule 5.5 that is
final for purposes of the Loan Papers. However, that final Schedule 5.5 may
not (a) include any assets other than the assets now reflected on the
attached pro forma Schedule 5.5 except that receivables and inventory may
vary upward by no more than 15% from the levels reflected on the attached pro
forma Schedule 5.5 and (b) reflect total tax-basis amounts that vary downward
by more than 15% from the total tax-basis amounts reflected on the attached
pro forma Schedule 5.5.
6. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of the
Loan Papers as amended by this amendment, (b) ratifies and confirms that all
guaranties, assurances, and Liens granted, conveyed, or assigned to Agent or
any Lender under the Loan Papers -- as they may have been renewed, extended,
and amended -- are not released, reduced, or otherwise adversely affected by
this amendment and continue to guarantee, assure, and secure full payment and
performance of the present and future Obligations, and (c) agrees to perform
those acts and duly authorize, execute, acknowledge, deliver, file, and
record those additional documents, and certificates as Agent or Determining
Lenders may request in order to create, perfect, preserve, and protect those
guaranties, assurances, and Liens.
7. REPRESENTATIONS. Borrower represents and warrants to Agent and Lenders
that as of the date of this amendment (a) all representations and warranties
in the Loan Papers are true and correct in all material respects except to
the extent that (i) any of them speak to a different specific date, (ii) the
facts on which any of them were based have been changed by transactions
contemplated or permitted by the Credit Agreement, or (iii) a change is
reflected on the attached Schedule 7.1, and (b) no Material Adverse Event,
Default, or Potential Default exists.
8. MISCELLANEOUS. All references in the Loan Papers to the "Credit
Agreement" refer to the Credit Agreement as amended by this amendment. This
amendment is a "Loan Paper" referred to in the Credit Agreement, and the
provisions relating to Loan Papers in Sections 1 and 14 are incorporated in
this amendment by reference. Except as specifically amended and modified in
this amendment, the Loan Papers are unchanged and continue in full force and
effect. This amendment may be executed in any number of counterparts with
the same effect as if all signatories had signed the same document. All
counterparts must be construed together to constitute one and the same
instrument. This amendment binds and inures to each of the undersigned and
their respective successors and permitted assigns, subject to Section 14.10
of the Credit Agreement. This amendment and the other Loan Papers represent
the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements by the
parties. There are no unwritten oral agreements between the parties.
Remainder of page intentionally blank.
EXECUTED as of the date first stated above.
PILLOWTEX CORPORATION, as Borrower
By (Signature) /s/ Jeffrey D. Cordes
(Name and Title) Jeffrey D. Cordes, Executive Vice President
NATIONSBANK OF TEXAS, N.A., as Agent and Lender
By (Signature) /s/ Lynn H. Mullin
(Name and Title) Lynn H. Mullin, Senior Vice President
BANK OF AMERICA ILLINOIS, as a Lender
By (Signature) /s/ Claire Lui
(Name and Title) Claire Liu, Vice President
COMERICA BANK - TEXAS, as a Lender
By (Signature) /s/ Melinda A. Chausse
(Name and Title) Melinda A. Chausse, Vice President
THE FIRST NATIONAL BANK OF BOSTON, as a Lender
By (Signature) /s/ William C. Purinton
(Name and Title) William C. Purinton , Vice President
WELLS FARGO BANK, N.A., as a Lender
By (Signature) /s/ Mary Jo Hoch
(Name and Title) Mary Jo Hoch, Vice President
THE BANK OF TOKYO, LTD., DALLAS AGENCY, as a Lender
By (Signature) /s/ John M. Mearns
(Name and Title) John M. Mearns, VP and Manager
FIRST INTERSTATE BANK OF TEXAS, N.A., as a Lender
By (Signature) /s/ Susan L. Coulter
(Name and Title) Susan L. Coulter, Vice President
BANK ONE, TEXAS, N.A., as a Lender
By (Signature) /s/ Scott Rhea
(Name and Title) Scott Rhea, Assistant Vice President
THE BANK OF NOVA SCOTIA, as a Lender
By (Signature) /s/ F.C.H. Ashby
(Name and Title) F.C.H. Ashby, Senior Manager Loan Operations
NBD BANK, as a Lender
By (Signature) /s/ Larry E. Schuster
(Name and Title) Larry E. Schuster, Authorized Agent
To induce Agent and Lenders to enter into this amendment, the undersigned
jointly and severally (a) consent and agree to this amendment's execution and
delivery, (b) ratify and confirm that all guaranties, assurances, and Liens
granted, conveyed, or assigned to Agent or any Lender under the Loan Papers --
as they may have been renewed, extended, and amended -- are not released,
diminished, impaired, reduced, or otherwise adversely affected by this amendment
and continue to guarantee, assure, and secure the full payment and performance
of all present and future Obligations, (c) agree to perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
guaranties, assignments, security agreements, deeds of trust, mortgages, and
other agreements, documents, instruments, and certificates as Agent or
Determining Lenders may reasonably deem necessary or appropriate in order to
create, perfect, preserve, and protect those guaranties, assurances, and Liens,
(d) represent and warrant to Agent and Lenders that (i) the value of the
consideration received and to be received by the undersigned in respect of those
guaranties, assurances, and Liens are reasonably worth at least as much as the
liability and obligation the undersigned under them, (ii) that liability and
obligation may reasonably be expected to directly or indirectly benefit the
undersigned, and (iii) each undersigned is -- and after giving effect to those
guaranties, assurances, Liens, and the Loan Papers, in light of all existing
facts and circumstances (including, without limitation, collateral for and other
obligors in respect of the Obligations and various components of it and various
rights of subrogation and contribution), each undersigned will be -- Solvent,
and (e) waive notice of acceptance of this consent and agreement, which consent
and agreement binds the undersigned and their successors and permitted assigns
and inures to Agent, Lenders, and their respective successors and permitted
assigns.
BEACON MANUFACTURING COMPANY
(formerly Be-Ac, Inc., and the successor by
merger with Realmac, Inc.),
MANETTA HOME FASHIONS, INC., and
TENNESSEE WOOLEN MILLS, INC.
By (Signature) /s/ Jeffrey D. Cordes
(Name and Title) Jeffrey D. Cordes, Executive Vice President or Vice
President of each of above Company
To induce Agent and Lenders to enter into this amendment, the undersigned
jointly and severally (a) consent and agree to this amendment's execution and
delivery, (b) ratify and confirm that the assignments, conveyances, and
transfers to them by Borrower as contemplated in this amendment are in each case
subject to the pre-existing Lender Liens (to the extent of those Lender Liens)
already encumbering the assets assigned, conveyed, or transferred, which Lender
Liens (except to the extent specifically limited in this amendment) continue to
secure the full payment and performance of all present and future Obligations,
(c) agree to perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record such additional guaranties, assignments, security
agreements, deeds of trust, mortgages, and other agreements, documents,
instruments, and certificates as Agent or Determining Lenders may reasonably
deem necessary or appropriate in order to create, perfect, preserve, and protect
those Lender Liens, (d) represent and warrant to Agent and Lenders that (i) the
value of the consideration received and to be received by the undersigned in
respect of those Lender Liens are reasonably worth at least as much as the
liability and obligation the undersigned under them, (ii) that liability and
obligation may reasonably be expected to directly or indirectly benefit the
undersigned, and (iii) each undersigned is -- and after giving effect to those
Lender Liens and the Loan Papers, in light of all existing facts and
circumstances (including, without limitation, collateral for and other obligors
in respect of the Obligations and various components of it and various rights of
subrogation and contribution), each undersigned will be -- Solvent, and (e)
waive notice of acceptance of this consent and agreement, which consent and
agreement binds the undersigned and their successors and permitted assigns and
inures to Agent, Lenders, and their respective successors and permitted assigns.
PILLOWTEX, INC.
By (Signature) /s/ Norman J. Shuman
(Name and Title) Norman J. Shuman, Secretary
PTEX HOLDING COMPANY
By (Signature) /s/ Norman J. Shuman
(Name and Title) Norman J. Shuman, Secretary
BEACON MANUFACTURING COMPANY,
TENNESSEE WOOLEN MILLS, INC., and
PILLOWTEX MANAGEMENT SERVICES COMPANY
By (Signature) /s/ Jeffrey D. Cordes
(Name and Title) Jeffrey D. Cordes, Executive Vice President or Vice
President of each of above Company