[EXECUTION COPY]
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of November 12,
1999 (this "Waiver and 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"), BELDOCH INDUSTRIES CORPORATION, a Delaware corporation ("BIC"; together
with DKA, and severally, the "Borrowers"), the Guarantors party thereto, the
lenders party thereto (collectively, the "Lenders") 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 certain existing
Events of Default under the Credit Agreement and (b) amend the Credit Agreement
to amend certain financial covenants set forth therein.
The Lenders are willing to waive such existing Events of Default and to
make such amendments to the Credit Agreement upon the terms and subject to the
conditions set forth in this Waiver and 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. Borrowers have defaulted under
Sections 7.10 (Minimum Interest Coverage Ratio) and 7.11 (EBITDA) of the Credit
Agreement (collectively, the "Subject Covenants") as a result of their breach of
such financial covenants for the quarterly period ending September 30, 1999. As
a result of the foregoing, Events of Default (collectively, the "Covenant
Defaults") have occurred under Article VIII(d) of the Credit Agreement. In
response to the Borrowers' request on or about the date hereof for a waiver of
the Covenant Defaults, Lenders hereby waive the Covenant Defaults, provided,
however, that nothing contained in this Waiver and Amendment shall be construed
to limit, impair or otherwise affect any rights of Lenders in respect of any
future noncompliance with the Subject Covenants or with any other 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 by adding thereto the following defined term:
"Tangible Net Worth" shall mean, as of any date, stockholders' equity
less the aggregate book value of intangible assets, all as determined
on a Consolidated basis for the Parent and its Subsidiaries in
accordance with GAAP."
4. 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
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September 30, 1999 .50 to 1.00
December 31, 1999 1.30 to 1.00"
5. Amendment of Section 7.11. Section 7.11 of the Credit Agreement is
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
----------------------- ------
September 30, 1999 $2,450,000
December 31, 1999 $4,800,000"
6. Amendment of Section 7.12. Section 7.12 of the Credit Agreement is
amended in its entirety to read as follows:
"Section 7.12 Net Worth. Permit the 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 the fiscal quarter
ending September 30, 1999 to be less than $15,500,000."
7. Addition of Section 7.12A. The Credit Agreement is hereby amended
by adding the following Section 7.12A thereto immediately following Section
7:12:
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"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 the
fiscal quarter ending December 31, 1999 to be less than $11,500,000."
8. 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 Waiver and 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 8 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 Waiver and 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.
9. Effectiveness. This Waiver and Amendment shall become effective on
the date Agent shall have received counterparts of this Waiver and Amendment
duly executed and delivered by each of the parties hereto.
10. Continuing Effect of Credit Agreement. This Waiver and 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
Waiver and Amendment, the provisions of the Credit Agreement are and shall
remain in full force and effect.
11. 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).
12. Counterparts; Facsimile Signature. This Waiver and 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 Waiver and Amendment by
facsimile shall be effective as delivery of a manually executed signature page
hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
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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BELDOCH 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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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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