Exhibit 10.7
AMENDMENT AND WAIVER AGREEMENT
THIS AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is made and
entered into as of this 30th day of April, 1999 among ITHACA INDUSTRIES, INC., a
Delaware corporation ("Borrower"), the Lenders party to this Agreement (the
"Lenders"), and NATIONSBANK, N.A., a national banking association, as the
collateral agent for the Lenders (the "Agent").
W I T N E S S E T H :
WHEREAS, Borrower, the Lenders, and the Agent entered into that
certain Loan and Security Agreement, dated as of March 24, 1998, pursuant to
which the Lenders agreed to make certain loans to Borrower (as amended,
modified, supplemented and restated from time to time, the "Loan Agreement");
and
WHEREAS, Borrower has entered into an Asset Purchase Agreement, dated
as of April 29, 1999, with Glendale Group, Ltd., a North Carolina corporation
("Buyer"), pursuant to which Borrower has agreed to sell, and Buyer has agreed
to purchase, Borrower's women's hosiery business (as amended, the "Purchase
Agreement"); and
WHEREAS, the consummation of the transactions contemplated by the
Purchase Agreement would constitute a violation of certain covenants set forth
in the Loan Agreement; and
WHEREAS, Borrower has asked the Lenders to consent to the consummation
of the transactions contemplated by the Purchase Agreement and to waive certain
Events of Default under the Loan Agreement; and
WHEREAS, the Lenders are willing to grant such consent and waiver,
subject to the terms and conditions set forth herein, including the amendments
to the Loan Agreement set forth herein; and
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise expressly
defined herein shall have the respective meanings given to such terms in the
Loan Agreement.
2. In reliance upon the representations, warranties, agreements and
covenants of Borrower set forth herein and in the Loan Agreement, as amended
hereby, the Lenders agree to waive the following defaults (the "Specified
Defaults"): (a) the default under SECTIONS 12.1(A), (C) and (D) of the Loan
Agreement for the fiscal year ended January 30, 1999, and the anticipated
default under SECTIONS 12.1(A), (C) and (D) of the Loan Agreement for the fiscal
quarter ending May 31, 1999, (b) the default under SECTION 11.1(B) of the Loan
Agreement arising from the failure of Borrower to deliver to the Lenders its
audited year-end financial statements for the fiscal year
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ended January 30, 1999 within the timeframe required thereunder, and (c) any
default arising directly from the consummation of the transactions contemplated
by the Purchase Agreement, including the sale of the Assets (as defined in the
Purchase Agreement) and the repurchase by Borrower of 400,000 shares of its
capital stock from Glendale Group, Ltd. on the effective date of the
consummation of the transactions contemplated by the Purchase Agreement,
including any default under SECTIONS 11.1(B), 12.6 and 12.7 thereof; provided,
however, the waiver of the Specified Defaults under SECTION 11.1(B) shall no
longer be effective (and the default thereunder shall no longer constitute a
Specified Default) after May 17, 1999 unless Borrower has complied with the
terms thereof on or before May 17, 1999. However, the Lenders reserve all of
their rights and remedies at all times with respect to any Default or Event of
Default, other than the Specified Defaults, whether presently existing or
occurring hereafter.
3. In order to induce the Lenders to enter into this Agreement and
grant the accommodations set forth herein, Borrower hereby represents, warrants,
agrees and covenants that (a) Borrower has heretofore furnished to the Lenders
true, complete and correct copies of the Purchase Agreement (including any
schedules, exhibits and annexes thereto) and each other agreement, document and
certificate executed (or to be executed) in connection therewith (collectively,
the "Purchase Documents"), (b) the Purchase Agreement has not been amended,
supplemented or modified except as previously disclosed in writing to the
Lenders and, together with the other Purchase Documents, constitutes the
complete understanding between Borrower and Buyer in respect of the acquisition
of the Assets and the other matters and transactions covered thereby, (c) to
Borrower's knowledge, the Purchase Agreement and each of the other Purchase
Documents has been duly executed and delivered by Buyer and is a valid, legal
and binding obligation of Buyer, (d) the representations and warranties of
Borrower contained in the Purchase Agreement and each of the other Purchase
Documents are (or will be) true and correct in all material respects on the
effective date of this Agreement as if made on and as of such date, except to
the extent that any such representation or warranty relates solely to an earlier
date, and the Lenders are entitled to rely on such representations and
warranties with the same force and effect as though they were incorporated in
this Agreement and made to the Lenders directly, (e) on and as of the effective
date of this Agreement, Borrower knows of no reason to believe that the
representations and warranties of, and information concerning, Buyer contained
in the Purchase Agreement and each of the other Purchase Documents are not true
and correct in all material respects, (f) upon the effective date of this
Agreement, the transactions contemplated by the Purchase Agreement and the other
Purchase Documents shall have been consummated in accordance with Applicable
Laws and, except as previously disclosed in writing to the Lenders, in the
manner provided therein in accordance with the terms thereof without any
material waivers or amendments thereto, and each of the conditions to such
consummation set forth in the Purchase Agreement and the other Purchase
Documents shall have been fulfilled without any material waiver of any thereof,
except with the prior written consent of the Lenders, (g) attached hereto as
Exhibit A are true and correct copies of the forecasted balance sheets, income
statements, and cash flow statements of Borrower and its Subsidiaries for their
2000 through 2003 fiscal years, together with supporting details and a statement
of underlying assumptions (the "Projections"), (h) the Projections have been
prepared by Borrower in good faith in light of the past operations of Borrower
and its Subsidiaries, and, as of the effective date of this Agreement, reflect
Borrower's good faith and reasonable estimates of the future financial
performance and of the other information projected therein for the periods set
forth therein,
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it being recognized by the Lenders that such projections as to future events are
only estimates and that actual results during the periods covered by the
Projections will differ from the projected results, (i) attached hereto as
Exhibit B are true and correct copies of the pro forma balance sheet of Borrower
and its Subsidiaries as at April 30, 1999, after giving effect to the
transactions contemplated by this Agreement and the Purchase Agreement (the "Pro
Forma"), (j) the Pro Forma presents fairly, on a pro forma basis in all material
respects, the financial position of Borrower and its Subsidiaries as at April
30, 1999, (k) attached hereto as Exhibit C is a true and correct copy of the
Amendment and Waiver Agreement, dated of even date herewith, with respect to the
Senior Loan Agreement (the "Senior Lender Amendment and Waiver"), and (l) upon
the effective date of this Agreement, the Senior Lender Amendment and Waiver
shall be in full force and effect and all conditions precedent to the
effectiveness thereof shall have been satisfied or waived.
4. [Intentionally Deleted]
5. [Intentionally Deleted]
6. [Intentionally Deleted]
7. [Intentionally Deleted]
8. [Intentionally Deleted]
9. [Intentionally Deleted]'
10. [Intentionally Deleted]
11. The Loan Agreement is amended by deleting SECTION 12.1 and
replacing it with the following:
SECTION 12.1. Financial Ratios.
(a) Minimum Tangible Net Worth. Permit Consolidated Tangible
Net Worth of the Borrower and its Consolidated Subsidiaries, as of any
fiscal quarter end (commencing with the fiscal quarter ending on July
31, 1999), to be less than $12,000,000 plus 75% of Consolidated Net
Income (without deduction for any net loss) on a cumulative basis from
and including May 1, 1999 to and including such fiscal quarter end.
(b) Minimum Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio, as of the end of any fiscal
quarter, calculated on a rolling four-quarter basis (except for the
calculation as of the end of the second and third fiscal quarters of
fiscal year 2000, which shall be on a fiscal year to date basis), to
be less than 1.0 to 1.
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(c) Maximum Funded Indebtedness to Cash Flow Ratio. Permit the
ratio of (i) Consolidated Funded Indebtedness as of any fiscal quarter
end to (ii) Consolidated Operating Cash Flow to be greater than: 5.00
to 1.0 as of the end of the second fiscal quarter of fiscal year 2000;
4.75 to 1.0 as of the end of the third fiscal quarter of fiscal year
2000 or as of fiscal year end 2000; 4.50 to 1.0 as of any fiscal
quarter end in fiscal year 2001; or 4.25 to 1.0 as of the end of any
fiscal quarter thereafter. Consolidated Operating Cash Flow shall be
calculated on an annualized fiscal year to date basis in the case of
the calculation of this covenant as of the end of the second and third
fiscal quarters of fiscal year 2000, and on a rolling four-quarter
basis for all calculations thereafter. Consolidated Operating Cash
Flow, for the purpose of this covenant, will include, or exclude, as
applicable, the effect of acquisitions and divestitures on a proforma
basis as if such acquisitions or divestitures occurred on the first
day of such applicable period.
12. The Loan Agreement is amended to delete the reference to
"$95,000,000" from clause (b) of SECTION 12.2 and replacing it with "$80,000,000
(which amount will be reduced to $70,383,003.76 as the First Lien Senior Secured
Facility is paid down from the proceeds of the April 30, 1999 sale of Borrower's
women's hosiery business)."
13. The Loan Agreement is amended by deleting SECTION 12.5 and
replacing it with the following:
SECTION 12.5. Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate (for the Borrower and its Subsidiaries)
in excess of the amount set forth below for the fiscal year set forth
opposite such amount:
Fiscal Year Amount
----------- ------
1999 $10,000,000
2000 $6,500,000
2001 $5,000,000
2002 $5,000,000
2003 $5,000,000
Notwithstanding the foregoing, up to 50% of the unused portion of the
limit set forth above with respect to any fiscal year may be carried
forward and utilized in the immediately succeeding fiscal year.
14. The Loan Agreement is amended by deleting clause (d) of SECTION
12.7 and replacing it with the following:
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(d) the sale of Borrower's narrow fabrics business, the
disposition of plant and equipment held for disposal as of the
Agreement Date and the disposition of Borrower's plant and equipment
located in Cairo, Georgia and Swainsboro, Georgia, provided the Net
Proceeds of any such sale or disposition are applied as set forth in
SECTION 5.9 of the Senior Loan Agreement, or if the loans under the
Senior Loan Agreement have been paid in full, applied to the Term
Loans to the extent that it would have been required to be applied to
reduce the First Lien Senior Secured Facility; and
15. The Loan Agreement is amended by deleting the words "Senior Loans"
from clauses (e) and (f) of SECTION 12.7 and replacing them with the words
"loans outstanding under the Senior Loan Agreement".
16. The Loan Agreement is amended by deleting SECTION 12.10 and
replacing it with the following:
SECTION 12.10. Capitalized Lease Obligations. Incur or permit
to exist any Capitalized Lease Obligation if such Capitalized Lease
Obligation, when added to existing Capitalized Lease Obligations and
Permitted Purchase Money Indebtedness, would exceed $8,000,000 in the
aggregate.
17. The Loan Agreement is amended by deleting SECTION 12.11 and
replacing it with the following:
SECTION 12.11. Operating Lease Obligations. Enter into any
Operating Lease if the aggregate annual rental payable under all
Operating Leases of the Borrower and its Subsidiaries would exceed
$12,000,000 in the aggregate.
18. [Intentionally Deleted]
19. Borrower covenants and agrees that it will promptly deliver to the
Lenders, and in any event within three Business Days after Borrower's receipt
thereof, the Closing Balance Sheet and any Notice of Disagreement (as such terms
are defined in the Purchase Agreement) or final determination of the Closing
Tangible Net Worth (as defined in the Purchase Agreement).
20. The Loan Agreement is amended by deleting Schedules 7.1(f),
7.1(h), 7.1(p), 7.1(t), 7.1(u), 7.1(v), 7.1(w), 7.1(x), 7.1(bb), 7.1(cc) and
1.1B and replacing them with the Schedules attached to this Agreement.
21. [Intentionally Deleted]
22. Each of the Lenders hereby authorizes and directs the Agent (a) to
release the Lien and Security Interest of the Agent and the Lenders in all of
the Assets, and (b) to execute and deliver to Borrower the release letter in
substantially the form attached hereto as Exhibit D and such other
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releases and documents as the Agent may deem appropriate or necessary in order
to evidence and effectuate such release.
23. The effectiveness of this Agreement and the waiver and amendments
set forth herein shall be conditioned upon the receipt (a) by the Agent of at
least $15,000,000 from the proceeds of the sale of the Assets pursuant to the
Purchase Agreement for application to the revolving loans under the Senior Loan
Agreement, and $6,001,993 from the proceeds of the sale of the Assets pursuant
to the Purchase Agreement for application to the outstanding balance of the term
loan under the Senior Loan Agreement, and (b) by the Lenders (by wire transfer)
of the fee referred to in Section 24 below and the following certificates,
notes, agreements, acknowledgments and opinions, all of which shall be in form
and substance reasonably satisfactory to the Lenders:
(i) [intentionally deleted];
(ii) [intentionally deleted];
(iii) a certificate of the Secretary of Borrower as to such
corporate and other matters as the Lenders may reasonably request,
which certificate shall contain a certified copy of Borrower's articles
of incorporation, a good standing certificate for Borrower from the
State of Delaware, a copy of Borrower's by-laws, and a copy of the
resolutions of Borrower's board of directors approving the transactions
contemplated hereby and by the Purchase Agreement;
(iv) an opinion of Borrower's counsel as to such matters as
the Lenders may reasonably request;
(v) copies of the Projections and Pro Forma, together with a
certificate of the Financial Officer with respect thereto;
(vi) a certified copy of the duly executed and delivered
Senior Lender Amendment and Waiver, including a certification of the
Financial Officer that such Senior Lender Amendment and Waiver is in
full force and effect and all conditions precedent to the effectiveness
thereof have been satisfied or waived;
(vii) on the effective date of this Agreement, (A) the Lenders
shall have received true and complete executed or conformed copies of
the Purchase Documents and any amendments thereto; (B) the Purchase
Documents shall be in full force and effect and no material term or
condition thereof shall have been amended, modified or waived after the
execution thereof (other than solely to extend the date by which the
purchase contemplated thereby is required to occur) except with the
prior written consent of the Lenders; (C) none of the parties to any of
the Purchase Documents shall have failed to perform any material
obligation or covenant required by such Purchase Document to be
performed or complied with by it on or before the effective date of
this Agreement; (D) all representations and warranties of Borrower and
Buyer contained in the Purchase Agreement and the other Purchase
Documents shall be true and correct in all material respects with the
same effect
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as though made on and as of the effective date of this Agreement; (E)
all requisite approvals by governmental authorities and regulatory
bodies having jurisdiction over the parties to the Purchase Agreement
in respect of the sale of the Assets shall have been obtained by such
parties, and no such approvals shall impose any unsatisfied conditions
to the consummation of the sale of the Assets; (F) the sale of the
Assets shall have been consummated in accordance with the terms and
provisions of the Purchase Agreement and the other Purchase Documents,
without any amendment or waiver of any material provision thereof; and
(G) the Lenders shall have received a certificate from an officer of
Borrower, or other evidence satisfactory to them, that each of the
conditions set forth in clauses (A) through (F) above have been
satisfied;
(viii) [intentionally deleted]; and
(ix) such other certificates, notes, agreements and
acknowledgments as the Lenders may reasonably request.
24. As consideration for the accommodations set forth herein, on the
effective date of this Agreement, Borrower shall pay to the Lenders a
non-refundable fee as set forth in the fee letter of even date herewith between
Borrower and the Lenders.
25. To induce the Lenders to enter into this Agreement, Borrower hereby
represents and warrants that, as of the date hereof, except for the Specified
Defaults, there exists no Default or Event of Default under the Loan Agreement.
26. Borrower hereby restates, ratifies, and reaffirms each and every
term, condition, representation and warranty heretofore made by it under or in
connection with the execution and delivery of the Loan Agreement, as amended
hereby, and the other Loan Documents, as fully as though such representations
and warranties had been made on the date hereof and with specific reference to
this Agreement, except to the extent that any such representation or warranty
relates solely to a prior date.
27. Except as expressly set forth herein, the Loan Agreement and the
other Loan Documents shall be and remain in full force and effect as originally
written, and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and the Lenders.
28. In addition to any other fees described herein, Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent and the Lenders in
connection with the preparation, execution, delivery and enforcement of this
Agreement and all other Loan Documents and any other transactions contemplated
hereby, including, without limitation, the fees and out-of-pocket expenses of
legal counsel to the Agent and the Lenders.
29. To induce the Agent and the Lenders to enter into this Agreement
and grant the accommodations set forth herein, Borrower (a) acknowledges and
agrees that no right of offset, defense, counterclaim, claim or objection exists
in favor of Borrower against the Agent or any Lender arising out of or with
respect to the Loan Agreement, the other Loan Documents, or the Secured
Obligations,
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and (b) releases, acquits, remises and forever discharges the Agent and each
Lender and its affiliates and all of their past, present and future officers,
directors, employees, agents, attorneys, representatives, successors and assigns
from any and all claims, demands, actions and causes of action (other than those
based on fraud or criminal misconduct), whether at law or in equity, whether now
accrued or hereafter maturing, and whether known or unknown, which Borrower now
or hereafter may have by reason of any manner, cause or things, in each case, to
and including the date of this Agreement arising out of the Loan Agreement, the
other Loan Documents, or the Secured Obligations.
30. Borrower acknowledges that (a) except as expressly set forth
herein, neither the Agent nor any Lender has agreed to (and has no obligation
whatsoever to discuss, negotiate or agree to) any other restructuring,
modification, amendment, waiver or forbearance with respect to the Secured
Obligations or the Loan Agreement, (b) no understanding with respect to any
other restructuring, modification, amendment, waiver or forbearance with respect
to the Secured Obligations or the Loan Agreement shall constitute a legally
binding agreement or contract, or have any force or effect whatsoever, unless
and until reduced to writing and signed by authorized representatives of each
party hereto, and (c) the execution and delivery of this Agreement has not
established any course of dealing between the parties hereto or created any
obligation or agreement of the Agent or any Lender with respect to any future
restructuring, modification, amendment, waiver or forbearance with respect to
the Secured Obligations or the Loan Agreement.
31. Borrower agrees to take such further action as the Lenders shall
reasonably request in connection herewith to evidence the agreements herein
contained.
32. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
33. This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns, and legal representatives and heirs, of
the parties hereto.
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34. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Georgia.
IN WITNESS WHEREOF, Borrower, the Agent and the Lenders have caused
this Agreement to be duly executed, all as of the date first above written.
BORROWER:
ITHACA INDUSTRIES, INC.
By: /s/ Richard P. Thrush
-------------------------
Name: Richard P. Thush
Title: SVP
LENDERS:
FOOTHILL CAPITAL CORPORATION
By: /s/ Karen S. Sandler
------------------------
Name: Karen S. Sandler
Title: SVP
AGENT:
NATIONSBANK, N.A.
By: /s/ Douglas E. Cowan
------------------------
Name: Douglas E. Cowan
Title: Vice President