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[EXECUTION COPY]
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT is made as of September 8, 1998 by and
among RIDGEVIEW, INC., a North Carolina corporation, SENECA KNITTING MILLS
CORPORATION, a New York corporation, and TRI-STAR HOSIERY MILLS, INC., a North
Carolina corporation (the "Borrowers"), and NATIONSBANK, N.A. (f/k/a
NationsBank, N.A. (South)) (the "Lender").
Preliminary Statement
The Borrowers and the Lender are parties to an Amended and Restated
Loan and Security Agreement dated as of December 20, 1996, as amended by
Amendment No. 1 dated as of January 31, 1997, Amendment No. 2 dated as of March
13, 1997, Amendment No. 3 dated as of July 31, 1997, Amendment No. 4 dated as of
March 13, 1998, and Amendment No. 5 dated as of July 14, 1998 (as so amended,
the "Loan Agreement"; terms defined therein and not otherwise defined herein
being used herein as therein defined).
Events of Default have occurred and are continuing under the Loan
Agreement. Specifically, Section 10.1 (b)(ii) of the Loan Agreement required as
of June 30, 1998 that the Tangible Net Worth of the Domestic Business of
Ridgeview and its U.S. Subsidiaries be $17,415,385; such Tangible Net Worth was
reported to the Lender as $15,517,086. Further, Section 10.1(b)(iii) of the Loan
Agreement required that the Fixed Charge Ratio of the Domestic Business of
Ridgeview and its U.S. Subsidiaries as of June 30, 1998 be greater than 1.25 to
1; such ratio was reported to the Lender as -0.87 to 1. This Agreement
constitutes written notice to the Borrowers of the foregoing Events of Default,
which Events of Default, and any continuation or repetition of such Events of
Default, are referred to hereinafter as the "Forbearance Defaults."
The Borrowers have requested, and the Lender has agreed, upon and
subject to all of the terms, conditions and provisions of this Agreement, to
forbear for a specified period from exercising the various rights and remedies
available to the Lender when an Event of Default has occurred and is continuing
under the Loan Agreement.
Accordingly, in consideration of the Loans, the mutual undertakings
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Acknowledgments and Agreements by Borrowers. The Borrowers
acknowledge and agree that:
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(a) Events of Default have occurred and now exist under the Loan
Documents and are continuing;
(b) The Loan Documents executed and delivered by the Borrowers are
the legal, valid and binding obligations of the Borrowers, enforceable against
them in accordance with their respective terms;
(c) The Security Interest granted by the Borrowers to the Lender in
the Collateral is a duly perfected, first priority Lien, subject only to
Permitted Liens; and
(d) All of the Secured Obligations are absolutely due and owing by
the Borrowers to the Lender without any defense, deduction, offset or
counterclaim.
Section 2. Agreement to Forbear. The Lender agrees that during the
Forbearance Period (as hereinafter defined) it will not, solely by reason of the
Forbearance Defaults, exercise any right or remedy available to it upon default
by the Borrowers, other than as expressly set forth in this Agreement. Further,
during the Forbearance Period the Lender may continue in its discretion to make
Revolving Credit Loans to the Borrowers in accordance with the provisions of the
Loan Agreement, modified as follows:
(a) Notwithstanding Section 10.14 of the Loan Agreement to the
contrary, there shall be no minimum Revolving Credit Availability;
(b) Notwithstanding any contrary provision of the Loan Agreement or
any notice or other communication by the Lender to the Borrowers prior to the
date hereof, and without prejudice to the Lender's right to impose the Default
Margin, interest shall be payable from and after September 1, 1998 on all Loans
and, to the extent permitted by applicable law, on all other Secured
Obligations, at the Prime Rate, plus 0.37%, payable on demand or, if no demand
is made, monthly on the first day of each month; and
(c) The Eurodollar Rate shall not be available.
"Forbearance Period" means the period beginning on the date hereof and ending on
the earlier of December 31, 1998 and the date on which any Forbearance Condition
(as hereinafter defined) fails or ceases to be satisfied.
Section 3. Forbearance Conditions. The following conditions shall
constitute the "Forbearance Conditions":
(a) On or before September 15, 1998, the Lender shall have received a
signed legal opinion from Bond, Schoeneck & King, LLP, in connection with
Amendment No. 5 to the Loan Agreement, in the form previously submitted by the
Lender to said law firm;
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(b) The Borrowers shall timely perform all of their obligations under
this Agreement;
(c) No Default or Event of Default, other than the Forbearance
Defaults, shall occur or be continuing;
(d) The Borrowers shall pay to the Lender on the date hereof, in
consideration of the Lender's forbearance, a fee of $10,000 which shall be fully
earned when due and payable and not subject to rebate or refund;
(e) The Borrowers shall not permit EBITDA for the fiscal quarter of
the Borrowers ending September 30, 1998 to be less than $2,000,000;
(f) On or before September 30, 1998, the Borrowers shall have
furnished to the Lender a copy of a proposal letter from a commercial lender
indicating the terms and conditions on which it proposes to make available to
the Borrower(s) credit facilities that will permit the Borrowers to repay the
Secured Obligations;
(g) On or before November 30, 1998, the Borrowers shall have
furnished to the Lender a copy of a binding commitment from a commercial lender,
as to credit facilities to be extended to the Borrower(s) that will permit the
repayment in full of the Secured Obligations on or before December 31, 1998; and
(h) On or before December 31, 1998, the Borrowers shall have paid the
Secured Obligations in full and delivered to the Lender a binding general
release.
Section 4. Forbearance Terminated. If any one or more of the
Forbearance Conditions is not satisfied, the agreement of the Lender to forbear
as set forth in Section 2 shall, at the election of the Lender, terminate
without notice to the Borrowers, and the Lender shall thereupon have and may
exercise from time to time all of the remedies available to it under the Loan
Documents and applicable law by reason of the existence of continuing Events of
Default.
Section 5. Representations and Warranties of Borrowers. The Borrowers
hereby represent and warrant to the Lender that:
(a) The Borrowers have no knowledge of any Defaults or Events of
Default existing under the Loan Documents other than the Forbearance Defaults;
(b) Subject to such existing Events of Default, the representations
and warranties of the Borrowers set forth in the Loan Documents are true and
correct in all material respects on the date of this Agreement;
(c) The Borrowers have the power and authority and have taken all
necessary steps to authorize them to execute, deliver and perform its
obligations under this
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Agreement in accordance with its terms, this Agreement has been duly executed
and delivered by the Borrowers and is the legal, valid and binding obligation of
the Borrowers, enforceable against the Borrowers in accordance with its terms;
and
(d) The execution, delivery and performance by the Borrowers of this
Agreement does not require any Governmental Approval, violate any applicable
law, conflict with or result in a breach of the Borrowers' certificates of
incorporation or by-laws, or conflict with or result in a breach of or
constitute a default under any material provisions of any indenture, agreement
or other instrument to which any Borrower is a party or by which any Borrower or
any of its property may be bound or any Governmental Approval applicable to any
Borrower or its property.
Section 6. Application of Proceeds. The Borrowers hereby agree, any
provision of the Loan Agreement or any other Loan Document to the contrary
notwithstanding, that as between the Borrowers, on one hand, and the Lender on
the other, the Lender shall have the right to apply and reapply any and all
Collateral, proceeds thereof, other amounts received by the Lender for
application to the Secured Obligations and any property of the Borrowers at any
time in the possession of the Lender or any Affiliate of the Lender to the
payment of the Secured Obligations in any order that the Lender in its sole and
absolute discretion may determine from time to time.
Section 7. Governing Law; General Provisions. (a) This Agreement
shall be governed by and construed in accordance with the laws of the State of
Georgia (without reference to conflict of laws principles).
(b) This Agreement may be executed in any number of copies and by the
parties on separate copies, all of which taken together shall constitute a
single agreement.
(c) Captions of Sections, subsections, schedules or exhibits herein
or attached hereto are for convenience of reference only and shall not be
considered in interpreting or construing any provision of this Agreement and its
attachments.
(d) The parties to this Agreement do not intend to create, and no
provision hereof shall be deemed to have created, any rights in favor of any
Person not a party to this Agreement.
(e) This Agreement may not be amended or otherwise modified except in
writing, signed by the parties to this Agreement.
(f) This Agreement is not intended to be, and it shall not be
construed to be, a novation or accord and satisfaction and, except as expressly
modified hereby, the Loan Agreement and the other Loan Documents remain in full
force and effect and are hereby ratified and confirmed.
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Section 8. No Waiver. None of this Agreement, the forbearance by the
Lender hereunder, the Lender's continued Revolving Credit Loans to the Borrowers
in accordance with the terms of the Loan Agreement and this Agreement or the
Lender's review of, or discussions or negotiations with the Borrowers as to a
potential restructuring of the facilities available under the Loan Agreement are
intended to be, nor are they nor shall they be deemed to be a waiver of or
consent to the Events of Default referred to herein or any other Default or
Event of Default. The Borrowers agree that no Default or Event of Default has
been waived or released, or shall be considered to have been cured by reason of
the Lender entering into this Agreement or performing the terms hereof,
including, without being limited to, forbearing from the exercise of available
remedies and making further Revolving Credit Loans to the Borrowers.
Section 9. Release; Waiver of Jury Trial. (a) TO INDUCE THE LENDER TO
ENTER INTO THIS AGREEMENT, THE BORROWERS HEREBY RELEASE THE LENDER, ITS
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AND ASSIGNS, FROM ANY AND ALL CLAIMS,
DEMANDS, ACTIONS, CAUSES OF ACTION AND OTHER LIABILITIES OF ANY KIND, WHETHER
MATURED OR UNMATURED OR CONTINGENT, LIQUIDATED OR UNLIQUIDATED, AT LAW OR IN
EQUITY, THAT THE BORROWERS HAVE OR HAVE HAD AGAINST THE LENDER.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers all as of the day and year first
written above.
BORROWERS:
[Corporate Seal] RIDGEVIEW, INC.
Attest:
By: /s/ Doug Yoder By: /s/ Hugh R. Gaither
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Name: Doug Yoder Hugh R. Gaither
--------------------------- President
Title: Assistant Secretary
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[Corporate Seal] SENECA KNITTING MILLS CORPORATION
Attest:
By: /s/ Walter Bost By: /s/ Hugh R. Gaither
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Name: Walter Bost Hugh R. Gaither
--------------------------- President
Title: Secretary
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[Corporate Seal] TRI-STAR HOSIERY MILLS, INC.
Attest:
By: /s/ Doug Yoder By: /s/ Hugh R. Gaither
---------------------------------- -------------------------------
Name: Doug Yoder Hugh R. Gaither
--------------------------- President
Title: Secretary
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LENDER:
NATIONSBANK, N.A.
By:
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Scott K. Goldstein
Vice President
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