SECOND AMENDMENT TO
TERM CREDIT AGREEMENT
THIS SECOND AMENDMENT TO TERM CREDIT AGREEMENT (this "Second Amendment"),
dated as of July 28, 1998, is entered into among PILLOWTEX CORPORATION, a Texas
corporation (the "Borrower"), the institutions listed on the signature pages
hereof (collectively, the "Lenders"), and NATIONSBANK, N.A. (successor by
merger to NationsBank of Texas, N.A.), as Administrative Agent (in said
capacity, the "Administrative Agent").
BACKGROUND
A. The Borrower, the Lenders and the Administrative Agent are parties to
that certain Term Credit Agreement, dated as of December 19, 1997, amended by a
First Amendment to Term Credit Agreement, dated as of June 19, 1998 (the
"Credit Agreement"; the terms defined in the Credit Agreement and not otherwise
defined herein shall be used herein as defined in the Credit Agreement).
B. The Borrower, the Lenders and the Administrative Agent desire to make
certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby acknowledged,
the Borrower, the Lenders and the Administrative Agent covenant and agree as
follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of Applicable Base Rate Margin in its entirety and substituting the
following in lieu thereof:
" Applicable Base Rate Margin' means the following per annum
percentages, applicable in the following situations:
Applicability Facility A Facility B
------------- Term Term
Loan Loan
Advances Advances
---------- ----------
(a) Initial Pricing Period 0.500% 1.000%
(b) Subsequent Pricing Period
-------------------------
(1) The Leverage Ratio is greater
than or equal to 5.50 to 1 0.750% 1.250%
(2) The Leverage Ratio is less
than 5.50 to 1 but greater
than or equal to 5.00 to 1 0.500% 1.000%
(3) The Leverage Ratio is less
than 5.00 to 1 but greater
than or equal to 4.50 to 1 0.250% 0.750%
(4) The Leverage Ratio is less
than 4.50 to 1 0.000% 0.500%
During the Subsequent Pricing Period, the Applicable Base Rate Margin
payable by the Borrower on the Base Rate Advances outstanding hereunder
shall be subject to reduction or increase, as applicable and as set forth
in the table above, according to the performance of the Borrower as tested
by using the Leverage Ratio calculated (i) if not in respect of an
Acquisition, as of the end of each fiscal quarter or (ii) if in respect of
an Acquisition, upon receipt of a Compliance Certificate as required under
Section 7.6 (iii) hereof; provided, that each adjustment in the Base Rate
Basis as a result of a change in the Applicable Base Rate Margin shall be
effective (A) if not in respect of an Acquisition, on the date which is
two Business Days following receipt by the Administrative Agent of the
financial statements required to be delivered pursuant to Section6.1 or
6.2 hereof, as applicable, and the corresponding Compliance Certificate
required pursuant to Section6.3 hereof, and (B) if in respect of an
Acquisition, on the closing date of such Acquisition. If such financial
statements and Compliance Certificate are not received by the
Administrative Agent by the date required, the Applicable Base Rate Margin
shall be increased to the Applicable Base Rate Margin next higher than the
Applicable Base Rate Margin currently in effect until such time as such
financial statements and Compliance Certificate are received."
(b) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of Applicable LIBOR Rate Margin in its entirety and substituting the
following in lieu thereof:
" APPLICABLE LIBOR RATE MARGIN' means the following per annum
percentages, applicable in the following situations:
Applicability Facility A Facility B
------------- Term Loan Term Loan
Advances Advances
---------- ----------
(a) Initial Pricing Period 2.000% 2.500%
2
(b) Subsequent Pricing Period
(1) The Leverage Ratio is greater than
or equal to 5.50 to 1 2.250% 2.750%
(2) The Leverage Ratio is less than
5.50 to 1 but greater than or
equal to 5.00 to 1 2.000% 2.500%
(3) The Leverage Ratio is less than
5.00 to 1 but greater than or
equal to 4.50 to 1 1.750% 2.250%
(4) The Leverage Ratio is less than
4.50 to 1 but greater than or
equal to 4.00 to 1 1.500% 2.000%
(5) The Leverage Ratio is less than
4.00 to 1 but greater than or
equal to 3.50 to 1 1.250% 2.000%
(6) The Leverage Ratio is less than
3.50 to 1 but greater than or
equal to 3.00 to 1 1.000% 2.000%
(7) The Leverage Ratio is less
than 3.00 to 1 0.750% 2.000%
During the Subsequent Pricing Period, the Applicable LIBOR Rate Margin
payable by the Borrower on the LIBOR Advances outstanding hereunder shall
be subject to reduction or increase, as applicable and as set forth in the
table above, according to the performance of the Borrower as tested by
using the Leverage Ratio calculated (i) if not in respect of an
Acquisition, as of the end of each fiscal quarter or (ii) if in respect of
an Acquisition, upon receipt of a Compliance Certificate as required under
section 7.6(iii) hereof; provided, that each adjustment in the LIBOR Basis
as a result of a change in the Applicable LIBOR Rate Margin shall be
effective (A) if not in respect of an Acquisition, on the date which is
two Business Days following receipt by the Administrative Agent of the
financial statements required to be delivered pursuant to Section6.1 or
6.2 hereof, as applicable, and the corresponding Compliance Certificate
required pursuant to Section6.3 hereof, and (B) if in respect of an
Acquisition, on the closing date of such Acquisition. If such financial
statements and Compliance Certificate are not received by the
Administrative Agent by the date required, the Applicable LIBOR Rate
Margin shall be increased to the Applicable LIBOR Rate Margin next higher
than the Applicable LIBOR Rate Margin currently in effect until such time
as such financial statements and Compliance Certificate are received."
(c) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of Facility B Term Loan Commitment in its entirety and substituting
the following in lieu thereof:
" FACILITY B TERM LOAN COMMITMENT' means commitment of the Lenders,
subject to the terms and conditions hereof, to make Facility B Term Loan
Advances up to an aggregate principal amount of $225,000,000, as
terminated pursuant to Section 2.1(b) hereof."
3
(d) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of Pretax Cash Flow in its entirety and substituting the following in
lieu thereof:
" PRETAX CASH FLOW' means, for any date of calculation, calculated
for the Borrower and its Subsidiaries on a consolidated basis (including
Fieldcrest ▇▇▇▇▇▇ and its Subsidiaries on a pro forma basis with respect
to any period prior to the Agreement Date), an amount equal to the result
of (a) EBITDA, minus (b) the lesser of (i) Capital Expenditures and (ii)
depreciation."
(e) Section 2.7(b) of the Credit Agreement is hereby amended by deleting
it in its entirety and substituting the following in lieu thereof:
"(b) FACILITY B TERM LOAN ADVANCES. To the extent not otherwise
required to be paid earlier as provided herein, the principal amount of
the Facility B Term Loan Advances shall be repaid on each Quarterly Date
and on the Facility B Term Loan Maturity Date in such amounts as set forth
next to each such date below:
Quarterly Date Amount of Reduction of Facility B
-------------- Term Loan Advances as of each Date
----------------------------------
March 31, 1998 $312,500
June 30, 1998 $312,500
September 30, 1998 $312,500
December 31, 1998 $312,500
March31, 1999 $562,500
June 30, 1999 $562,500
September 30, 1999 $562,500
December 31, 1999 $562,500
March 31, 2000 $562,500
June 30, 2000 $562,500
September 30, 2000 $562,500
December 31, 2000 $562,500
March 31, 2001 $562,500
June 30, 2001 $562,500
September 30, 2001 $562,500
4
December 31, 2001 $562,500
March 31, 2002 $562,500
June 30, 2002 $562,500
September 30, 2002 $562,500
December 31, 2002 $562,500
March 31, 2003 $562,500
June 30, 2003 $562,500
September 30, 2003 $562,500
December 31, 2003 $562,500
March 31, 2004 $53,125,000
June 30, 2004 $53,125,000
September 30, 2004 $53,125,000
December 31, 2004 $53,125,000
or such other amount of Facility B
Term Loan Advances then
outstanding"
(f) Section 7.6 of the Credit Agreement is hereby amended by deleting it
in its entirety and substituting the following in lieu thereof:
" Section 7.6 Acquisitions. The Borrower shall not, and shall not
permit any of its Subsidiaries to, make any Acquisitions; provided,
however, if (a)immediately prior to and after giving effect to the
proposed Acquisition there shall not exist a Default or Event of Default
and (b)immediately after giving effect to the proposed transaction the
Revolver Availability shall be no less than (i) $40,000,000 if the
Acquisition occurs in a fiscal quarter ending March 31, (ii) $25,000,000
if the Acquisition occurs in a fiscal quarter ending June 30, (iii)
$15,000,000 if the Acquisition occurs in a fiscal quarter ending September
30, or (iv) $20,000,000 if the Acquisition occurs in a fiscal quarter
ending December 31, the Borrower or any of its Subsidiaries may make
Acquisitions so long as (i) such Acquisition shall not be opposed by the
board of the directors of the Person being acquired, (ii)the Lenders shall
have received written notice thereof at least 15 Business Days prior to
the date of such Acquisition, (iii)the Administrative Agent shall have
received at least 10 Business Days prior to the date of such Acquisition a
Compliance Certificate setting forth the covenant calculations both
5
immediately prior to and after giving effect to the proposed Acquisition,
(iv)the assets, property or business acquired shall be in the business
described in Section4.1(d) hereof and the Administrative Agent for the
benefit of the Lenders shall have a first priority Lien (subject to the
Intercreditor Agreement) in substantially all of such assets (or, if less
than substantially all of such assets, such assets required by the
Determining Lenders to be pledged), except for Permitted Liens, (v)if such
Acquisition results in a Domestic Subsidiary, (A)such Subsidiary shall
execute a Subsidiary Guaranty of the Obligations and Collateral Documents
granting a first priority Lien (subject to the Intercreditor Agreement) in
substantially all of such assets (or, if less than substantially all of
such assets, all assets required by the Determining Lenders to be
pledged), except for Permitted Liens to secure the Obligations, (B)100% of
such Subsidiary's Capital Stock shall be pledged to secure the Obligations
and (C)the Administrative Agent on behalf of the Lenders shall have
received such board resolutions, officer's certificates and opinions of
counsel as the Administrative Agent shall reasonably request in connection
with the actions described in clauses(A) and (B) above, and (vi)if such
Acquisition results in a direct Foreign Subsidiary, (A)65% of such
Subsidiary's Capital Stock shall be pledged to secure the Obligations and
(B)the Administrative Agent on behalf of the Lenders shall have received
such board resolutions, officer's certificates and opinions of counsel as
the Administrative Agent shall reasonably request in connection with
clause(A) immediately preceding.".
(g) The Compliance Certificate is hereby amended to be in the form of
Exhibit E attached to this Second Amendment.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section1:
(a) the representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct on and as of the date hereof
as made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default
or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver this
Second Amendment and the $107,960,000 Facility B Term Loan Note payable to
NationsBank, N.A. (the "NationsBank Note"), and this Second Amendment and the
NationsBank Note constitute the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable Debtor Relief Laws and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and except as rights to indemnity may be
limited by federal or state securities laws;
(d) neither the execution, delivery and performance of this Second
Amendment or the NationsBank Note nor the consummation of any transactions
6
contemplated herein will conflict with any Law, the articles of incorporation,
bylaws or other governance document of the Borrower or any of its Subsidiaries,
or any indenture, agreement or other instrument to which the Borrower or any of
its Subsidiaries or any of their respective property is subject; and
(e) no authorization, approval, consent, or other action by, notice to,
or filing with, any governmental authority or other Person (other than the
Board of Directors of the Borrower), is required for the execution, delivery or
performance by the Borrower of this Second Amendment or the acknowledgment of
this Second Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be
effective as of July28, 1998, subject to the following:
(a) the Administrative Agent shall receive counterparts of this Second
Amendment executed by all of the Lenders;
(b) the Administrative Agent shall receive counterparts of this Second
Amendment executed by the Borrower and acknowledged by each Guarantor;
(c) the Administrative Agent shall have received the NationsBank Note,
duly executed;
(d) the Administrative Agent shall have received (i) certified
resolutions of the board of directors of the Borrower authorizing the
execution, delivery and performance of this Second Amendment and the
NationsBank Note and (ii) a certificate of incumbency setting forth the names,
titles and signatures of the officers of the Borrower authorized to execute and
deliver the Loan Documents; and
(e) the Administrative Agent shall receive, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as the Administrative Agent shall reasonably
require.
4. GUARANTOR ACKNOWLEDGMENT. By signing below, each of the Guarantors
(a)acknowledges, consents and agrees to the execution and delivery of this
Second Amendment, (b)acknowledges and agrees that its obligations in respect of
its Subsidiary Guaranty (i) are not released, diminished, waived, modified,
impaired or affected in any manner by this Second Amendment or any of the
provisions contemplated herein and (ii) cover the Commitments, including the
Facility B Term Loan Commitment, as increased hereby, (c)ratifies and confirms
its obligations under its Subsidiary Guaranty, and (d)acknowledges and agrees
that it has no claims or offsets against, or defenses or counterclaims to, its
Subsidiary Guaranty as a result of this Second Amendment.
7
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Agreement, as amended by this
Second Amendment.
(b) The Credit Agreement, as amended by this Second Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
6. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with
the preparation, reproduction, execution and delivery of this Second Amendment
and the other instruments and documents to be delivered hereunder (including
the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities under the Credit
Agreement, as amended by this Second Amendment).
7. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
8. GOVERNING LAW: BINDING EFFECT. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Borrower and each Lender and their respective
successors and assigns.
9. HEADINGS. Section headings in this Second Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Second Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
8
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as the date first above written.
PILLOWTEX CORPORATION
By:
-------------------------
Name:
Title:
NATIONSBANK, N.A. (successor by merger to
NationsBank of Texas, N.A.), as Administrative
Agent and as a Lender
By:
-------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
BANK OF AMERICA NT&SA
By:
-------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
ATLANTA AGENCY
By:
-------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
COMERICA BANK
By:
-------------------------
Name:
Title:
9
CREDIT LYONNAIS NEW YORK BRANCH
By:
-------------------------
Name:
Title:
▇▇▇▇▇ FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By:
-------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
-------------------------
Name:
Title:
BANK ONE, TEXAS, N.A.
By:
-------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
-------------------------
Name:
Title:
BHF-BANK AKTIENGESELLSCHAFT
By:
-------------------------
Name:
Title:
10
FIRST UNION NATIONAL BANK
By:
-------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-------------------------
Name:
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-------------------------
Name:
Title:
11
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
FLEET BANK, N.A.
By:
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
THE FUJI BANK, LTD. - HOUSTON AGENCY
By:
-------------------------
Name:
Title:
NATIONAL BANK OF CANADA
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
By:
-------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
-------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
-------------------------
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
PRIME INCOME TRUST
By:
-------------------------
Name:
Title:
▇▇▇▇▇▇▇ ▇▇▇▇▇ SENIOR FLOATING RATE
FUND, INC.
By:
-------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By:
-------------------------
Name:
Title:
▇▇▇▇▇▇▇ ▇▇▇▇▇ PRIME RATE PORTFOLIO
By:
-------------------------
Name:
Title:
13
AERIES FINANCE LTD.
By:
-------------------------
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By:
-------------------------
Name:
Title:
PAMCO CAYMAN LTD.
By: Highland Capital Management L.P.,
as Collateral Manager
By:
-------------------------
Name:
Title:
DEEP ROCK & COMPANY
By:
-------------------------
Name:
Title:
KZH-CRESCENT CORPORATION
By:
-------------------------
Name:
Title:
CYPRESSTREE INVESTMENT PARTNERS I, LTD.
By: CypressTree Investment Management Company,
Inc., As Portfolio Manager
By:
-------------------------
Name:
Title:
KZH HOLDING CORPORATION III
By:
-------------------------
Name:
Title:
14
▇▇▇ ▇▇▇▇▇▇ CLO I, LIMITED
By: ▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL
MANAGEMENT, INC.,
as Collateral Manager
By:
-------------------------
Name:
Title:
BALANCED HIGH-YIELD FUND I LTD.
By: BHF-BANK AKTIENGESELLSCHAFT,
acting through its New York Branch as
attorney-in-fact
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By:
-------------------------
Name:
Title:
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL SENIOR
INCOME TRUST
By:
-------------------------
Name:
Title:
15
ACKNOWLEDGED AND AGREED:
PILLOWTEX, INC.
PTEX HOLDING COMPANY
PILLOWTEX MANAGEMENT SERVICES COMPANY
BEACON MANUFACTURING COMPANY
▇▇▇▇▇▇▇ HOME FASHIONS, INC.
TENNESSEE WOOLEN ▇▇▇▇▇
FIELDCREST ▇▇▇▇▇▇, INC.
CRESTFIELD COTTON COMPANY
ENCEE, INC.
FCC CANADA, INC.
FIELDCREST ▇▇▇▇▇▇ FINANCING, INC.
FIELDCREST ▇▇▇▇▇▇ LICENSING, INC.
FIELDCREST ▇▇▇▇▇▇ INTERNATIONAL, INC.
FIELDCREST ▇▇▇▇▇▇ SURE FIT, INC.
FIELDCREST ▇▇▇▇▇▇ TRANSPORTATION, INC.
ST. MARYS, INC.
AMOSKEAG COMPANY
AMOSKEAG MANAGEMENT CORPORATION
DOWNEAST SECURITIES CORPORATION
BANGOR INVESTMENT COMPANY
▇▇▇▇▇'▇ FALLS CORPORATION
By:
-------------------------
Name:
Title:
16
EXHIBIT E
COMPLIANCE CERTIFICATE
To: NationsBank, N.A., as Administrative Agent
From: Pillowtex Corporation
Date:
-------- --, ----
Re: Term Credit Agreement, dated as of December 19, 1997 (as amended or
modified, "Credit Agreement"), among Pillowtex Corporation (the
"Borrower"), certain Lenders, and NationsBank, N.A., (successor by
merger to NationsBank of Texas, N.A.) as Administrative Agent.
This Compliance Certificate is delivered pursuant to Section 6.3 of the
Credit Agreement. All capitalized terms used herein and defined in the Credit
Agreement shall be used as so defined. For purposes hereof, section references
herein related to sections of the Credit Agreement and bracketed amounts or
ratios refer to the maximum or minimum amounts or ratios required under the
relevant sections of the Credit Agreement.
I. Leverage Ratio
A. Total Debt, determined for the Borrower and its Subsidiaries on a
consolidated basis
1. Indebtedness for borrowed money $
-------
2. Obligations evidenced by bonds, debentures,
notes or other similar instruments $
-------
3. Non-contingent obligations to pay the deferred
purchase price of property or services other than
trade payables incurred in the ordinary course of
business $
-------
4. Capitalized Lease Obligations $
-------
5. Total Debt [(1) + (2) + (3) + (4)] $
-------
B. EBITDA, calculated for the four consecutive Fiscal
Quarters ending on the date of calculation (adjusted
on a pro forma basis to exclude from any period under
consideration personnel costs that have been eliminated
concurrent with, or during the twelve-month period
subsequent to, the Agreement Date)
1. Earnings from operations $
-------
2. Depreciation $
-------
3. Amortization $
-------
4. Other non-cash charges (to the extent included in
determining Earnings from operations) $
-------
5. EBITDA [(1) + (2) + (3) + (4)] $
-------
C. Leverage Ratio [(A) to (B)] to 1
---
II. COVENANT CALCULATIONS. [To be completed quarterly] Demonstration of
compliance with certain covenants contained in Article 7 of the Credit
Agreement for the period ended .
-----------------
A. Section 7.1(c) Indebtedness of the Borrower and its Domestic
Subsidiaries, including in respect of Capitalized Lease Obligations,
incurred to purchase, or to finance the purchase of, assets which
constitute property, plant and equipment $
----------
1. Maximum in aggregate principal amount outstanding, when
aggregated with Section 7.1(o) $35,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
B. Section 7.1(h) Indebtedness assumed in connection with
Acquisitions permitted under Section 7.6 (excluding the
Fieldcrest ▇▇▇▇▇▇ Transaction)
1. Maximum in aggregate principal amount outstanding $20,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
C. Section 7.1(o) Other Indebtedness of the Borrower and its
Domestic Subsidiaries
1. Maximum in aggregate principal amount outstanding,
when aggregated with Section 7.1(c) $35,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
D. Section 7.3(g) Investments consisting of non-cash
consideration received in connection with a sale of
assets permitted by Section 7.5
1. Maximum in aggregate amount outstanding at any time $25,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
2
E. Section 7.3(i) Loans or advances to directors, officers
and employees of the Borrower or any of its Subsidiaries
1. Maximum in aggregate amount outstanding at any time $ 5,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
F. Section 7.3(j) Other Investments
1. Maximum in aggregate amount outstanding at any time $25,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
G. Section 7.5(c) Net Cash Proceeds from the disposition of
assets (to the extent not applied pursuant to Section 2.5(b))
outstanding and pending reinvestment pursuant to Section 7.5(c)
1. Maximum at any time $ 5,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
H. Section 7.7 Capital Expenditures
1. Maximum after the Agreement Date in aggregate
amount
a. 3.25% of cumulative net revenues of the
Borrower and its Subsidiaries from and
after the Agreement Date $
----------
b. Maximum [$175,000,000 + (a)] $
----------
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
I. Section 7.8(b) Dividends payable by the Borrower
1. Maximum in aggregate amount during any Fiscal Year $10,000,000
2. Actual $
----------
3. Difference [(1) - (2)] $
----------
3
J. Section 7.11 Maximum Leverage Ratio
1. Maximum
a. From and including the last Fiscal Quarter
of Fiscal Year 1997 to but not including
the last Fiscal Quarter of Fiscal Year 1998 5.75 to 1
b. From and including the last Fiscal Quarter
of Fiscal Year 1998 to but not including
the last Fiscal Quarter of Fiscal Year 1999 5.25 to 1
c. From and including the last Fiscal Quarter
of Fiscal Year 1999 to but not including
the last Fiscal Quarter of Fiscal Year 2000 4.75 to 1
d. From and including the last Fiscal Quarter
of Fiscal Year 2000 and thereafter 4.25 to 1
2. Actual (see I.C. above) to 1
-----
K. Section 7.12 Minimum Fixed Charge Coverage Ratio
1. Minimum at the end of each Fiscal Quarter
commencing with the first Fiscal Quarter of
Fiscal Year 1998 1.10 to 1
2. Actual
a. Pretax Cash Flow, for the four consecutive
Fiscal Quarters ending on the date of
calculation
1. EBITDA (see I.B.5. above) $
----------
2. Lesser of (i) Capital Expenditures
And (ii) depreciation $
----------
3. Pretax Cash Flow [(1) - (2)] $
----------
b. Fixed Charges, calculated for the Borrower
and its Subsidiaries on a consolidated
basis; for the first three Fiscal Quarters
of Fiscal Year 1998, on an annualized
basis, and for each Fiscal Quarter
thereafter, for the four consecutive
Fiscal Quarters ending on the date of
calculation
(1) Scheduled principal payments
in respect of Indebtedness $
----------
4
(2) Cash interest expense
(including interest expense
pursuant to Capitalized Lease
Obligations) $
----------
(3) Cash Dividends paid $
----------
(4) Fixed Charges [(1) + (2) + (3)] $
----------
c. Fixed Charge Coverage Ratio
[(a) to (b)] to 1
-----
L. Section 7.13 Minimum Net Worth
1. Minimum
a. Fixed amount $
-----------
(1) From the Agreement Date to but not including
the last Fiscal Quarter of Fiscal Year 1998 $250,000,000
(2) From and including the last Fiscal Quarter
of Fiscal Year 1998 to but not including the
last Fiscal Quarter of Fiscal Year 1999 $260,000,000
(3) From and including the last Fiscal Quarter
of Fiscal Year 1999 to but not including the
last Fiscal Quarter of Fiscal Year 2000 $280,000,000
(4) From and including the last Fiscal Quarter
of Fiscal Year 2000 to but not including the
last Fiscal Quarter of Fiscal Year 2001 $300,000,000
(5) From and including the last Fiscal Quarter
of Fiscal Year 2001 to but not including the
last Fiscal Quarter of Fiscal Year 2002 $320,000,000
(6) From and including the last Fiscal Quarter
of Fiscal Year 2002 and thereafter $340,000,000
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b. An amount equal to the net worth of any
Person that, on or after the Agreement
Date becomes a Subsidiary of the Borrower
or any of its Subsidiaries or is merged
into or consolidated with the Borrower or
any of its Subsidiaries or substantially
all of the assets of which are acquired
by the Borrower or any of its Subsidiaries
to the extent that the purchase price
therefor is paid in Capital Stock of the
Borrower or any of its Subsidiaries $
-----------
c. An amount equal to 100% of any increase in
Net Worth pursuant to offerings of Capital
Stock of the Borrower or any of its
Subsidiaries or pursuant to the conversion
or exchange of any convertible subordinated
debt or redeemable preferred stock into
Capital Stock of the Borrower or any of its
Subsidiaries $
-----------
(excluding any such increase in b. and c. above
as a result of the Fieldcrest ▇▇▇▇▇▇ Transaction)
d. Minimum Net Worth [(a) + (b) + (c)] $
--------
2. Actual $
--------
3. Difference [(2) - (1)] $
--------
M. Section 7.14 Sale or Discount of Receivables
1. Maximum in aggregate amount during the Credit Agreement $
--------
2. Actual $
--------
3. Difference [(1) - (2)] $
--------
III. COMPLIANCE CERTIFICATE. [To be completed quarterly] The undersigned
hereby certifies to you as follows:
(a) I am the duly elected qualified and acting chief financial officer [or
chief accounting officer] of Borrower.
(b) I have reviewed the provisions of the Credit Agreement and the other
Loan Documents, and a review of the activities of Borrower during the
period from , to , (the "Reporting Period") has been made
under my supervision with a view toward determining whether, during
the Reporting Period, Borrower has kept, observed, performed and
6
fulfilled all its obligations under the Credit Agreement and such
other Loan Documents.
(c) The representations and warranties made in the Loan Documents are true
and correct in all material respects as of the date hereof as though
made at and of the date hereof, except for such representations and
warranties which relate to a particular date or which fail to be true
and correct as a result of events or occurrences permitted under the
Loan Documents, and no Default or Event of Default has occurred or is
continuing or is imminent.
This Compliance Certificate is executed and delivered on the day
of , .
PILLOWTEX CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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