SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number(s) 000-22385
---------------------------------
ITHACA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 56-1385842
- ---------------------------- ---------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification number)
Highway 268 West, P.O. Box 620, Wilkesboro, NC 28697
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(Address of principal executive office) (Zip Code)
(336) 667-5231
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(Registrant's telephone, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
YES x NO
----- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES x NO
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the registrant's classes of common stock, as of the
latest practicable date. As of December 3, 1999 the registrant had 10,000,000
shares of common stock, par value $.01 per share outstanding.
<PAGE>
ITHACA INDUSTRIES, INC.
QUARTERLY REPORT
QUARTER ENDED OCTOBER 30, 1999
INDEX
Part I. FINANCIAL INFORMATION Page
Item 1. Consolidated Balance Sheets - October 30, 1999 (unaudited) and 3
January 30, 1999
Consolidated Statements of Operations - Thirteen Weeks Ended 4
October 30, 1999 and October 31, 1998 (unaudited)
Consolidated Statements of Operations - Thirty-Nine Weeks 5
Ended October 30, 1999 and October 31, 1998 (unaudited)
Consolidated Statements of Cash Flows - Thirty-Nine Weeks 6
Ended October 30, 1999 and October 31, 1998 (unaudited)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Part II. OTHER INFORMATION
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 13
Signature 15
* No information provided due to inapplicability of item
Page 2
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ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share data)
(Unaudited)
October 30, 1999 January 30, 1999
---------------- ----------------
ASSETS
- ------
Current Assets:
Cash and Cash Equivalents $ 15 $ 66
Accounts Receivable - Net 20,227 19,836
Inventories (Note 2) 39,884 49,707
Prepaid Expenses and Other
Current Assets 767 270
Assets Held for Disposition, Net 3,692 1,972
---------------- ----------------
Total Current Assets 64,585 71,851
Property, Plant and Equipment - Net 24,451 26,016
Investment in Discontinued Operations - 27,553
Receivable from Sale of Discontinued
Operations (Note 3) 3,002 -
Other Assets 4,312 3,741
---------------- ----------------
Total Assets $ 96,350 $ 129,161
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current Installments of Long-Term
Debt $ 14 $ 14
Accounts Payable 9,738 10,723
Accrued Payroll and Related
Expenses 4,963 6,168
Other Accrued Expenses 2,223 2,434
Current Deferred Tax Payable 1,498 1,498
Income Taxes Payable 2,687 5,450
---------------- ----------------
Total Current Liabilities 21,123 26,287
Long Term Debt - Related 31 43
Long Term Debt - Non Related 52,704 77,670
Deferred Income Taxes 10,725 10,788
Other Non-Current Liabilities 220 83
---------------- ----------------
Total Liabilities 84,803 114,871
Stockholders' Equity:
Common Stock of $.01 Par Value 100 104
Additional Paid-In Capital 22,780 23,276
Accumulated Deficit (11,333) (9,090)
---------------- ----------------
Total Stockholders' Equity 11,547 14,290
Total Liabilities and
Stockholders' Equity $ 96,350 $ 129,161
================ ================
See accompanying notes to consolidated financial statements
Page 3
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ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except share data)
Thirteen Weeks Ended
------------------------------------
October 30, 1999 October 31, 1998
---------------- ----------------
Net Sales $ 39,140 $ 51,939
Cost of Sales 34,893 44,222
---------------- ----------------
Gross Margin 4,247 7,717
Selling, General and Administrative
Expenses 4,620 5,335
Provision for Restructuring (Note 4) (120) -
---------------- ----------------
Operating Income (Loss) (253) 2,382
Interest Expense, Related Parties - 12
Interest Expense, Non-Related Parties
- Net 1,664 1,543
Other Income - Net 23 32
---------------- ----------------
(Loss) Income Before Income Taxes,
Continuing Operations (1,894) 859
Income Tax (Benefit) Expense (701) 318
---------------- ----------------
Income (Loss) From Continuing
Operations (1,193) 541
Income (Loss) From Discontinued
Operations - 274
---------------- ----------------
Net Income (Loss) $ (1,193) $ 815
================ ================
Basic and Dilutive Income (Loss) From
Continuing Operations
per Common Share $ (0.12) $ 0.05
Basic and Dilutive Income From
Discontinued Operations
per Common Share 0.00 0.03
---------------- ----------------
Basic and Dilutive Net Income (Loss)
per Common Share $ (0.12) $ 0.08
================ ================
Weighted Average Common Shares
Outstanding 10,000,000 10,400,000
================ ================
See accompanying notes to consolidated financial statements
Page 4
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ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except share data)
Thirty-Nine Weeks Ended
------------------------------------
October 30, 1999 October 31, 1998
---------------- ----------------
Net Sales $ 123,002 $ 145,138
Cost of Sales 106,430 122,737
---------------- ----------------
Gross Margin 16,572 22,401
Selling, General and Administrative
Expenses 13,915 15,658
Provision for Restructuring (Note 4) 950 -
---------------- ----------------
Operating Income 1,707 6,743
Interest Expense, Related Parties 18 234
Interest Expense, Non-Related Parties
- Net 4,790 4,065
Other Income (Expense) - Net 219 154
---------------- ----------------
Income (Loss) Before Income Taxes,
Continuing Operations (2,882) 2,598
Income Tax (Benefit) Expense (1,067) 961
---------------- ----------------
Income (Loss) From Continuing
Operations (1,815) 1,637
Income (Loss) From Discontinued
Operations (427) (643)
---------------- ----------------
Net Income (Loss) $ (2,242) $ 994
================ ================
Basic and Dilutive Income (Loss) From
Continuing Operations
per Common Share $ (0.18) $ 0.16
Basic and Dilutive Loss From
Discontinued Operations
per Common Share (0.04) (0.06)
---------------- ----------------
Basic and Dilutive Net Income (Loss)
per Common Share $ (0.22) $ 0.10
================ ================
Weighted Average Common Shares
Outstanding 10,131,868 10,323,810
================ ================
See accompanying notes to consolidated financial statements
Page 5
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ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Thirty-Nine Weeks Ended
------------------------------------
October 30, 1999 October 31, 1998
---------------- ----------------
Cash Provided By Operating Activities:
Net Loss $ (2,242) $ 992
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operations
Depreciation and Amortization of
Property and Equipment 3,129 4,554
Amortization of Debt Fees 509 398
Deferred Taxes (63) 564
(Gain) Loss on Sale of Property,
Plant and Equipment (52) (66)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (392) (12,635)
(Increase) Decrease in Inventories 9,823 1,125
(Increase) Decrease in Prepaid
Expenses (1,596) (556)
(Increase) Decrease in Other Assets (713) (483)
Increase (Decrease) in Accounts
Payable (983) 4,905
Increase (Decrease) in Accrued
Expenses and Other Liabilities (1,282) 779
(Decrease) In Asset Writedown and
Restructuring Reserve - (1,245)
(Decrease) in Income Taxes Payable (2,762) (140)
---------------- ----------------
Net Cash From Operations 3,376 (1,808)
Cash Flows From Investing Activities:
Sale (Purchase) of Hosiery Division
Assets 25,140 (6,911)
Proceeds from the Sale of Property,
Plant and Equipment 618 752
Additions to Property, Plant and
Equipment (3,708) (4,007)
---------------- ----------------
Net Cash From Investing Activities 22,050 (10,166)
Cash Flows From Financing Activities:
Increase (Decrease) in Long-Term Debt (7,605) 2,230
Increase (Decrease) in Revolver (17,372) 12,143
Stock Repurchase (500) -
Cash Paid for Refinancing - (2,953)
---------------- ----------------
Net Cash From Financing Activities (25,477) 11,420
Net Decrease in Cash and Cash
Equivalents (51) (554)
Cash and Cash Equivalents at
Beginning of Period 66 680
---------------- ----------------
Cash and Cash Equivalents at
End of Period $ 15 $ 126
================ ================
Supplemental Disclosure of Cash Paid
(Received) during the Period for:
Income Taxes $ 55 $ 49
================ ================
Interest $ 5,503 $ 5,290
================ ================
See accompanying notes to consolidated financial statements
Page 6
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ITHACA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED
OCTOBER 30, 1999 AND OCTOBER 31, 1998
(Unaudited)
1. FINANCIAL STATEMENTS
The consolidated balance sheet as of October 30, 1999 and the consolidated
statements of operations for the thirteen and thirty-nine weeks ended October
30, 1999 and October 31, 1998, respectively, and the consolidated statements of
cash flows for the thirty-nine weeks ended October 30, 1999 and October 31, 1998
have been prepared by Ithaca Industries, Inc. ("Company"). In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
necessary for a fair presentation of the financial position of the Company at
October 30, 1999 and the results of operations for the thirteen and thirty-nine
weeks ended October 30, 1999 and October 31, 1998, respectively, and the
statements of cash flows for the thirty-nine weeks ended October 30, 1999 and
October 31, 1998 have been made on a consistent basis.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the audited financial statements and notes thereto
for the year ended January 30, 1999 and January 31, 1998 included in the
Company's Annual Report on Form 10-K as filed with the Securities and Exchange
Commission on May 14, 1999.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
Inventories consist of the following:
Unaudited
October 30, 1999 January 30, 1999
---------------- ----------------
Raw Materials $ 10,271 $ 12,615
Work in Process 6,434 13,262
Finished Goods 23,179 23,830
---------------- ----------------
$ 39,884 $ 49,707
================ ================
Page 7
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3. DISCONTINUED OPERATIONS
On April 30, 1999, the Company sold substantially all the assets of its
hosiery division. The Company recorded a net loss on disposal in the fourth
quarter of fiscal 1999 of $2.4 million. The transaction was subject to a final
purchase price adjustment that was determined in the Company's second quarter of
fiscal 2000. Pursuant to the audited statement of net assets purchased by
Glendale Group, Ltd., the Company has recorded an adjustment reflecting an
additional net operating loss from discontinued operations of $427 thousand for
the second quarter of fiscal 2000.
The Company received total proceeds of $24.1 million on April 30, 1999 and
$1.3 million on September 1, 1999. The net proceeds from the sale of its hosiery
division reduced the Company's bank borrowings. Pursuant to the final audit, the
Company is owed an additional $3.0 million that it has recorded as a long-term
asset. The balance is currently due but is reported as a long-term asset
reflecting on-going negotiations with Glendale Group, Ltd. regarding payment of
amounts not yet received by the Company. The Company has initiated legal
proceedings to collect the amount due.
In connection with the sale, the Company is contingently liable for
operating leases assumed by the buyer with aggregate rentals of $911 thousand
through 2004.
4. PROVISION FOR RESTRUCTURING
During the first quarter of fiscal 2000 the Company recorded a provision of
$1.1 million for restructuring costs for the termination of approximately 700
production-related employees of its underwear division at its Cairo, Georgia and
Swainsboro, Georgia facilities. Actual charges against the reserve were $950
thousand through October 30, 1999 and the Company has recorded a credit of $120
thousand in the third quarter of fiscal 2000 reflecting an adjustment of this
estimated provision. Additionally, certain assets related to the closure of
Cairo and Swainsboro facilities have been classified as "Assets held for
Disposition - Net" on the balance sheet.
5. LONG TERM DEBT
The Company anticipates that financial covenants for the fourth quarter of
fiscal year ending January 2000 will not be met, however the Company has
commenced discussions with its lenders and management believes that any
violations will be waived and/or the covenants will be modified to reflect the
Company's anticipated performance for the quarter ending January 29, 2000 and
for the fiscal year ending January 27, 2001.
Page 8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended October 30, 1999 Compared
With Thirteen Weeks Ended October 31, 1998
The Company completed the sale of its hosiery division on April 30,
1999. The purchase price was subject to adjustments based on a final audit
to be performed by the purchaser. The final audit was performed during the
second quarter of fiscal 2000.
Net sales decreased from $51.9 million to $39.1 million for the
thirteen weeks ended October 31, 1998 and October 30, 1999 respectively.
This decrease is a result of a decrease in orders from the Company's major
customers because of excess inventory levels and overall weakness in their
retail sales.
The third quarter gross profit margin decreased from 14.9% for the
thirteen weeks ended October 31, 1998 to 10.9% for the thirteen weeks ended
October 30, 1999. The decrease is attributable to unfavorable manufacturing
variances recognized from lower plant production levels.
Selling, general and administrative expenses for the third quarter of
fiscal 2000 decreased to $4.6 million from $5.3 million for the third
quarter of last year. This decrease is the result of lower shipping and
selling costs directly associated with sales volume. As a percent of sales,
this year's expense increased to 11.8% from 10.3% for the same period last
year. The increase results from lower sales volume available to absorb
fixed general and administrative costs.
Operating income for the thirteen weeks ended October 30, 1999 was a
loss of $253 thousand versus a profit of $2.4 million for the same period
last year.
Interest expense for the thirteen weeks ended October 30, 1999
increased to $1.7 million from $1.6 million for the thirteen weeks ended
October 31, 1998. This increase reflects a higher average borrowing rate on
the outstanding debt.
Net loss for the 13 week periods ended October 30, 1999 and October
31, 1998 included net income from discontinued operations of $0 and $274
thousand, respectively.
Thirty-Nine Weeks Ended October 30, 1999 Compared
With Thirty-nine Weeks Ended October 31, 1998
The Company completed the sale of its hosiery division on April 30,
1999. The purchase price was subject to adjustments based on a final audit
to be performed by the purchaser. The final audit was performed during the
second quarter of fiscal 2000. The adjustments required based on the final
audit and the results of discontinued operations for the thirty-nine weeks
ended October 31, 1998 are reflected as discontinued operations.
Net sales decreased to $123.0 million for the thirty-nine weeks ended
October 30, 1999 from $145.1 million for the thirty-nine weeks ended
October 31, 1998. This decrease reflects customer product line changes,
lowering of in-store inventory levels and weakness in certain distribution
channels serviced by the Company.
The gross profit margin decreased to 13.5% for the first thirty-nine
weeks of fiscal 2000 from 15.4% for the same period last year. This
decrease reflects the effect lower sales volume has on fixed cost
absorption in the Company's owned manufacturing facilities.
Page 9
<PAGE>
Selling, general and administrative expenses decreased to $13.9
million for the thirty-nine weeks ended October 30, 1999 from $15.7 million
for the comparative period last year. This is the result of lower shipping
and selling costs associated with lower sales volume. As a percent of
sales, the current year is 11.3% while the prior year was 10.8%. This
reflects the effect of fixed general and administrative costs on lower
sales.
Operating income decreased in the thirty-nine weeks of fiscal 2000 to
$1.7 million from $6.7 million for the comparative period last year. This
year's results were negatively impacted by a non-recurring provision for
plant closures of $950 thousand. This provision covered the remaining costs
associated with the Company's redeployment of production from its Cairo,
Georgia and Swainsboro, Georgia manufacturing facilities to lower cost
countries.
Interest expense for the thirty-nine weeks ended October 30, 1999
increased to $4.8 million from $4.3 million for the thirty-nine weeks ended
October 31, 1998. This increase reflects a higher average borrowing rate on
the outstanding debt.
Net loss for the 39 week periods ended October 30, 1999 and October
31, 1998 included net loss from discontinued operations of $427 thousand
and $643 thousand, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On April 30, 1999, the Company, in conjunction with the sale of its
hosiery operations, amended its existing credit agreements. The amended
facilities total $85.4 million and consist of a term loan ("Term Loan") of
$15.4 million, a revolving loan facility of up to $55.0 million and a
separate term loan facility for an additional $15.0 million term loan
(together with the Term Loan, the "Term Loans"). The revolving loan
facility includes a sub-limit of $15.0 million for the issuance of letters
of credit. As of December 6, 1999, the Company had $29.6 million of Term
Loans outstanding, $22.1 million of borrowings under the revolving loan
facility, and $4.6 million of outstanding letters of credit. The Company at
December 6, 1999 had $9.7 million availability under its revolving loan
facility. Working capital reflected in the accompanying balance sheet
excludes borrowings under the revolving credit facility, which are
classified as long-term.
The Company provided cash from operating activities of $3.4 million
for the first nine months of fiscal 2000 compared to cash used of $1.8
million in the comparable prior period. These amounts include the hosiery
operations sold effective April 30, 1999. Cash received from the sale of
the hosiery business was used principally to fund debt reduction. Cash
provided from operating activities increased as a result in a reduction in
inventory.
As of October 30, 1999, the Company was not in compliance with the
tangible net worth, fixed charge and funded indebtedness covenant
requirements in the credit agreements described above. On December 10, 1999
the Company and its lenders signed Amendment and Waiver Agreements
(collectively, the "Amendments"). The Amendments waived the covenant
requirements for the period ended October 30, 1999. The Company anticipates
that financial covenants for the fourth quarter of fiscal year ending
January 2000 will not be met, however the Company has commenced discussions
with its lenders and management believes that any violations will be waived
and/or the covenants will be modified to reflect the Company's anticipated
performance for the quarter ending January 29, 2000 and for the fiscal year
ending January 27, 2001.
The Company's cash on hand as of October 30, 1999 was $15 thousand
compared to $66 thousand at January 30, 1999. The Company manages cash to
minimize outstanding bank borrowings.
Page 10
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YEAR 2000 ("Y2K") COMPLIANCE
Some of the Company's computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs may recognize a date using "00" as the year 1900 rather than the year
2000. This could cause a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage similar normal business activities.
To improve the Company's overall financial and operational information, a
system was selected and is in the process of being installed. This new ERP
system, which is Y2K compliant, will replace the Company's legacy systems. The
ERP project is supervised and supported by senior management. The implementation
of the ERP system is a joint effort of the Company's internal staff and outside
consultants.
The Company's Y2K compliance project was begun in July 1996 and has five
phases. Phase one, which involved the assessment of all systems and equipment
affected by the Y2K issue, has been completed. Phase two, which involved the
defining of strategies to correct those systems and equipment which were found
to pose Y2K problems, has also been completed. Phase three, which involved the
remediation or replacement of the systems and equipment which were found to be
defective and were not going to be resolved by the installation of the new ERP
system mentioned above, has also been completed. Phase four involved assessing
the potential impact on the Company of the Y2K compliance efforts of its
customers and suppliers. Formal communications with all major customers and
suppliers by the Company were begun in March 1998. Responses have been received
by all major customers and suppliers and the Company is finalizing the analysis
of the responses received and, based on that analysis, will determine what
corrective actions need to be taken to minimize the impact of its customers' and
suppliers' failure to address their Y2K problems on the Company. There is no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted and will not have an adverse effect on the
Company's systems. Phase five involves the formal testing to insure Y2K
compliance. This testing began in July 1997 and is planned to continue up
through December 31, 1999.
Since the actions being taken by the Company to correct the Y2K problem are
extensive and on going, the Company's worst case scenario is unknown at this
time. The Company believes it is prudent to have contingency plans in place to
minimize the impact of internal or third party failures to correct Y2K problems.
The Company has identified the areas where contingency plans are required based
on the best information that it has available at this time.
The incremental cost of becoming Y2K compliant is not material. The date on
which the Company believes it will complete the Y2K modifications is based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and costs of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
The Company believes that the successful, timely completion of its Y2K
compliance project will result in the Company not suffering any material adverse
effect on its results of operations, financial position or cash flows. However,
if all Y2K issues are not properly identified, assessed, remediated, replaced or
tested, there can be no assurance that the Y2K issue will not have a material
adverse effect on its results of operations, financial position, or cash flows
or adversely affect the Company's relationship with suppliers, customers or
other third parties. Additionally, there can be no assurance that the Y2K issues
of other entities will not adversely effect the Company. (See "Special Note
Regarding Forward-Looking Statements")
Page 11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report including information set forth under
"Note 5 to the Financial Statements" and "Management's Discussion and Analysis
of Financial condition and Results of Operations," constitute "Forward-Looking
Statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Ithaca Industries, Inc., a Delaware corporation (the
"Company" or "Ithaca"), desires to take advantage of certain "safe harbor"
provisions of the Reform Act and is including this special note to enable the
Company to do so. Forward-looking statements included in this report, involve
known and unknown risks, uncertainties, and other factors which could cause the
Company's actual results, performance (financial or operating) or achievements
to differ materially from the future results, performance (financial or
operating) or achievements expressed or implied by such forward-looking
statements. These risks include business risks such as changes in the price of
raw materials, concentration of Ithaca's principal customers, availability of
labor and competitive factors; industry risks such as changes in the retailing
industry and shifts in consumer preferences; financial risks such as liquidity
and access to capital; and other risks as set forth from time to time in the
company's filings with the Securities and Exchange Commission.
Many of the foregoing factors have been discussed in the Company's prior
filings with the Securities and Exchange Commission (the "Commission") and other
publicly available documents. Had the Reform Act been effective at an earlier
time, this special note would have been included in earlier Commission filings.
The foregoing review of significant factors should not be construed as
exhaustive or as an admission regarding the adequacy of disclosures previously
made by the Company prior to the effective date of the Reform Act.
Page 12
<PAGE>
Part II. OTHER INFORMATION
Item 1 Legal Proceedings None
Item 2 Changes in Securities None
Item 3 Defaults upon Senior Securities None
Item 4 Submission of Matter to a Vote of Security Holders None
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits
Ex. 10.1 - Amendment and Waiver Agreement,
dated December 10, 1999, among Ithaca
Industries, Inc., the Lenders party thereto, and
Bank of America, N.A.
Ex. 10.2 - Amendment and Waiver
Agreement, dated December 10, 1999, among
Ithaca Industries, Inc., the
Lenders party thereto, and Bank of America, N.A.
Ex. 27 -- Financial Data Schedule
(b) Reports on Form 8-K None
Page 13
<PAGE>
Item 5. Other Information
Morton Handel resigned as a Director of the Company effective September 17,
1999.
Daniel G. Harmetz was elected as a Director effective November 16, 1999.
Mr. Harmetz co- founded DDJ Capital Management which owns approximately 18%
of the common stock of Ithaca Industries, Inc. He is a graduate of the
University of California at Berkley and Harvard Law School. From 1987 -
1998 he was a practicing attorney and a manager of high yield investments
at several firms. He retired in 1998 and is currently involved with several
philanthropic causes.
With deep regret, we advise that Marvin Crow, a Director of the Company
since 1996, passed away on November 17, 1999. We will miss his wise counsel
and dedication.
Page 14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITHACA INDUSTRIES, INC.
----------------------------------
(Registrant)
By: /s/ Richard P. Thrush
-----------------------------
RICHARD P. THRUSH
Senior Vice President Finance and Administration
Principal Financial and Chief Accounting Officer
Dated: December 14, 1999
-------------------------
Page 15
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Exhibit Index
- -------------
Exhibit No. Description of Exhibits
- ----------- -----------------------
10.1 Amendment and Waiver Agreement, dated December 10, 1999,
among Ithaca Industries, Inc., the Lenders party thereto,
and Bank of America, N.A.
10.2 Amendment and Waiver Agreement, dated December 10, 1999,
among Ithaca Industries, Inc., the Lenders party thereto,
and Bank of America, N.A.
27 Financial Data Schedule for the thirty-nine week period
ended October 30, 1999
Page 16
Exhibit 10.1
AMENDMENT AND WAIVER AGREEMENT
THIS AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is made and entered
into as of this 10th day of December, 1999, among ITHACA INDUSTRIES, INC., a
Delaware corporation ("Borrower"), the Lenders party to this Agreement (the
"Lenders"), and BANK OF AMERICA, N.A., a national banking association, formerly
NationsBank, N.A., as agent for the Lenders (the "Agent").
W I T N E S S E T H :
---------------------
WHEREAS, Borrower, the Lenders, the Agent, NationsBanc Montgomery
Securities LLC, as Syndication Agent and Arranger, and BankAmerica Business
Credit, Inc., as Documentation 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 asked the Agent and the Lenders to waive certain
Events of Default under the Loan Agreement; and
WHEREAS, the Agent and the Lenders are willing to grant such 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 Agent and the Lenders agree to waive the defaults under Sections
12.1(a), (b) and (c) of the Loan Agreement for the fiscal quarter ended October
30, 1999 (collectively, the "Specified Defaults"); provided, however, the waiver
of the Specified Defaults shall no longer be effective (and the defaults
thereunder shall no longer constitute Specified Defaults) unless Borrower has
complied with the terms of Paragraph 3(c) of this Agreement on or before the
date set forth therein. Notwithstanding the foregoing waiver, the Agent and 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.
Page 17
<PAGE>
3. In order to induce the Agent and the Lenders to enter into this
Agreement and grant the accommodations set forth herein, Borrower hereby
represents, warrants, agrees and covenants that:
(a) attached hereto as Exhibit A is a true and correct copy of the
Amendment and Waiver Agreement, dated of even date herewith, with respect
to the Second Lienholder Loan Agreement (the "Second Lienholder Waiver"),
and upon the effective date of this Agreement, the Second Lienholder Waiver
shall be in full force and effect and all conditions precedent to the
effectiveness thereof shall have been satisfied or waived;
(b) Borrower shall pay for the cost of the preparation by one or more
appraisers selected by the Agent of a new appraisal of each of Borrower's
owned parcels of Real Estate identified by the Agent for appraisal and a
desktop appraisal of Borrower's Equipment, and Borrower shall cooperate
with the Agent and each such appraiser in order to allow such appraisals to
be completed as promptly as practicable, including by providing access
during normal business hours by each such appraiser to Borrower's premises
and books and records; and
(c) on or before December 31, 1999, Borrower shall deliver to the
Agent and each Lender the final operating budget for Borrower and its
Consolidated Subsidiaries for the fiscal year commencing on or about
January 31, 2000, in the form customarily prepared by management of
Borrower consistent with past practice, together with a statement of the
assumptions upon which such budget was prepared.
4. The Loan Agreement is amended by deleting the definition of
"Applicable Margin" set forth in Section 1.1 and replacing it with the
following:
"Applicable Margin" means (a) as to Prime Rate Revolving Credit Loans,
1.0%, (b) as to Prime Rate Term Loans, 1.25%, (c) as to Eurodollar Rate
Revolving Credit Loans, 3.0%, and (d) as to Eurodollar Rate Term Loans,
3.25%; provided, however, no Loans shall be made as, converted into, or
continued as Eurodollar Rate Loans after December 10, 1999.
5. The Loan Agreement is amended by deleting Section 5.2(d)(i) and
replacing it with the following:
(i) The Borrower agrees to pay to the Agent, for the ratable benefit
of the Lenders, Letter of Credit fees equal to (A) 0.75% per annum, based
on the average daily aggregate Letter of Credit Amount of all documentary
Letters of Credit from time to time outstanding during the term of this
Agreement, and (B) 3.0% per annum, based on the average daily aggregate
Letter of Credit Amount of all standby Letters of Credit from time to time
outstanding during the term of this Agreement. Such fees shall be payable
to the Agent for the ratable benefit of the
Page 18
<PAGE>
Lenders in accordance with their respective Commitment Percentages monthly
in arrears and shall be calculated based on a year of 360 days and the
actual number of days elapsed.
6. The Loan Agreement is amended by adding the following new Section
5.18:
SECTION 5.18. Termination of Eurodollar Rate Option. The parties
hereto agree that, notwithstanding anything to the contrary set forth in this
Agreement or any other Loan Document, no Loans shall be made as, converted into,
or continued as Eurodollar Rate Loans after December 10, 1999.
7. The Loan Agreement is amended by deleting the performance pricing
matrix attached thereto as Annex I.
8. The Loan Agreement is amended by deleting Section 9.12 and
replacing it with the following:
SECTION 9.12. Information and Reports.
(a) Schedule of Receivables. The Borrower shall deliver to the Agent
on or before the Effective Date and not later than the third Business Day
of each fiscal week thereafter a Schedule of Receivables which (i) shall be
as of the last Business Day of the immediately preceding fiscal week, (ii)
shall be reconciled to the Borrowing Base Certificate as of such last
Business Day, and (iii) shall set forth a detailed aged trial balance of
all its then existing Receivables, specifying the names and balance due for
each Account Debtor obligated on a Receivable so listed.
(b) Schedule of Inventory. The Borrower shall deliver to the Agent on
or before the Effective Date and not later than the 15th Business Day of
each fiscal month thereafter (other than the fiscal month that ends the
fiscal year) a Schedule of Inventory as of the last Business Day of the
immediately preceding fiscal month of the Borrower, itemizing and
describing the kind, type and quantity of Inventory, the Borrower's cost
thereof and the location thereof. For the last fiscal month of Borrower's
fiscal year, Borrower shall deliver the Schedule of Inventory not later
than 45 days after such fiscal year end.
(c) Schedule of Foreign Letter of Credit Amount. The Borrower shall
deliver to the Agent not later than the third Business Day of each fiscal
week a schedule setting forth the letter of credit number and undrawn
amount of each Letter of Credit (and, if the issuer thereof is not Bank of
America, the name of the Issuing Bank) included in the calculation of the
Foreign Letter of Credit Amount in the corresponding Borrowing Base
Certificate; provided that no schedule need be delivered if there has been
no change since the previous schedule delivered.
Page 19
<PAGE>
(d) Schedule of Equipment. The Borrower shall deliver to the Agent on
or before the Effective Date and thereafter on such subsequent dates upon
reasonable notice as may be requested by the Agent, a Schedule of
Equipment, describing each item of the Borrower's Equipment and the
location, cost and then current book value thereof.
(e) Borrowing Base Certificate. The Borrower shall deliver to the
Agent (i) on or before the third Business Day of each fiscal week after the
Effective Date a Borrowing Base Certificate prepared as of the close of
business on the last Business Day of the immediately preceding fiscal week,
and (ii) together with each Schedule of Inventory, a Borrowing Base
Certificate updated to include the information contained in such Schedule
of Inventory. Each Borrowing Base Certificate shall be executed by a
Financial Officer, provided the Borrowing Base Certificate accompanying
each Schedule of Inventory shall be executed by the Borrower's chief
financial officer.
(f) Additional Information. The Agent may in its discretion from time
to time request that the Borrower deliver the schedules or certificates
described in Sections 9.12(a), (b), (c), (d) and (e) more or less often and
on different schedules than specified in such Sections and the Borrower
will use reasonable efforts to comply with such requests. The Borrower will
also furnish to the Agent and each Lender such other information with
respect to the Collateral as the Agent or the Required Lenders may from
time to time reasonably request.
9. The parties hereto acknowledge that (a) it is their intent to
establish new financial covenants for the fiscal year ending on or about January
31, 2000 and the succeeding fiscal year based on, among other things, the
appraisals and budget described in paragraphs 3(b) and (c) of this Agreement,
(b) the establishment of acceptable financial covenants is a material condition
to the Lenders' determination to continue to make financial accommodations
available to the Borrower after such fiscal year end, and (c) in connection with
the establishment of such financial covenants, the Lenders may in good faith
require adjustments to the interest rate applicable to the Loans. Therefore, the
parties hereto agree (i) to negotiate in good faith to establish such financial
covenants (and adjustments to the applicable interest rate) prior to such fiscal
year end on terms acceptable to all of the parties hereto, and (ii) that, in the
event that the parties hereto are not able in good faith to establish such
financial covenants and applicable interest rate prior to such fiscal year end,
on terms acceptable to all of the parties hereto, at the election of the
Required Lenders the Commitments shall automatically terminate, and all of the
Secured Obligations under the Loan Agreement shall be due and payable, as of
such fiscal year end.
10. The effectiveness of this Agreement and the waiver and amendments
set forth herein shall be conditioned upon the receipt by the Agent of the
following certificates, agreements and opinions, all of which shall be in form
and substance reasonably satisfactory to the Agent and the Lenders:
Page 20
<PAGE>
(a) a certificate of the Secretary of Borrower as to such corporate and
other matters as the Agent may reasonably request;
(b) if requested by the Agent, an opinion of Borrower's counsel as to
such matters as the Agent may reasonably request; and
(c) a certified copy of the duly executed and delivered Second
Lienholder Waiver, including a certification of the Financial Officer that
such Second Lienholder Waiver is in full force and effect and all
conditions precedent to the effectiveness thereof have been satisfied or
waived.
11. The Loan Agreement is amended by deleting Schedules 1.1B, 7.1(h),
7.1(u), 7.1(v) and 7.1(w) and replacing them with the Schedules attached to this
Agreement as Exhibit B.
12. 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 of $50,000, such fee to be shared among the Lenders on a
Ratable basis.
13. To induce the Agent and the Lenders to enter into this Agreement,
Borrower hereby represents and warrants that, as of the date hereof, except for
the Specified Defaults (and except for any defaults waived by the Second
Lienholder Waiver, which defaults may be deemed to be a Default or an Event of
Default under the Loan Agreement), there exists no Default or Event of Default
under the Loan Agreement.
14. 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.
15. 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.
16. In addition to any other fees described herein, Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent 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 reasonable fees and out-of-pocket expenses of legal
counsel to the Agent.
Page 21
<PAGE>
17. 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, 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 with respect
to matters arising out of the Loan Agreement, the other Loan Documents or the
Secured Obligations.
18. 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.
19. Borrower agrees to take such further action as the Agent shall
reasonably request in connection herewith to evidence the agreements herein
contained.
20. 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.
21. 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.
22. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Georgia.
Page 22
<PAGE>
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. Thrush
Title: Senior VP/CFO
LENDERS:
BANK OF AMERICA, N.A.
By: /s/ Douglas E. Cowan
----------------------------------
Douglas E. Cowan, VP
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Douglas E. Cowan
----------------------------------
Douglas E. Cowan, VP
Page 23
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ Alex M. Council
----------------------------------
Name: Alex M. Council
Title: Vice President
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/ M. Kim Carpenter
----------------------------------
Name: M. Kim Carpenter
Title: Vice President
FLEET BUSINESS CREDIT CORPORATION, as
successor to Sanwa Business Credit
Corporation
By: /s/ Mark Pickering
----------------------------------
Name: Mark Pickering
Title: Vice President
AGENT:
BANK OF AMERICA, N.A.
By: /s/ Douglas E. Cowan
----------------------------------
Douglas E. Cowan, VP
Page 24
Exhibit 10.2
AMENDMENT AND WAIVER AGREEMENT
THIS AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is made and entered
into as of this 10th day of December, 1999, among ITHACA INDUSTRIES, INC., a
Delaware corporation ("Borrower"), the Lenders party to this Agreement (the
"Lenders"), and BANK OF AMERICA, N.A., a national banking association, formerly
NationsBanks, N.A., 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 asked the Lenders to waive certain Events of Default
under the Loan Agreement; and
WHEREAS, the Lenders are willing to grant such waiver, subject to the terms
and conditions 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 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 defaults under Sections 12.1(a), (b) and
(c) of the Loan Agreement for the fiscal quarter ended October 30, 1999
(collectively, the "Specified Defaults"); provided, however, the waiver of the
Specified Defaults shall no longer be effective (and the defaults thereunder
shall no longer constitute Specified Defaults) unless Borrower has complied with
the terms of Paragraph 3(c) of this Agreement on or before the date set forth
therein. Notwithstanding the foregoing waiver, 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.
Page 25
<PAGE>
26
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) attached hereto as Exhibit A 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 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; and
(b) [Intentionally Deleted]
(c) on or before December 31, 1999, Borrower shall deliver to the
Lenders the final operating budget for Borrower and its Consolidated
Subsidiaries for the fiscal year commencing on or about January 31, 2000,
in the form customarily prepared by management of Borrower consistent with
past practice, together with a statement of the assumptions upon which such
budget was prepared.
4. [Intentionally Deleted]
5. [Intentionally Deleted]
6. [Intentionally Deleted]
7. [Intentionally Deleted]
8. [Intentionally Deleted]
9. The parties hereto acknowledge that (a) it is their intent to
establish new financial covenants for the fiscal year ending on or about January
31, 2000 and the succeeding fiscal year based on, among other things, the
appraisals and budget described in paragraph 3(b) of the Senior Lender Amendment
and Waiver and paragraph 3(c) of this Agreement and (b) the establishment of
acceptable financial covenants is a material condition to the Lenders'
determination to continue to make financial accommodations available to the
Borrower after such fiscal year end. Therefore, the parties hereto agree (i) to
negotiate in good faith to establish such financial covenants prior to such
fiscal year end on terms acceptable to all of the parties hereto and (ii) that
in the event that the parties hereto are not able in good faith to establish
such financial covenants prior to such fiscal year end, on terms acceptable to
all of the parties hereto, at the election of the Required Lenders the Term Loan
shall automatically terminate, and all of the Secured Obligations under the Loan
Agreement shall be due and payable as of such fiscal year end.
Page 26
<PAGE>
27
10. The effectiveness of this Agreement and the waiver and amendments
set forth herein shall be conditioned upon the receipt by the Lenders of the
following certificates, agreements and opinions, all of which shall be in form
and substance reasonably satisfactory to the Lenders:
(a) a certificate of the Secretary of Borrower as to such corporate
and other matters as the Lenders may reasonably request;
(b) if requested by the Lenders, an opinion of Borrower's counsel as
to such matters as the Lenders may reasonably request; and
(c) 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.
11. The Loan Agreement is amended by deleting Schedules 1.1B, 7.1(h),
7.1(u), 7.1(v) and 7.1(w) and replacing them with the Schedules attached to this
Agreement as Exhibit B.
12. 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 of $150,000, such fee to be shared among the Lenders on a
ratable basis.
13. 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 and except for any defaults waived by the Senior Lender
Amendment and Waiver, which defaults may be deemed to be a Default or an Event
of Default under the Loan Agreement, there exists no Default or Event of Default
under the Loan Agreement.
14. 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 and except if Borrower has previously informed
the Agreement of any inaccuracies or changes in such terms, conditions,
representations and warranties.
15. 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.
Page 27
<PAGE>
28
16. 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 reasonable fees and out-of-pocket
expenses of legal counsel to the Agent and the Lenders.
17. 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, 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 with respect
to matters arising out of the Loan Agreement, the other Loan Document or the
Secured Obligations.
18. 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.
19. Borrower agrees to take such further actions as the Lenders shall
reasonably request in connection herewith to evidence the agreements herein
contained.
20. 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.
21. 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.
Page 28
<PAGE>
29
22. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Georgia.
Page 29
<PAGE>
30
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. Thrush
Title: Senior VP/CFO
LENDERS:
FOOTHILL CAPITAL CORPORATION
By: /s/ Karen S. Sandler
----------------------------------
Name: Karen S. Sandler
Title: Senior VP
AGENT:
BANK OF AMERICA, N.A.
By: /s/ Douglas E. Cowan
----------------------------------
Douglas E. Cowan, V.P.
Page 30
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 20,692
<ALLOWANCES> 465
<INVENTORY> 39,884
<CURRENT-ASSETS> 64,585
<PP&E> 35,810
<DEPRECIATION> 11,359
<TOTAL-ASSETS> 96,350
<CURRENT-LIABILITIES> 21,123
<BONDS> 0
<COMMON> 100
0
0
<OTHER-SE> 11,447
<TOTAL-LIABILITY-AND-EQUITY> 96,350
<SALES> 123,002
<TOTAL-REVENUES> 123,002
<CGS> 106,430
<TOTAL-COSTS> 106,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,808
<INCOME-PRETAX> (2,882)
<INCOME-TAX> (1,067)
<INCOME-CONTINUING> (1,815)
<DISCONTINUED> (427)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,242)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
