EXHIBIT 99.1
EXECUTION COPY
LEVI XXXXXXX & CO.
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment")
is dated as of January 28, 2002 and entered into by and among LEVI XXXXXXX &
CO., a Delaware corporation (the "Borrower"), the banks, financial institutions
and other institutional lenders listed on the signature pages hereof (the
"Lenders"), BANK OF AMERICA, N.A. ("Bank of America"), as the provider of Swing
Line Advances (the "Swing Line Bank"), BANC OF AMERICA SECURITIES LLC and
XXXXXXX XXXXX BARNEY INC., as co-lead arrangers and joint book managers (the
"Co-Lead Arrangers"), CITICORP USA, INC., as the syndication agent (the
"Syndication Agent"), THE BANK OF NOVA SCOTIA, as the documentation agent (the
"Documentation Agent"), and BANK OF AMERICA, N.A., as the administrative and
collateral agent (the "Administrative Agent"), and is made with reference to
that certain Credit Agreement dated as of February 1, 2001, as amended by First
Amendment to Credit Agreement dated as of July 11, 2001 (the "Credit
Agreement"), by and among the Borrower, the Lenders, Swing Line Bank,
Syndication Agent, Documentation Agent and Administrative Agent. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.
R E C I T A L S
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WHEREAS, the Borrower anticipates incurring certain
restructuring and related charges in Fiscal Year 2002;
WHEREAS, such charges will result in a decrease in
Consolidated EBITDA;
WHEREAS, the Borrower and the Lenders desire to amend the
Credit Agreement in order to facilitate the Restructuring (as defined below);
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Article 1: Definitions and Accounting Terms
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A. Section 1.01 of the Credit Agreement is hereby amended by
adding thereto the following definitions, which shall be inserted in proper
alphabetical order:
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"`Applicable Margin Consolidated EBITDA' means, for any period,
(a) Consolidated Net Income for such period plus (b) the sum of each of the
following expenses that have been deducted in the determination of Consolidated
Net Income for such period: (i) Consolidated Interest Expense for such period,
(ii) all income tax expense (whether federal, state, local, foreign or
otherwise) of the Borrower and its Subsidiaries for such period, (iii) all
depreciation expense of the Borrower and its Subsidiaries for such period, (iv)
all amortization expense of the Borrower and its Subsidiaries for such period,
and (v) all nonoperating expense of the Borrower and its Subsidiaries for such
period minus all nonoperating income of the Borrower and its Subsidiaries for
such period."
"`Mandatory Prepayment Consolidated EBITDA' means, for any
period, (a) Consolidated Net Income for such period plus (b) the sum of each of
the following expenses that have been deducted in the determination of
Consolidated Net Income for such period: (i) Consolidated Interest Expense for
such period, (ii) all income tax expense (whether federal, state, local, foreign
or otherwise) of the Borrower and its Subsidiaries for such period, (iii) all
depreciation expense of the Borrower and its Subsidiaries for such period, (iv)
all amortization expense of the Borrower and its Subsidiaries for such period,
(v) all nonoperating expense of the Borrower and its Subsidiaries for such
period minus all nonoperating income of the Borrower and its Subsidiaries for
such period, and (vi) non-cash Restructuring and Related Charges for such
period."
"`Applicable Margin Leverage Ratio' means, at any date of
determination, the ratio of (a) all Funded Debt of the Borrower and its
Subsidiaries on such date to (b) Applicable Margin Consolidated EBITDA for the
most recently completed Measurement Period prior to such date for which the
Required Financial Information has been delivered under Section 5.03(b) or (c),
as the case may be."
"`Restructuring' means the proposed restructuring outlined by
the Borrower in that certain press release dated January 16, 2002, attached
hereto as Exhibit H."
"`Restructuring and Related Charges' means all expenses incurred
in connection with the Restructuring and treated as restructuring charges in
accordance with GAAP and all expenses related to the Restructuring that do not
constitute restructuring charges for purposes of GAAP."
B. Section 1.01 of the Credit Agreement is hereby further
amended by changing all references to "Leverage Ratio" to "Applicable Margin
Leverage Ratio" in the term "Applicable Margin" contained therein.
C. Section 1.01 of the Credit Agreement is hereby further
amended by changing all references to "Consolidated EBITDA" to "Mandatory
Prepayment Consolidated EBITDA" in the term "Consolidated Excess Cash Flow"
contained therein.
D. Section 1.01 of the Credit Agreement is hereby further
amended by deleting the terms "Consolidated EBITDA" and "Hedge Bank Hedge
Agreement" therefrom in their entirety and substituting the following therefor:
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"`Consolidated EBITDA' means, for any period, (a) Consolidated
Net Income for such period plus (b) the sum of each of the following expenses
that have been deducted in the determination of Consolidated Net Income for such
period: (i) Consolidated Interest Expense for such period, (ii) all income tax
expense (whether federal, state, local, foreign or otherwise) of the Borrower
and its Subsidiaries for such period, (iii) all depreciation expense of the
Borrower and its Subsidiaries for such period, (iv) all amortization expense of
the Borrower and its Subsidiaries for such period, (v) all nonoperating expense
of the Borrower and its Subsidiaries for such period minus all nonoperating
income of the Borrower and its Subsidiaries for such period, (vi) Restructuring
and Related Charges for such period; provided, however, that to the extent
cumulative cash Restructuring and Related Charges exceed $165,000,000, the
excess over $165,000,000 will not be added back to Consolidated Net Income, and
(vii) accruals for the Borrower's long term management incentive program during
such period minus (c) cash payments made by the Borrower during such period
under such long term management incentive program."
"`Hedge Bank Hedge Agreement' means any Ordinary Course Hedge
Agreement that is entered into by and between the Borrower, FinServ or any
Material Domestic Subsidiary that is party to the Subsidiary Guaranty and any
Hedge Bank that is subject to a legally enforceable netting agreement between
the Borrower, FinServ, or such Material Domestic Subsidiary, as the case may be,
and such Hedge Bank."
1.2 Amendments to Article V: Covenants of the Borrower
A. Section 5.02(b)(iii)(D) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"Debt of the Borrower, FinServ and each Material Domestic
Subsidiary party to the Subsidiary Guaranty in respect of Ordinary
Course Hedge Agreements and consistent with prudent business practice,
provided that the aggregate Agreement Value of all such Ordinary Course
Hedge Agreements under which the Borrower, FinServ or such Material
Domestic Subsidiary would be required to make a payment on termination
thereof do not exceed in the aggregate $75,000,000 (net of the value of
cash, Cash Equivalents or other assets deposited in a margin account in
connection with any such Ordinary Course Hedge Agreements and the face
amount of any letter of credit issued with respect to any such Ordinary
Course Hedge Agreements) at any time outstanding;"
B. Section 5.02(b)(iii)(Q) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"in addition to the foregoing clauses 5.02 (b)(iii)(A)-(P),
Debt other than Ordinary Course Hedge Agreements of the Borrower and
its Subsidiaries not exceeding $150,000,000 in the aggregate at any
time."
C. Section 5.04(a) of the Credit Agreement is hereby amended to
read in its entirety as follows:
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"Leverage Ratio. Maintain at all times a Leverage Ratio of not
more than the amount set forth below for each Business Day occurring in
the periods set forth below:
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Period Ratio
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11/25/01 - 05/25/02 4.00:1.00
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05/26/02 - 11/23/02 3.75:1.00
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11/24/02 - 05/24/03 3.50:1.00
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05/25/03 - 08/23/03 3.25:1.00
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08/24/03 - 08/29/03 3.00:1.00
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D. Section 5.04(b) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Senior Secured Leverage Ratio. Maintain at all times a Senior
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Secured Leverage Ratio of not more than the amount set forth below for
each Business Day occurring in the periods set forth below:
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Period Ratio
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11/25/01 - 11/23/02 1.50:1.00
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11/24/02 - 05/24/03 1.25:1.00
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05/25/03 - 08/29/03 1.00:1.00
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1.3 Amendments to Exhibits
Exhibit A hereto is added to the Credit Agreement as Exhibit H
thereto.
Section 2. AMENDMENTS TO PLEDGE AND SECURITY AGREEMENT AND
SUBSIDIARY GUARANTY
The parties agree that, as of the Second Amendment Effective
Date (as defined below), the Pledge and Security Agreement and the Subsidiary
Guaranty shall be amended or supplemented as set forth in the forms thereof
provided to the Lenders.
Section 3. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Second
Amendment Effective Date"):
A. On or before the Second Amendment Effective Date, the
Borrower shall deliver to the Lenders (or to the Administrative Agent for the
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following, each, unless otherwise noted, dated the
Second Amendment Effective Date:
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1. Secretary's Certificate dated as of the Second
Amendment Effective Date, certifying that there have been no changes to
its Articles of Incorporation or Bylaws since July 11, 2001 and that the
Restructuring has been approved and authorized by all necessary
corporate action, together with a good standing certificate from the
Secretary of State of the State of Delaware dated a recent date prior to
the Second Amendment Effective Date;
2. Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment,
certified as of the Second Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment; and
3. Signature and incumbency certificates of its officers
executing this Amendment.
B. On or before the Second Amendment Effective Date, the
Borrower and each other Loan Party shall execute First Amendment to Pledge and
Security Agreement, dated as of January 28, 2002, in form and substance
satisfactory to the Lenders.
C. On or before the Second Amendment Effective Date, the
Borrower and each other Loan Party shall execute First Amendment to Subsidiary
Guaranty, dated as of January 28, 2002, in form and substance satisfactory to
the Lenders.
D. On or before the Second Amendment Effective Date, subject to
the execution of this Amendment by at least the Required Lenders, the Borrower
shall pay to the Administrative Agent, for the benefit of each Lender that
approves this Amendment no later than 5:00 p.m. (New York time) on January 29,
2002, a fee equal to such Lender's aggregate Commitment multiplied by .25% and
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shall have paid all accrued fees and expenses of the Agents.
Section 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. Organization and Powers. The Borrower (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good standing
as a foreign corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would not be
reasonably likely to have a Material Adverse Effect and (iii) has all requisite
corporate power and authority (including, without limitation, all Governmental
Authorizations) to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this Amendment (the "Amended Agreement").
B. No Conflict. The execution and delivery of this Amendment and
performance by the Borrower of the Amended Agreement are within the Borrower's
corporate
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powers, have been duly authorized by all necessary corporate action, and do not
(i) contravene the Borrower's Constitutive Documents, (ii) violate any
Requirements of Law, (iii) conflict with or result in the breach of, or
constitute a default or require any payment to be made under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting the Borrower, any of its Subsidiaries or any of their properties
or (iv) except for the Liens created or permitted under the Loan Documents,
result in or require the creation or imposition of any Lien upon or with respect
to any of the properties of the Borrower or any of its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries are in violation of any such Requirements
of Law or in breach of any such contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument, the violation or breach of which would
be reasonably likely to have a Material Adverse Effect.
C. Governmental Consents. No Governmental Authorization, and
no other authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority or any other third party is required for
the due execution, delivery, recordation or filing of this Amendment or the
performance by the Borrower of the Amended Agreement.
D. Binding Obligation. This Amendment and the Amended Agreement
have been duly executed and delivered by the Borrower, and are the legal, valid
and binding obligation of each Loan Party party thereto, enforceable against
such Loan Party in accordance with its terms.
E. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Article IV of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
F. Absence of Default. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
Section 5. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the
Other Loan Documents.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement shall mean
and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
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(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the
Administrative Agent or any Lender under, the Credit Agreement or any of the
other Loan Documents.
B. Fees and Expenses. The Borrower acknowledges that all costs,
fees and expenses as described in Section 2.08 of the Credit Agreement incurred
by the Administrative Agent and its counsel with respect to this Amendment and
the documents and transactions contemplated hereby shall be for the account of
the Borrower.
C. Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK) WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE
APPLICATION OF ANOTHER LAW.
E. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery by telecopier of an executed counterpart of a signature page to this
Amendment shall be as effective as delivery of an original executed counterpart
of this Amendment. This Amendment shall become effective upon the execution of a
counterpart hereof by the Borrower and Required Lenders and receipt by the
Borrower and the Administrative Agent of written or telephonic notification of
such execution and authorization of delivery thereof.
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