EXHIBIT 10.39.1
CONSENT AND AMENDMENT NO. 1 TO THE CREDIT AGREEMENT
CONSENT AND AMENDMENT TO THE CREDIT AGREEMENT, dated as of July 5, 2006
(this "AMENDMENT"), by and among Tarrant Apparel Group, Fashion Resource (TCL),
Inc., TAG Mex, Inc., United Apparel Ventures, LLC, Private Brands, Inc. and
No!Jeans, Inc., as borrowers (the "BORROWERS"), and each of the entities listed
as a guarantor on the signature pages hereto, as guarantors (each a "GUARANTOR"
and collectively, the "GUARANTORS"; the Borrower and each Guarantor
individually, a "CREDIT PARTY" and collectively, the "CREDIT PARTIES"), and each
of the entities listed as a lender on the signature pages hereto (individually,
a "LENDER" and, collectively, the "LENDERS") and Guggenheim Corporate Funding,
LLC, as administrative agent and as collateral agent (the "AGENT").
W I T N E S S E T H:
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WHEREAS, the parties entered into a Credit Agreement, dated as of June
16, 2006, pursuant to which the Lenders made available to the Borrowers certain
loans and the Borrowers and the other Credit Parties provided a continuing
security interest in the collateral identified therein to secure the prompt
payment to the Lenders of the obligations identified therein;
WHEREAS, the Borrowers have requested that the Required Lenders consent
to a limited waiver of Section 6.1.13(b) of the Credit Agreement so that PCBR
and TAG may enter into a Termination and Settlement Agreement between PBCR,
Tarrant and Xxxxxxx Xxxxxx (such Termination and Settlement Agreement, in the
form provided to the Administrative Agent prior to the date hereof, with such
modifications thereof as may be acceptable to the Administrative Agent, the
"SETTLEMENT AGREEMENT"); and
WHEREAS, the Borrowers have further requested that the Required Lenders
consent to certain amendments to the Credit Agreement relating to the use of
proceeds and borrowing procedures contemplated by Section 2.4 thereof; and
WHEREAS, the parties hereto desire to amend the Credit Agreement to
give effect to the changes set forth below;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
contained and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, it is agreed that the Credit Agreement is amended as
follows:
1. DEFINITIONS
Capitalized terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement. The
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Amendment as a whole.
2. CONSENT AND WAIVER
2.1. WAIVER OF SECTION 6.1.13(b). The Lenders hereby waive the
requirements of SECTION 6.1.13(b) of the Credit Agreement, solely to the extent
that such provisions would be violated by PBCR's and TAG's entry into the
Settlement Agreement and its performance thereof.
2.2. WAIVER OF IRREVOCABILITY OF BORROWING NOTICE. The parties hereby
agree that the Borrowing Notice delivered by TAG on June 23, 2006, pursuant to
SECTION 3.1(d) of the Credit Agreement is hereby revoked, and the parties agree
that in the irrevocability requirement contained in the last sentence of SECTION
3.1(d) of the Credit Agreement shall be deemed to be waived with respect to such
Borrowing Notice.
3. AMENDMENTS
3.1. AMENDMENTS. Effective upon the satisfaction of each of the
conditions precedent set forth in Section 5 below, the Credit Agreement is
amended as follows:
(a) The definitions of "Subordinated Debt Repayment" and
"Subordinated Debt Repayment Date" are hereby deleted. The following
definitions shall be added to the Credit Agreement, in each case in
alphabetical order:
""SUBORDINATED DEBT WARRANTS" has the meaning specified in SECTION
10.19(a).
"SUPPLEMENTAL LOAN" has the meaning specified in SECTION 2.4.
"SUPPLEMENTAL LOAN DATE" has the meaning specified in SECTION 3.1(d).
"SUPPLEMENTAL LOAN USE" has the meaning specified in SECTION 2.4."
(b) SECTION 2.4 is deleted in its entirety and replaced by the
following:
"Section 2.4 SUPPLEMENTAL LOAN. The Borrowers may, within one hundred
eighty (180) days of the date hereof, by delivery of a Borrowing
Request to the Administrative Agent pursuant to Section 3.1(d), request
that the Lenders make term loans to the Borrowers in an aggregate
principal amount of up to $7,000,000 (the "SUPPLEMENTAL LOAN"). Any
such Borrowing Request shall specify the proposed use of the proceeds
of the Supplemental Loan (the "SUPPLEMENTAL LOAN USE"). In addition to
the conditions specified in Section 3.1(d), the obligation of the
Lenders to make such term loans shall be subject to the Borrowers
making a representation and warranty as to the matters specified in
Article 5 as of the date of such Supplemental Loan (except to the
extent such representations and warranties specifically relate to an
earlier date)."
(c) SECTION 3.1(d) is deleted in its entirety and replaced by
the following:
"(d) The Borrowers shall deliver to the Administrative Agent a
Borrowing Request not later than 2:00 p.m. (New York City time) five
(5) Business Days in advance of the Business Day that the Borrowers
wish to draw a the Supplemental Loan (the "SUPPLEMENTAL LOAN DATE").
The Administrative Agent shall promptly notify each Lender of the
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Supplemental Loan Date specified in the Borrowing Request under this
SECTION 3.1(D). Each Lender shall deposit in the account specified by
the Administrative Agent an amount equal to its share of such Loan in
immediately available funds on the Supplemental Loan Date. Subject to
the satisfaction of the conditions set forth in SECTION 2.4 and the
conditions precedent set forth in 4.1.3, 4.1.7, 4.1.10, 4.1.23, 4.1.24,
4.1.25, 4.1.26, 4.1.27, 4.1.28, and 4.1.30, the Administrative Agent
shall make the proceeds of such Loan received by it available to the
Borrowers on the Supplemental Loan Date. The Borrowing Request given
pursuant to this SECTION 3.1(d) shall be irrevocable and binding on the
Borrowers."
(d) SECTION 6.1.16(a) is amended by replacing clause (iii)
with the following:
"(iii) the proceeds of any Loans made under SECTION 2.4 shall be used
only for the Supplemental Loan Use."
(e) SECTION 10.19(a) is deleted in its entirety and replaced
with the following:
"(a) The Lenders and the Credit Parties agree to characterize the
Initial Loan made by each lender (in an aggregate amount of
$15,500,000), excluding for this purpose the Delayed Draw and the
Supplemental Loan, together with the Guggenheim Warrants issued to such
Lender (excluding any Guggenheim Warrants issued as a result of the
Borrowers having requested to draw a loan in addition to the Initial
Loan, such excluded warrants, the "SUBORDINATED DEBT WARRANTS") as
investment units for all U.S. federal income tax purposes. The Lenders
and the Credit Parties agree to characterize the Subordinated Debt
Warrants for all U.S. federal income tax purposes as a commitment fee."
(f) SECTION 10.19(b) is amended by deleting the first sentence
and replacing it with the following:
"Within forty-five days after the end of Fiscal Year 2006, the
Administrative Agent shall determine the value of the Guggenheim
Warrants and shall notify the Lenders and TAG of such valuation."
(g) SECTION 10.19 is amended by adding the following:
"Notwithstanding anything to the contrary in this Agreement, if the
Administrative Agent determines that the transactions under this
Agreement are more accurately characterized for U.S. federal income tax
purposes in a manner other than the characterizations under Sections
10.19(a) and 10.19(c), then the Administrative Agent will notify the
Lenders and Credit Parties of such revised characterizations within
forty-five days after the end of Fiscal Year 2006. The Lenders and
Credit Parties hereby agree to abide by the Administrative Agent's
determination and the Lenders and Credit Parties agree that any tax
return or tax report filed by such Lender or Credit Party will be
consistent with such revised characterizations."
3.2. FULL FORCE AND EFFECT. Except as expressly modified by this
Amendment, the Credit Agreement shall remain in full force and effect. Each
reference in the Credit Agreement to "this Agreement" or "hereto" or
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"hereunder", and each reference in the other Loan Documents to the Credit
Agreement (however expressed), shall mean the Credit Agreement as amended by
this Amendment, unless the context otherwise requires.
4. REPRESENTATIONS AND WARRANTIES
Each of the Credit Parties hereby represents and warrants that, after
giving effect to this Amendment, all of its representations in the Loan
Documents are true and correct as of the date hereof in all material respects
(except to the extent such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date, and except for changes after the Closing
Date which are not prohibited by any Loan Document).
5. MISCELLANEOUS
5.1. FEES AND EXPENSES. The Credit Parties, jointly and severally,
agree to pay all reasonable out-of-pocket costs, fees and expenses of each of
the Lenders and the Agent in connection with the preparation of this Amendment
and the transactions contemplated thereby, including, without limitation, all
reasonable legal fees and expenses of Xxxxxxxx & Xxxxxxxx LLP, counsel to the
Lenders and the Agent.
5.2. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE OTHER LOAN
DOCUMENTS.
5.3. SEVERABILITY. Wherever possible, each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Amendment shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
5.4. BINDING EFFECT; BENEFITS. This Amendment and the other Loan
Documents shall be binding upon, and inure to the benefit of, the successors of
each Credit Party and each Lender and the assigns, transferees and endorsees of
each Lender.
5.5. CONFLICT OF TERMS. Except as otherwise provided in this Amendment
or any of the other Loan Documents by specific reference to the applicable
provisions of this Amendment, if any provision contained in this Amendment is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Amendment shall govern and control.
5.6. GOVERNING LAW. This Amendment shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York applicable to
contracts made and performed in such state.
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5.7. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Amendment are for reference purposes only and shall not affect
the meaning or interpretation of this Amendment.
5.8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the Credit Parties and the Lenders have executed this
Amendment as of the day and year first above written.
BORROWERS
TARRANT APPAREL GROUP, as Borrower
By: /S/ XXXXXX XXXX
-----------------------------------
Name: Xxxxxx Xxxx
Title: Chairman of the Board
NO! JEANS, INC., as Borrower
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
TAG MEX, INC., as Borrower
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
FASHION RESOURCE (TCL), INC., as
Borrower
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
PRIVATE BRANDS, INC., as Borrower
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
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UNITED APPAREL VENTURES, LLC, as
Borrower
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
AGENT
GUGGENHEIM CORPORATE FUNDING, LLC,
as Administrative Agent and Collateral
Agent
By: /S/ XXXX X. XXXXXX
------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Director
LENDERS
ORPHEUS HOLDINGS LLC
By: GUGGENHEIM INVESTMENT MANAGEMENT,
LLC as Manager
By: /S/ XXXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
NORTH AMERICAN COMPANY FOR LIFE AND
HEALTH INSURANCE
By: MIDLAND ADVISORS COMPANY as its
Agent
By: /S/ XXXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
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MIDLAND NATIONAL LIFE INSURANCE COMPANY
By: MIDLAND ADVISORS COMPANY as its
Agent
By: /S/ XXXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
GUARANTORS
XXXX XXX INTERNATIONAL, LLC
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
TAG MEX, LLC
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
ROCKY APPAREL, LLC
By: /S/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
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