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EXHIBIT 10.63
THE CIT GROUP/BUSINESS CREDIT, INC.
THIRD FLOOR
000 XXXXX XXXXX XXXXXX
XXX XXXXXXX, XXXXXXXXXX 00000
TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000
April 15, 1997
Clothestime Stores, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Re: Limited Waiver
Ladies and Gentlemen:
1. We refer to the Financing Agreement dated December 28, 1995,
as amended from time to time (the "Agreement"), among The CIT Group/Business
Credit, Inc., as Lender ("CITBC"), Clothestime Stores, Inc., as Borrower, and
The Clothestime, Inc. ("TCI"), MRJ Industries, Inc., Clothestime Investment,
Inc., Clothestime International, Inc., and Clothestime Acquisition Corporation,
as Guarantors. The Borrower and the Guarantors are referred to herein
collectively as the "Debtors." Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the Agreement.
2. You have advised us of several matters in the Cases and a
prospective transaction that, in the absence of this Waiver Letter, could result
in violations of certain covenants set forth in the Agreement. These matters are
as follows:
a. TCI, Xxxxxx Xxxxxxxx and the Official Committee have
entered into a stipulation and agreed order resolving the claims by Xx.
Xxxxxxxx against the Debtors and the claims by the Debtors against Xx.
Xxxxxxxx (the "Xxxxxxxx Stipulation"). The Xxxxxxxx Stipulation
provides, among other things, for the Debtors' payment to Xx. Xxxxxxxx,
not later than 10 business days after the Xxxxxxxx Stipulation is
entered by the Bankruptcy Court and has become final and nonappealable,
of a lump sum of $378,007.38 (the "Xxxxxxxx Settlement Payment"). The
Debtors and the Official Committee are jointly seeking Bankruptcy Court
approval of the Xxxxxxxx Stipulation.
b. TCI, Xxxx Xxxxxx XX and the Official Committee are
negotiating the terms of a stipulation and
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April 15, 1997
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agreed order resolving the claims by Xx. Xxxxxx against the Debtors and
the claims by the Debtors against Xx. Xxxxxx (the "Xxxxxx Stipulation").
The parties anticipate that the Xxxxxx Stipulation will provide, among
other things, for one or more payments to Xx. Xxxxxx, in an aggregate
amount not to exceed $290,765.65 (the "Xxxxxx Settlement Payments"). The
Debtors and the Official Committee anticipate seeking Bankruptcy Court
approval of the Xxxxxx Stipulation after its terms have been finalized.
c. On April 2, 1997, the Bankruptcy Court granted the
motion (the "Xxxxx Motion") of Xxxxx Fargo, as agent for itself and
Union Bank of California, N.A., successor to Union Bank (collectively,
the "Banks"), for relief from the automatic stay to exercise Xxxxx
Fargo's and the Banks' remedies with respect to a bond issued by the New
York State Dormitory Authority (the "New York Bond") and certain sales
proceeds (collectively, the "Collateral") that were collateral for the
Debtors' prepetition financing facility with the Banks. Such remedies
include the right to sell the New York Bond on the public market and to
apply the Collateral to the Banks' secured prepetition claims. The
proposed order granting the relief requested in the Xxxxx Motion that
Xxxxx Fargo has submitted to the Bankruptcy Court is attached hereto as
Exhibit A and referred to herein as the "Xxxxx Collateral Order."
d. The Debtors are in the process of negotiating a sale of
the office and warehouse facility located at 0000 Xxxx Xxxxxx Xxxxxx in
Anaheim, California (the "Office Building"). Pursuant to financing
arrangements entered into by the Debtors with Xxxxx Fargo and the Banks
prior to the Petition Date, Xxxxx Fargo holds a first priority lien on
the Office Building, and the Banks hold a second priority lien on the
Office Building. Any sale of the Office Building during the pendency of
the Cases will be subject to Bankruptcy Court approval. The Debtors
anticipate that, in their motion for approval of such sale, they will
seek an order directing that the net proceeds of such sale (the "Office
Building Sale Proceeds") be paid to Xxxxx Fargo, to the extent of its
first lien against the Office Building, and the remainder of the
proceeds be applied to the secured prepetition claims of the Banks. The
Bankruptcy Court order that is ultimately entered approving the sale of
the Office Building is referred to herein as the "Office Building Sale
Order."
3. The Bankruptcy Court's entry of either the Xxxxxxxx
Stipulation or the Xxxxxx Stipulation may result in an
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Event of Default under Section 9.1(g) of the Agreement. In addition, the
Debtors' payment of the Xxxxxxxx Settlement Payment or the Xxxxxx Settlement
Payments may result in a violation of Section 6.8(J) of the Agreement, and thus
may result in an Event of Default under Sections 9.1(g) and 9.1(r) of the
Agreement.
4. The Bankruptcy Court's entry of the Xxxxx Collateral Order may
result in an Event of Default under Section 9.1(f) of the Agreement. Xxxxx
Fargo's exercise of its and the Banks' remedies, as authorized by the Xxxxx
Collateral Order, also may result in a violation of Section 6.8(J) of the
Agreement, and thus may result in an Event of Default under Sections 9.1(g) and
9.1(r) of the Agreement.
5. The Bankruptcy Court's entry of the Office Building Sale Order
may result in an Event of Default under Section 9.1(f) of the Agreement. The
sale of the Office Building and the payment of the Office Building Sale Proceeds
to the Banks may result in a violation of Sections 6.8(C) and 6.8(J) of the
Agreement, and thus may result in an Event of Default under Sections 9.1(g) and
9.1(r) of the Agreement.
6. At your request, we hereby confirm to you that: (a) we hereby
waive any violations of the Agreement that result from: (i) the Bankruptcy
Court's entry of an order approving the Xxxxxxxx Stipulation or the Xxxxxx
Stipulation or its entry of the Xxxxx Collateral Order or the Office Building
Sale Order; (ii) the Debtors' payment of the Xxxxxxxx Settlement Payment or any
of the Xxxxxx Settlement Payments following the Bankruptcy Court's entry of the
Xxxxxxxx Stipulation or the Xxxxxx Stipulation, as applicable; (iii) Xxxxx
Fargo's exercise of its remedies with respect to the Collateral pursuant to the
Xxxxx Collateral Order, including, without limitation, the sale of the New York
Bond and the application of the Collateral to the Banks' secured prepetition
claims; or (iv) the sale of the Office Building or the payment of the Office
Building Sale Proceeds to Xxxxx Fargo and the Banks; and (b) such violations
shall not constitute or result in a Default or an Event of Default under the
Agreement.
7. In consideration of our execution of this Waiver Letter, you
agree to pay us an Accommodation Fee of $25,000. Such fee shall be due and
payable in full on the Effective Date (as hereinafter defined) and may, at our
option, be charged to your Revolving Loan Account on the due date thereof. By
signing below, you expressly authorize CITBC to charge your loan account
pursuant hereto.
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8. This Waiver Letter shall not constitute a waiver by us of any
other existing Defaults and/or Events of Default under the Agreement, whether or
not we have knowledge of same, and shall not constitute a waiver of any future
Defaults and/or Events of Default whatsoever.
9. By signing below, you represent and warrant to CITBC that, as
of the date hereof, no event has occurred and is continuing, or would result
from the execution and effectiveness of this Waiver Letter, that would
constitute a Default or Event of Default other than such Defaults or Events of
Default described herein.
10. This Waiver Letter, and the waivers set forth herein, shall
be effective upon the date (such date, the "Effective Date") that CITBC shall
have received in full the Accommodation Fee set forth in Paragraph 7.
11. Except as herein specifically provided, no other amendment,
modification, waiver or change of any of the other terms or provisions of the
Agreement is hereby intended or implied, and all terms and conditions of the
Agreement and the Loan Documents remain in full force and effect. If the
foregoing is in accordance with your understanding, please sign and return to us
the enclosed copy of this letter to so indicate.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /S/XXXXXX XXXXXX
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Title: Assistant Vice President
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Read and agreed to as of the date set forth above:
CLOTHESTIME STORES, INC.
By: /S/XXXXXXX X. XXXXXXX
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Title: CFO
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