EXHIBIT 10.90.10
GMAC COMMERCIAL FINANCE LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
August 14, 2003
TARRANT APPAREL GROUP
TAG MEX, INC.
FASHION RESOURCE (TCL), INC.
UNITED APPAREL VENTURES, LLC
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Re: WAIVER, CONSENT AND AMENDMENT
Gentlemen:
Reference is made to the Revolving Credit, Factoring and Security
Agreement, dated as of January 21, 2000, by and among Tarrant Apparel Group
("Tarrant"), Tag Mex, Inc. ("Tag"), Fashion Resource (TCL), Inc. ("Fashion"),
United Apparel Ventures, LLC ("United"; and together with Tarrant, Tag and
Fashion, each, individually, a "Borrower" and collectively, the "Borrowers") and
GMAC Commercial Finance LLC, as successor by merger to GMAC Commercial Credit
LLC, as agent (as a lender and as successor in interest to Finova Capital
Corporation and Sanwa Bank California, the "Agent"), and the Lenders from time
to time parties thereto (as heretofore amended, and as the same now exists or
may hereafter be amended, restated, renewed, replaced, substituted,
supplemented, extended, or otherwise modified, the "CREDIT AGREEMENT"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Credit Agreement.
A. WAIVER
1. The Borrowers have advised Agent that, for the quarter period
ended June 30, 2003; (i) Borrowers' Tangible Net Worth was less than
$75,000,000, the minimum Tangible Net Worth permitted as at June 30, 2003 under
Section 7.5(a) of the Credit Agreement; (ii) Borrowers' Fixed Charge Coverage
Ratio was less than 0.7 to 1.0, the minimum Fixed Charge Coverage Ratio
permitted as at June 30, 2003 under Section 7.5(b) of the Credit Agreement, and
(iii) Borrowers' Total Leverage Ratio was greater than 2.5 to 1.0, the maximum
Total Leverage Ratio permitted as at June 30, 2003 under Section 7.5(d) of the
Credit Agreement. In addition, Borrowers failed to comply with Section 5.15 of
the Credit Agreement, which Section requires Borrowers (x) to refrain from
commingling the collections of Receivables with Borrowers' funds and to refrain
from using such collections for any purpose other than to pay the Obligations
and (y) upon request, to deliver to Agent in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness of Customers. As a result of such noncompliance,
Events of Default have occurred and are
continuing under subsection (e) of Article XI (EVENTS OF DEFAULT) of the Credit
Agreement (the "SUBJECT EVENTS OF DEFAULT").
2. The Borrowers have requested that Agent waive the Subject
Events of Default, and Agent has agreed to, and hereby does, waive such Subject
Events of Default subject to the terms and conditions set forth herein; it being
acknowledged that, Agent does not waive any Events of Default other than the
Subject Events of Default as at June 30, 2003 specified above, and Agent hereby
reserves all rights and remedies granted to Agent under the Credit Agreement,
the Other Documents, applicable law or otherwise, and nothing contained herein
shall be construed to limit, impair or otherwise affect the right of Agent to
declare a Prospective Event of Default or an Event of Default with respect to
any future non-compliance with any covenant, term or provision of the Credit
Agreement or any of the Other Documents now or hereafter executed and/or
delivered in connection therewith.
B. CONSENT
1. Pursuant to a memorandum dated June 27, 2003 re: Tarrant
Apparel Group's Acquisition of License to "American Rag Cie" Trademark and
Equity Interest in American Rag Compagnie, addressed to Xxxxx Xxxx from Xxxx
XxXxxxx (the "Memorandum") and discussions among the Borrowers and Agent and
their respective representatives in connection with the Memorandum, Borrowers
have advised Agent of their interest in acquiring certain assets and interests
in certain assets of American Rag Cie II, a California corporation ("ARCII") and
American Rag Compagnie, a California corporation ("ARC"), including certain
rights to the American Rag Cie trademarks (collectively, the "Acquisition
Transaction").
2. Borrowers have requested that Agent consent to the Acquisition
Transaction. Borrowers have agreed to grant or cause to be granted certain
security interests and liens in and upon assets and other interests in assets
acquired in the Acquisition Transaction and certain other assets as required by
Agent in its sole and absolute discretion. Subject to the terms and conditions
of this agreement, Agent has agreed to consent to the Acquisition Transaction,
PROVIDED, THAT, Borrowers shall, to the satisfaction of Agent, as determined in
Agent's sole and absolute satisfaction:
a. Comply timely and completely with all due diligence
requests made by Agent and its counsel in connection with the Acquisition
Transaction, including, without limitation, provide information and
documentation in connection with:
i. the transfer of the assets of Industries
West, Inc. ("IW") to ARCII;
ii. the spinoff of IW's capital stock of ARCII
to the principals of IW;
iii. the corporate name change of Rocky Apparel,
Inc. to Private Brands, Inc. ("Private");
iv. the License Agreement between ARCII and
Private regarding Private's use of the
American Rag Cie trademarks (the "ARC
Trademarks");
v. the Distribution Agreement between Private
and Federated;
vi. the company formation documents, including,
without limitation, the Operating Agreement,
and capital structure for American Rag Cie,
LLC ("ARCLLC");
vii. contribution of substantially all of the
assets of ARCII to ARCLLC;
viii. the issuance of a promissory note by Tarrant
to ARCLLC, and the subsequent distribution
of that promissory note to Xxxx Xxxxx;
ix. the Shareholder's Agreement for ARC;
x. a detailed listing of all trademarks, trade
names and other intellectual property owned,
licensed, used or contemplated to be owned,
licensed or used by Private including, the
ARC Trademarks;
xi. UCC, tax lien, judgment and pending
litigation searches against Private and
Rocky Apparel, Inc. and any other Affiliate
of Tarrant party to the Acquisition
Transaction in the jurisdiction of
incorporation of each such entity and in all
jurisdictions in which such entities do
business or maintain assets; and
xii. such other information and documentation as
may be requested or required by Agent, in
its sole and absolute discretion, in
connection with the Acquisition Transaction
and the entities party thereto.
b. Execute and deliver, in form and content satisfactory
to Agent, all notes, instruments, mortgages, pledges, agreements and other
documentation required by Agent, in its sole and absolute discretion, in
connection with the Acquisition Transaction, including obtaining a first
priority security interest in Private's right to the ARC Trademarks (subject to
any existing security interest in favor of the ARC shareholders) and all other
assets and interests in assets acquired by Private, Tarrant or any Affiliate of
Tarrant in connection with the Acquisition Transaction; it being acknowledged
that Private shall grant to Agent security interests in and liens upon all of
its now owned or hereafter acquired assets and interests in assets, whether
owned, used or licensed. Notwithstanding the foregoing, Agent's security
interest in the equity of ARCLLC and ARC acquired by Tarrant shall be subject to
a first priority security interest in such equity granted by Tarrant to ARCLLC
to secure repayment of the promissory note issued by Tarrant to ARCLLC as a
contribution to capital (which note and related security interest will be
subsequently assigned to Xxxx Xxxxx). The agreements and documentation requested
below is based on Agent's present understanding of the Memorandum and such
requested documentation and agreements may be modified or supplemented, in
Agent's sole discretion, as a result of Agent's due diligence review of the
Acquisition Transaction and the entities in
connection therewith. Based upon Agent's present understanding, such documents
may include, without limitation:
i. Amendment to Credit Agreement by Borrowers;
ii. Pledge Agreements regarding the grant of a
security interest in the 45% of equity
interests in ARC and ARCLLC in favor of
GMACCF (subject to the first priority
security interest granted by Tarrant to
ARCLLC and subsequently assigned to Xxxx
Xxxxx);
iii. Pledge of 100% equity interest in Private by
Tag;
iv. Guaranty and General Security Agreement
executed by Private granting a lien on all
of such entity's assets;
v. Collateral Assignment of Rights Under
License Agreement by Private;
vi. Depository Account Control Agreement
executed by Private;
vii. Trademark Collateral Assignment and Security
Agreement by Private covering all trademarks
now existing or hereafter owned, licensed or
used by Private, including, without
limitation the ARC Trademarks;
viii. Assignment of 45% interest in cash
distributions by ARCLLC to Tarrant under the
Operating Agreement;
ix. Consent by ARCLLC to Assignment of Private
Brand's rights in License Agreement to
Agent;
x. Company and corporate authorization
documentation for the foregoing and the
Acquisition Transaction;
xi. UCC financing statements and amendments with
respect to Tarrant and its Affiliates as
required by Agent; and
xii. such other notes, instruments, mortgages,
pledge agreements and other documents with
respect to Tarrant and its Affiliates as may
be required by Agent in connection with the
Acquisition Transaction,
it being acknowledged, confirmed and agreed by Borrowers' that (x) Borrowers'
failure to timely and completely comply with the Agent's due diligence requests
summarized in Section B.2.a. above, as determined by Agent in its sole and
absolute discretion, or (y) Borrowers' failure to execute and/or deliver or
cause to be executed and/or delivered any of the notes, instruments, mortgages,
pledges, agreements or documents required by Agent from the parties specified by
Agent as described in Section B.2.b. above, in Agent's sole and absolute
discretion, within forty-five (45) days from the date hereof, shall constitute
an Event of Default under the Credit Agreement and the Other Documents.
C. AMENDMENT. The definition of "Borrowing Base" appearing in Section 1.2
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:
""Borrowing Base" means the sum of:
(a) up to ninety percent (90%) of the Factor Payments
Due, less reserves established by Agent from time to
time in its sole and absolute discretion (in addition
to, and not in limitation of the reserves established
by Agent pursuant to subsection (g) of this
definition); plus
(b) ninety percent (90%) of the balance due on Eligible
Receivables; plus
(c) the lesser of (i) fifty percent (50%) of the value of
Eligible Inventory located in the United States of
America or (ii) Thirteen Million ($13,000,000)
Dollars; plus
(d) fifty percent (50%) of the value of Eligible
Inventory which is in transit and is covered by a
commercial letter of credit issued by the Issuer;
plus
(e) the Overadvance Limit; plus
(f) up to ninety percent (90%) of the PKT Receivable
Supplemental Availability; less
(g) reserves. Reserves shall mean an excess dilution
reserve in an amount equal to all amounts by which
Dilution of Receivables exceeds ten percent (10%),
rounded up to the nearest full percentage."
D. AGREEMENT
1. On or before the date that is forty-five (45) days from the
date hereof, Borrowers shall change the lockbox designation on all invoices
evidencing all Receivables (other than Factored Receivables) created on and
after such date and take such other actions as are necessary to ensure that all
payments with respect to such Receivables are directed to a lockbox designated
by Agent.
2. Without limiting Agent's rights under the Credit Agreement,
including under Section 5.10 of the Credit Agreement, and without limiting
Agent's right to determine the time, method, frequency and manner of such audits
and inspections, Borrowers acknowledge that Agent has advised Borrowers that
Agent shall conduct audits of Borrowers' books and records, including cash
receipt journals, on a monthly basis, or more frequently as determined by Agent
in its sole and absolute discretion from time to time. Borrowers acknowledge,
confirm and agree that Borrowers shall fully cooperate with all such inspections
and audits and promptly provide
access to and make available to Agent all books, records, information, documents
and personnel requested by Agent in connection with such audits and inspections.
3. In addition to Borrowers' obligations under Section 5.15(d) of
the Credit Agreement, Borrowers hereby acknowledge, confirm and agree that
Borrowers shall notify Agent of the receipt by any Borrower of any proceeds of
any Receivable on the date of receipt thereof.
4. Each of the Borrowers hereby agrees to provide Agent with such
financial information, projections and reports so as to permit Agent and
Borrowers to amend and restate the financial covenants as set forth in Section
7.5 of the Credit Agreement on mutually agreeable terms on or before October 1,
2003; and in determining such covenants, Agent will consider such projections of
the Borrowers that are accepted by Agent and by an independent consultant
appointed by Borrowers and approved by Agent; PROVIDED, HOWEVER, THAT, in the
event that the financial covenants are not amended and restated on terms
acceptable to Agent in its sole discretion on or prior to October 1, 2003, such
failure shall be deemed to be an Event of Default under the Credit Agreement and
the Other Documents.
5. Borrowers acknowledge, confirm and agree that Borrowers'
failure to comply with any of the terms or provisions of Sections D.1, 2, 3 or 4
of this agreement, as determined by Agent in its sole and absolute discretion,
shall constitute an Event of Default under the Credit Agreement and the Other
Documents.
E. FEE. In consideration of the waiver herein, Borrowers jointly and
severally agree to pay a non-refundable fee to Agent in the amount of One
Hundred Thousand ($100,000) Dollars, which fee shall be fully earned, due and
payable as of the date hereof and shall be charged by Agent to Borrowers as of
the date hereof.
F. GENERAL PROVISIONS
1. Each of the Borrowers hereby acknowledges, confirms and agrees
that all amounts charged or credited to the Loan Account as of June 30, 2003 are
correct and binding upon each of the Borrowers and that all amounts reflected to
be due and owing in the Loan Account as of June 30, 2003 are due and owing
without defense, offset or counterclaim.
2. Each of the Borrowers forever releases and discharges Agent,
its affiliates, officers, directors, and employees, and its successors and
assigns (collectively the "Released Parties") from any and all actions, causes
of action, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extent, executions, claims and
demands whatsoever, in law, admiralty or equity, without defense, offset or
counterclaim, which any of the Borrowers ever had or now or hereafter can, shall
or may, have against any of the Released Parties for, upon, or by reason of any
matter, cause or thing whatsoever solely arising under or in any way connected
with the Credit Agreement, the Other Documents, this Agreement, any other
agreements, instruments, or documents contemplated or required under this
Agreement, or the transactions arising under or in connection herewith or
therewith.
3. Except as specifically set forth herein, no other changes or
modifications to the Credit Agreement or the Other Documents are intended or
implied, and, in all other respects, the Credit Agreement and the Other
Documents shall continue to remain in full force and effect in accordance with
their respective terms as of the date hereof. Except as specifically set forth
herein, nothing contained herein shall evidence a waiver or amendment by Agent
of any other provision of the Credit Agreement or the Other Documents nor shall
anything contained herein be construed as a consent by Agent to any transaction
other than those specifically consented to herein.
4. The terms and provisions of this agreement shall be for the
benefit of the parties hereto and their respective successors and assigns; no
other person, firm, entity or corporation shall have any right, benefit or
interest under this agreement.
5. This agreement may be signed in counterparts, each of which
shall be an original and all of which taken together constitute one agreement.
In making proof of this agreement, it shall not be necessary to produce or
account for more than one counterpart signed by the party to be charged.
6. This agreement sets forth the entire agreement and
understanding of the parties with respect to the matters set forth herein. This
agreement cannot be changed, modified, amended or terminated except in a writing
executed by the party to be charged.
7. Notwithstanding to the contrary set forth herein, this
agreement shall not be effective unless and until Agent receives an original
Ratification and Amendment of Guaranties executed as of the date hereof by
Xxxxxx Xxxx, in favor and content satisfactory to Agent, in its sole discretion.
Very truly yours,
GMAC COMMERCIAL FINANCE LLC,
AS AGENT
By: /S/ ILLEGIBLE
------------------------
Title:
ACKNOWLEDGED AND AGREED:
TARRANT APPAREL GROUP
By: /S/ XXXXXXX XXXX
-----------------------
Xxxxxxx Xxxx
Title: Chief Financial Officer
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TAG MEX, INC.
By: /S/ XXXXXXX XXXX
-----------------------
Xxxxxxx Xxxx
Title: Chief Financial Officer
FASHION RESOURCE (TCL), INC.
By: /S/ XXXXXXX XXXX
-----------------------
Xxxxxxx Xxxx
Title: Chief Financial Officer
UNITED APPAREL VENTURES, LLC
By: /S/ XXXXXXX XXXX
-----------------------
Xxxxxxx Xxxx
Title: Manager
