1
Exhibit 10.8
November 2, 1998
Gildan Activewear Inc./Les Vetements de Sports Gildan Inc.
725 Xxxxxx xx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Mr. H. Xxxx Xxxxxxxx
Chief Executive Officer and Chairman
Gentlemen:
Re: Amendment No. 6
Reference is hereby made to the Amended and Restated Loan Agreement
(as amended by Amendment No. 1 dated October 28, 1997, Amendment No. 2 dated
January 8, 1998, Amendment No. 3 dated February 18, 1998, Amendment No. 4 dated
March 19, 1998 and Amendment No. 5 dated June 15, 1998, the "Loan Agreement"),
dated as of August 6, 1997, between Gildan Activewear Inc./Les Vetements de
Sports Gildan Inc. (the "Borrower") and Bank of America Canada (the "Lender").
Capitalized terms used herein and not otherwise defined shall have the meanings
specified in the Loan Agreement.
In consideration of the mutual covenants and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lender and the Borrower have agreed as follows:
1. The Lender hereby consents, for the purposes of Section 9.10, to the
Borrower's entering into, as original tenant thereunder or as a
guarantor thereof, the Florida Lease, provided, however, that the
monthly base rental amounts so incurred or guaranteed will not
exceed U.S. $85,000 and the foregoing shall not be construed as any
consent to any payments under or pursuant to the Florida Lease or
any guarantee in respect thereof except as are made in compliance
with all terms of the Loan Agreement, including in particular
Section 9.13.
2. The Lender hereby consents for the purposes of Section 9.7 of the
Loan Agreement to (a) the Borrower's and/or Xxxxxx Subsidiary's
transfer of Equipment having a book value not in excess of U.S.
$300,000 to the Florida Subsidiary or transfer without limit from
the Xxxxxx Subsidiary to the Borrower and (b) the sale and leaseback
of Equipment having a book value not in excess of $12,000,000 to
give effect to the financing referred to in paragraph (f) of the
definition of "Permitted Liens" in Section 1.1 of the Loan
Agreement.
2
-2-
3. Section 1.1 of the Loan Agreement is amended by adding the following
definitions (in the correct alphabetical order):
""Consolidated FST Debenture" means the 11% Interest Unsecured
Debenture No. A-4 in the capital amount of $15,000,000, issued
by the Borrower to the FST on June 25, 1998 in respect of the
consolidation of all Debt owing to the FST.
"Florida Subsidiary" means Gildan Activewear Miami, Inc.,
formerly called Miami Activewear Distribution Inc., a
corporation incorporated pursuant to the laws of Florida and
carrying on business at 0000X X.X. 00xx Xxxxxx, Xxxxx, Xxxxxxx
00000.
"Florida Lease" means an Industrial Gross Lease dated as of
May 28, 1998 between the Borrower and Xxxxxxx Companies, Inc.,
which lease was assigned by the Borrower to the Florida
Subsidiary on August 25, 1998, relating to approximately
211,000 square feet of warehouse space at 0000X X.X. 00xx
Xxxxxx, Xxxxx, Xxxxxxx.
"Florida Cashflow Recapture" means an amount equal to the
Florida Subsidiary's net earnings before interest,
depreciation and amortization expenses but after the payment
of its local taxes less increases in working capital plus
decreases in working capital.
"Florida Debt" means, in respect of the Florida Subsidiary,
all indebtedness and obligations, present and future, direct
and indirect, of the Florida Subsidiary to the Borrower
including, without limitation, the face amount of any
liabilities of the Borrower under or in connection with any
guarantees, indemnities, sureties or like obligations
undertaken by the Borrower in respect of the Florida
Subsidiary.
"Xxxxxx Subsidiary" means Gildan Activewear Xxxxxx, Inc.,
formerly called Xxxxxx Manufacturing, Inc., a corporation
incorporated pursuant to the laws of New York and carrying on
business at Xxxxx 00, Xxxxxx Xxxx, Xxxxxx, Xxx Xxxx.
"Pluma Accounts" means any Account due from Pluma, The
Stardust Corporation or F.L. Xxxxxxxx (or an affiliate
thereof)."
4. The definition of "Availability" in Section 1.1 of the Loan
Agreement is amended by deleting the reference to "$17,500,000" and
substituting $25,000,000" therefor.
5. The definition of "Permitted Liens" in Section 1.1 of the Loan
Agreement is deleted and the following is substituted therefor:
3
-3-
""Permitted Liens" means: (a) Liens for taxes not yet payable
or Liens for taxes being contested in good faith and by proper
proceedings diligently pursued, provided that a reserve or
other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor on the applicable Financial
Statements and that a stay of enforcement of any such Lien is
in effect; (b) Liens in favour of the Lender; (c) Liens on
Equipment and Liens on Accounts and Inventory in favour of GE
Capital Quebec Equipment Financing Inc. but subject to the
execution and delivery of the GE Priority Agreement on terms
satisfactory to the Lender in its discretion; (d) Lien(s) in a
principal amount not exceeding $1,200,000 secured on the
Valleyfield Facility (the "Valleyfield Mortgage"); (e) PMSIs
expressly permitted to be outstanding in accordance with
Section 9.11 (f) Liens on Equipment to secure up to
$12,000,000 of Equipment financing to be completed by the
Borrower on terms satisfactory to the Lender and subject to
the execution and delivery to the Lender of an intercreditor
agreement among the Borrower, the Lender and the provider of
such financing, in form and substance satisfactory to the
Lender in its sole discretion; (g) Liens on Equipment in
favour of Bombardier securing the Approved Bombardier
Transaction in an amount not in excess of $2,000,000 (plus the
customary additional hypothec); (h) approved prior
encumbrances; (i) Liens as described in Exhibit A hereto; (j)
Liens on Equipment located at the Valleyfield Facility in
favour of Laurentian Bank of Canada, provided that (A) such
Liens rank subordinate in priority to the Liens in favour of
the Lender and (B) the Borrower, the Lender and Laurentian
Bank of Canada have entered into a subordination agreement on
terms (including as to standstill arrangements) satisfactory
to the Lender in its sole discretion; (k) a first hypothec on
the lands and buildings at 313 and 000, xxx xx Xxxxxxx,
Xxxxxxxx, Xxxxxx, being the Comdye lands, in an amount not in
excess of $2,000,000, in favour of the Business Development
Bank of Canada to secure its mortgage loan in the maximum
principal amount of Cdn. $1,500,000 upon the terms of its term
sheet dated January 19, 1998; and (1) a first hypothec on the
lands and buildings to be acquired by the Borrower in 1998 and
located at 0000 Xxxxx Xxxxxx Xxxxxxx, Xx. Xxxxxxx, Xxxxxx
(comprising approximately 16,974.9 square metres of lands and
the building thereon), to secure a mortgage loan in a
principal amount not in excess of $2,200,000, in favour of
Business Development Bank of Canada and substantially upon the
terms of and its term sheet dated September 23, 1998."
6. The definition of "Eligible Accounts" is Section 1.1 of the Loan
Agreement is amended by deleting paragraphs (a) and (b) thereof and
substituting the following:
"(a) other than Dated Accounts or Pluma Accounts with respect
to which more than ninety (90) days have elapsed since
the date of the original invoice therefor;
(b) any Dated Account or Pluma Accounts which do not have
credit insurance (in amounts, on terms and with insurers
satisfactory to the Lender in its discretion) with a
loss payable endorsement in favour of
4
-4-
the Lender, which is in excess of any approved (in the
Lender's discretion) credit limit for the applicable
Account Debtor or which is (x) in the case of Dated
Accounts, (A) payable more than 150 days from invoice
date (except for Accounts due from Broder Brothers which
may be payable 180 days from invoice date) or (B) more
than thirty (30) days past due or (y) in the case of
Pluma Accounts, (A) outstanding more than sixty (60)
days past invoice date, or (B) not subject to a reserve
against Availability in the amount of any liquidated
damages or other offsets, the amount of which has been
conclusively determined to the satisfaction of the
Lender in its discretion and confirmed by an agreement
with Pluma modifying the existing Settlement Agreement
to the Lender's satisfaction in its discretion, or (C)
not verified by a certification given by the Borrower to
the Lender in form satisfactory to the Lender as of the
end of the previous month by the fifteenth day of the
following month to certify that the Borrower is in
compliance with all terms of all of its agreements
relating to such Accounts, has no knowledge or notice of
any default under any such agreements and that the
Borrower intends to continue to comply with all such
agreements (and further provided that the maximum
Revolving Loans and Letters of Credit based on Dated
Accounts will be limited to $20,000,000);"
7. Section 6.8(d) is deleted and the following is substituted therefor:
"(d) (A) during October, November, December, January,
February and March of each year, bi-monthly by the 20th
calendar day and 5th calendar day for the period ended
on the 15th day of the month or the last day of the
month, respectively, and, (B) at all other times,
monthly by the fifteenth calendar day following the end
of each month, perpetual inventory reports at cost, by
category and location, and reconciled to the general
ledger as of month end by the last day of the following
month, and listing ineligibles;"
8. Section 9.7 of the Loan Agreement is amended by deleting the phrase
"non-Honduras assets not exceeding a value of $50,000" and
substituting therefor:
"assets other than shares in the capital stock of the Honduras
Subsidiary not having a value in excess of $500,000"
9. Section 9.7 of the Loan Agreement is amended by adding the following
immediately after the phrase "Honduras Subsidiary to carry on sewing
operations" in the second line thereof:
",the establishment of the Florida Subsidiary to act as a
distribution centre (in replacement of the Champlain, New York
facility)"
10. Section 9.11 of the Loan Agreement is deleted and the following
substituted therefor:
5
-5-
"9.11 Neither of the Borrower or any of its Subsidiaries shall
incur or maintain any Debt other than: (a) the Obligations;
(b) in the case of the Borrower, trade payables, and
contractual obligations to suppliers and customers incurred in
the ordinary course of business; (c) other Debt existing on
the Closing Date, and included in the Financial Statements
attached as Exhibit G-1; (d) Permitted Rentals as permitted by
Section 9.21; (e) Debt pursuant to unsecured Guarantees as
described in Exhibit C; (f) Debt secured by purchase money
security interests ("PMSIs") in Equipment acquired by the
Borrower and/or its Subsidiaries in compliance with Section
9.20 hereof (provided the principal amount of such Debt does
not exceed the purchase price of such Equipment) and, to the
extent not included in Debt as above provided in this
paragraph (f), all obligations under unsecured Guarantees in
connection with acquisitions by the Borrower of Equipment, not
in the aggregate in excess of $500,000 outstanding at any time
in the Fiscal Year ending in 1997 and $1,000,000 in the Fiscal
Year ending in 1998 and thereafter; (g) the intercorporate
loan to the Xxxxxx Subsidiary referred to in paragraph (e) of
Section 9.13; (h) the Additional FST Investment and the FSTQ
Third Debenture Debt as defined in Section 11.1(q) (which, on
June 25, 1998 was consolidated into the Consolidated FST
Debenture); (i)(A) in the case of Los Angeles de San Jose,
S.A., up to $3,500,000 (inclusive of all moneys received by
the Borrower and its Subsidiaries from CIDA in respect of
Honduras Operations) less, if a positive number, the
cumulative Honduras Cashflow Recapture applicable to Los
Angeles de San Jose, S.A., (B) in the case of Xxxxxx El
Progreso, S.A., up to $2,000,000 less, if a positive number,
the cumulative Honduras Cashflow Recapture applicable to
Xxxxxx El Progreso, S.A., (C) in the case of the Florida
Subsidiary, $1,500,000 less, if a positive number, the
cumulative Florida Cashflow Recapture, and (D) in the case of
the Barbados Subsidiary, up to $500,000 of loans by the
Borrower to the Barbados Subsidiary; (j) Debt secured by
Permitted Liens; and (k) an amount not exceeding $1,000,000 to
refinance and replace the existing Valleyfield Mortgage.
Notwithstanding the foregoing or any other term hereof
(including Section 9.13(b)), the Debt to FST shall only be
permitted if no principal payments are required to be made
prior to June, 2003 and no interest in excess of 11% per annum
is payable thereon and FST, the Lender and the Borrower shall
have entered into the Subordination Agreement in form and
substance satisfactory to the Lender in its discretion,
relating to the Consolidated FST Debenture."
11. Section 9.13 of the Loan Agreement is deleted and the following is
substituted therefor:
"9.13 Transactions with Affiliates. Except (a) for
Distributions permitted under Section 9.8; (b) for a loan of
not more than $2,000,000 made to its parent, Harco Holdings
Ltd.; (c) for payments to the Xxxxxx Subsidiary, the Florida
Subsidiary or the Honduras Subsidiary for services actually
6
-6-
rendered not in excess of commercially reasonable amounts and
on pricing terms not exceeding those prevailing between arm's
length parties; (d) for rent paid to Harco Holdings Ltd.
pursuant to the Borrower's leases of its Premises; (e) for
loans made to the Xxxxxx Subsidiary not in excess of
$1,500,000 in the aggregate; (f) for trade credit and loans
made to each Honduras Subsidiary and/or to the Florida
Subsidiary, provided, however, that the aggregate amount of
Honduras Debt owed by each Honduras Subsidiary, the aggregate
amount of the Florida Debt and the aggregate amount of any
loans to the Barbados Subsidiary shall not exceed the limits
applicable thereto specified in Section 9.11(i); (g) for
payments of principal and interest made to FST in compliance
with the Borrower's agreements with FST and subject to the
terms of the Subordination Agreement among the Borrower, the
Lender and FST, and (h) for an initial equity investment in
the amount of U.S. $200,000 in the Florida Subsidiary, neither
the Borrower nor any of its Subsidiaries shall: sell,
transfer, distribute, or pay any money or Property to any
Affiliate, or lend or advance money or Property to any
Affiliate or related Person (within the meaning of the Income
Tax Act of Canada), or invest in (by capital contribution or
otherwise) or purchase or repurchase any equity or
indebtedness, or any Property, of any Affiliate or related
Person (within the meaning of the Income Tax Act of Canada),
or become liable on any Guarantee of the indebtedness,
dividends, or other obligations of any Affiliate or related
Person (within the meaning of the Income Tax Act of Canada).
12. Section 9.15(a) of the Loan Agreement is amended by adding the
following phrase immediately after the phrase "Honduras Subsidiary
to carry on sewing operations":
", the establishment of the Florida Subsidiary to act as a
distribution center (to replace the Champlain, New York
facility)"
13. Section 9.15(b) of the Loan Agreement is amended by deleting the
reference to "3,000,000" and substituting "7,000,000" therefor.
14. Section 9.15(c) of the Loan Agreement is amended by deleting the
word "and" at the end thereof.
15. Section 9.15(d) of the Loan Agreement is amended by deleting the
period at the end thereof and replacing it with a semicolon.
16. Section 9.15 in the Loan Agreement is amended by adding the
following after paragraph (d) thereof:
"(e) The Borrower shall annually, within one hundred and
twenty (120) days after each fiscal year end, for the
immediately preceding fiscal year, provide evidence to the
Lender that the amount of the Florida Debt has been reduced by
an amount equal to the Florida Cashflow Recapture, which
amounts will be applied first to permanently repay in full the
Florida Debt and thereafter
7
-7-
shall be in the form of dividends or non interest bearing
loans subordinated to the Obligations in terms satisfactory to
the Lender in its sole discretion; and
(f) The Borrower will not permit the profits of the Florida
Subsidiary to exceed ten percent (10%) of such Subsidiary's
direct operating expenses."
17. Section 9.18 of the Loan Agreement is amended by deleting the word
"and" before paragraph (c) thereof and replacing it with a comma and
by adding the following at the end (before the period):
"and (d) the Florida Subsidiary to act as a distribution
center"
18. Section 9.20 of the Loan Agreement is amended, retroactive to March
31, 1998, by deleting the references to "$11,500,000" and
"$1,300,000" and replacing such references with "$25,000,000" and
"$8,000,000", respectively.
19. Section 9.22 of the Loan Agreement is amended, retroactively to
March 31, 1998, by deleting the references to "1.15 to 1" and "1.20
to 1" in paragraphs (g) and (h), respectively, and replacing such
references with "1.08 to 1" in paragraph (g) and "1.11 to 1" in
paragraph (h).
20. The amendments, consents and waivers set forth herein are strictly
limited to the matters and times specifically described above and
shall not be deemed to constitute an amendment, consent or waiver
with respect to any other term, covenant, matter, time or occasion.
21. The Borrower agrees to pay to the Lender an amendment fee in the
amount of $25,000 upon its acceptance of the terms hereof and
authorizes and directs the Lender to debit its account in order to
pay such fee. All reasonable expenses of the Lender incurred in
connection with this letter agreement and any and all matters
incidental thereto including, without limitation, legal fees, the
allocated costs of in-house counsel and out-of-pocket expenses of
Lender's counsel are for the account of the Borrower and shall be
payable upon demand and may be paid by direct debit to the
Borrower's accounts.
22. This letter agreement supersedes and replaces any prior agreements
or understandings with respect to any of the matters provided for
herein.
23. This letter agreement shall be deemed to have been made in the
Province of Ontario and shall be governed by and interpreted in
accordance with the laws of such Province and the laws of Canada
applicable therein, except that no doctrine of choice of law shall
be used to apply the laws of any other jurisdiction.
Except to the extent waived or modified herein, the Loan Agreement
remains in full force and effect and is hereby ratified and confirmed. Please
evidence your agreement with the terms of this letter agreement by signing in
the space below. Notwithstanding the date of execution of this letter agreement,
this letter agreement shall be deemed effective as of the 30th day of September,
8
-8-
1998. The Borrower shall do, or cause to be done or occur, as the case may be,
each of the following to the entire satisfaction of the Lender by December 15,
1998, failing which an Event of Default shall be deemed to have occurred:
(a) FSTQ and the Borrower shall execute and deliver a
Subordination Agreement reflecting the consolidation into the
Consolidated FST Debenture of all Debt to FST (including the
Additional FST Investment and the FSTQ Third Debenture Debt)
and to replace the intercreditor agreement dated August 6,
1997, in form and substance satisfactory to the Lender;
(b) the Borrower shall deliver a complete copy of the Florida
Lease and the assignment thereof to the Florida Subsidiary;
(c) the Florida Subsidiary and the Borrower, as applicable, shall
execute and deliver each of the following documents, each in
form satisfactory to the Lender:
(i) a guarantee by the Florida Subsidiary of the
obligations of the Borrower to the Lender;
(ii) a security agreement of the Florida Subsidiary in
favour of the Lender, securing all obligations under
the guarantee;
(iii) a demand promissory note of the Florida Subsidiary
evidencing all the advances by the Borrower to the
Florida Subsidiary;
(iv) a security agreement of the Florida Subsidiary in
favour of the Borrower to secure, inter alia, the note;
(v) an assignment by the Borrower of the note and security
agreement of the Florida Subsidiary;
(vi) UCC financing statements to perfect all of the security
interests created by the foregoing documents
(including, if requested, fixture filings);
(vii) a landlord's waiver of the landlord under the Florida
Lease;
(viii) certified resolutions of the directors of the Borrower
and the Florida Subsidiary authorizing each of the
foregoing documents signed by it and this Amendment No.
6;
(ix) an opinion of legal counsel to the Florida Subsidiary
in respect of each of the foregoing documents signed by
it;
(x) an opinion of legal counsel to the Borrower in respect
of this Amendment No. 6; and
(d) all filings necessary or required to be made by or on behalf
of the Lender in consequence of the changes of names of the
Xxxxxx Subsidiary and the Florida Subsidiary to protect or
preserve the Lender's Liens and the priority thereof shall
have been made and the Lender shall have received, forthwith
upon the issuance thereof, certified articles of amendment
confirming the name changes and, by the date above specified,
reports of local legal counsel
9
-9-
confirming the making of all necessary UCC and other filings
to the Lender's satisfaction.
The parties acknowledge that they have required that this agreement
and all related documents be prepared in English.
Les parties reconnaissent avoir exige que la presente convention et
tous les documents connexes soient rediges en anglais.
Sincerely,
BANK OF AMERICA CANADA
By: /s/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: Vice-President
AGREED AS OF THE DATE FIRST-ABOVE PROVIDED:
GILDAN ACTIVEWEAR INC./LES VETEMENTS DE SPORTS GILDAN INC.
By: /s/ H. Xxxx Xxxxxxxx
---------------------
Name:
Title:
By:
---------------------
Name:
Title:
10
-10-
The undersigned Gildan Activewear Xxxxxx, Inc. (the "Guarantor") (i) consents to
and approves the execution and delivery of this letter agreement by the parties
hereto, (ii) agrees that this letter agreement does not and shall not limit or
diminish in any manner the obligations of the Guarantor under that certain
Guaranty dated as of August 29, 1996 (the "Guaranty"), executed by the Guarantor
and delivered to the Lender, and that such obligations would not be limited or
diminished in any manner even if the Guarantor had not executed this letter
agreement, (iii) agrees that this letter agreement shall not be construed as
requiring the consent of the Guarantor in any other circumstance, (iv) reaffirms
its obligations under the Guaranty, and (v) agrees that the Guaranty remains in
full force and effect and is hereby ratified and confirmed.
GILDAN ACTIVEWEAR XXXXXX, INC.
By: /s/ H. Xxxx Xxxxxxxx
---------------------
Name:
Title:
