THE CIT GROUP/COMMERCIAL SERVICES, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
As of November 30, 1998
▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: The CIT Group/Commercial Services, Inc.
with ▇▇▇▇▇▇ Corporation
---------------------------------------
Gentlemen:
Reference is made to the Revolving Credit, Factoring and Security
Agreement between The CIT Group/Commercial Services, Inc. ("Lender") and
▇▇▇▇▇▇ Corporation ("Borrower") dated September 20, 1993, as amended (the
"Credit Agreement"). Capitalized terms used and not otherwise defined
herein shall have their respective meanings as set forth in the Credit
Agreement.
Pursuant to the Thirteenth Amendment to the Credit Agreement (a)
Borrower requested Lender (i) to forbear through November 30, 1998 from
exercising any of its rights and remedies arising from certain Events of
Default specified therein and (ii) to extend the term of the Credit
Agreement through November 30, 1998 and (b) Lender agreed to forbear and to
extend the term of the Credit Agreement through November 30, 1998 upon the
terms and conditions set forth therein.
Borrower has requested Lender (a) to continue to forbear through
December 31, 1998 from exercising any of its rights and remedies arising
from the Payment Default and the Additional Payment Default, (b) to extend
the term of the Credit Agreement through December 31, 1998, (c) in the
event Borrower files a case under chapter 11 of the Bankruptcy Code on or
before December 31, 1998, to provide Borrower with debtor-in-possession
financing on substantially the terms and conditions set forth in the
Debtor-in-Possession Revolving Credit Facility Term Sheet dated November
30, 1998 (the "DIP Facility Term Sheet"), a copy of which is attached
hereto and (d) provided that Borrower emerges from chapter 11 not later
than June 30, 1999, to thereafter provide Borrower with financing
substantially on the terms and conditions set forth in the Chapter 11 Exit
Financing - Syndicated Revolving Credit Facility Term Sheet dated November
30, 1998 (the "Chapter 11 Exit Financing Term Sheet"), a copy of which is
attached hereto.
In response to Borrower's requests as set forth above, it is
hereby agreed as follows:
1. Lender shall, subject to the terms and conditions set forth
below, (a) continue to forbear from exercising any of its rights and
remedies arising from the Payment Default and the Additional Payment
Default and (b) continue making loans, advances and other financial
accommodations to Borrower on and subject to the terms and conditions set
forth in the Credit Agreement, as amended below. Such forbearance shall
terminate on December 31, 1998, or earlier upon the happening of:
(i) the occurrence of any Event of Default other than the
Payment Default, Additional Default or any Event of
Default arising solely by reason of the commencement
by Borrower of a case under chapter 11 of the
Bankruptcy Code, provided, that, a Financing Order as
described in the DIP Facility Term Sheet has been
entered and has not been reversed, modified, amended
or stayed and the time to appeal the same has
expired, unless otherwise agreed by Lender; or
(ii) the exercise of any right or remedy with respect to
the Collateral by any holder of any New Public
Secured Note or by the Trustee under the New Public
Secured Notes Indenture; or
(iii) the payment of any interest on the New Public Secured
Notes in respect of which the Payment Default and
Additional Payment Default arose or otherwise; or
(iv) the occurrence of an Agreement Termination Event
under and as defined in the letter agreement dated
March 2, 1998, as amended (the "Magten Letter
Agreement") among Borrower, Apollo Apparel Partners,
L.P. ("Apollo") and Magten Asset Management Corp.
("Magten") attached to the Twelfth Amendment as part
of Exhibit A thereto, other than the occurrence of an
Agreement Termination Event under Section 4(g) of the
Magten Letter Agreement.
2. Section 10.1(a) of the Credit Agreement is amended and
restated in its entirety to read as follows:
"10.1 Term
(a) This Agreement and the other Financing Agreements
shall become effective as of the date hereof and
shall continue in full force and effect for a term
ending on December 31, 1998, unless sooner terminated
pursuant to the terms hereof."
3. Provided that Borrower files a case under chapter 11 of the
Bankruptcy Code on or before December 31, 1998, Lender agrees to provide
Borrower with Debtor-in-Possession financing on substantially the terms and
conditions set forth in the DIP Facility Term Sheet, which terms and
conditions are acceptable to Borrower and which terms and conditions shall
be incorporated in the Credit Agreement upon entry of the Financing Order
described in the DIP Facility Term Sheet.
4. Lender agrees to provide Borrower no later than December 4,
1998 with a commitment letter for financing after Borrower exits from
chapter 11 on substantially the same terms and conditions set forth in the
chapter 11 Exit Financing Term Sheet and Borrower agrees to accept and
return such commitment letter to Lender together with the commitment fee
specified therein in immediately available funds within one business day of
receipt thereof.
5. In consideration of the further forbearance by Lender with
respect to the Payment Default and the Additional Payment Default and the
extension of the term of the Credit Agreement as set forth herein, Borrower
shall pay Lender a forbearance fee in the amount of $200,000, which shall
be fully earned upon execution of this Agreement and shall be paid to
Lender on or before December 1, 1998. Such fee shall not be refundable in
whole or part for any reason and may be charged, at Lender's sole option,
to any account of Borrower maintained by Lender.
6. If Lender is repaid in full, other than as a result of being
acquired or a capital infusion, prior to the commencement of the
Debtor-in-Possession financing arrangements between Lender and Debtor, then
Borrower shall thereupon pay to Lender an early termination fee in the
amount of $250,000 which Lender may, at its sole option, charge to any
account of Borrower maintained with Lender.
7. This Agreement shall become effective as of November 30, 1998
provided that Lender shall have received all of the following no later than
December 2, 1998:
(a) This Agreement duly executed and delivered by the
Borrower and the Guarantors.
(b) The agreement of Borrower, Magten and Apollo the
effect of which is to provide that Magten and Apollo
will forbear through December 31, 1998.
8. This Agreement shall not constitute a waiver or amendment of
any provision of the Credit Agreement not expressly referred to herein and
shall not be construed as a consent to any further or future action on the
part of the Borrower that would require consent of Lender. Except as
expressly amended herein, the provisions of the Credit Agreement are and
shall remain in full force and effect. Nothing herein shall constitute a
waiver of the Payment Default or the Additional Payment Default or limit,
impair or affect any of Lender's rights or remedies with respect thereto,
subject however, to the terms of the forbearance provided for herein, all
of which Borrower acknowledges and agrees have been heretofore and are
hereby further expressly reserved by Lender.
9. This Agreement may be executed in counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
10. This Agreement shall be governed by and construed and
interpreted in accordance with, the laws of the State of New York.
11. By execution of this Agreement where indicated below, each of
the Guarantors acknowledges and agrees to all of the foregoing.
Please indicate your agreement to the foregoing by executing this
letter where indicated below and return it to us.
Very truly yours.
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Title: Vice President
---------------------------------
AGREED:
▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------
Title: Executive Vice President
& General Counsel
---------------------------
ACKNOWLEDGED AND AGREED:
CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, INC. SLT SOURCING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
▇▇▇▇ LICENSING, INC. ▇▇▇▇▇▇ CANADA INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
▇.▇. ▇▇▇▇▇▇ CLOTHING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------
Title: Executive Vice President
& General Counsel
--------------------------
TERM SHEET
November 30, 1998
▇▇▇▇▇▇ CORPORATION
DEBTOR-IN-POSSESSION REVOLVING CREDIT FACILITY
Borrower: ▇▇▇▇▇▇ Corporation, as Debtor and Debtor-in-
Possession.
Guarantors: All subsidiaries.
Lender: The CIT Group/Commercial Services, Inc.
Amount of Facility: $85,000,000 Revolving Credit Facility.
Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible
accounts plus (ii) 60% of eligible ▇▇▇▇▇ ▇▇▇▇▇
finished goods inventory, plus (iii)(x) for the
first 120 days of the initial 150 day term of the
facility, 55% of eligible finished goods inventory
of non-▇▇▇▇▇ ▇▇▇▇▇ business units, and (y)
following such 120 day period, 50% of the eligible
finished goods inventory of non-▇▇▇▇▇ ▇▇▇▇▇
business units, not to exceed $25,000,000 in the
aggregate at any time outstanding in respect of
all inventory; and (b) $85,000,000. Eligibility
with respect to finished goods inventory shall be
mutually agreed upon between Borrower and Lender.
Letter of Credit
Subfacility: $30,000,000
Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender in
its sole discretion may make loans to Borrower in
excess of applicable lending formulae but within
the $85,000,000 Revolving Credit Facility and all
such loans shall be repayable on demand.
Reserve for
Professional
FeeCarve-Out: A minimum of $2,000,000 to be reserved for
carve-out of professional fees.
Factoring: Effective January 1, 1999, only for accounts of
non-▇▇▇▇▇ ▇▇▇▇▇ business units on a
non-notification basis for the first 150 days and
on a notification basis thereafter.
Interest Rate: Reference Rate + 1.00% (No LIBOR option).
Letter of Credit Fees: (a) Documentary L/Cs. 1/8 of 1.0% on issuance; 1/8
of 1.0% on negotiation.
(b) Standby L/Cs: 1% per annum plus bank charges.
Factoring Commission: .75%
Collection Days: Two days, calculated at a rate equal to Reference
Rate + 1.00%.
Forbearance Fee: $200,000 payable on December 1, 1998.
Collateral Management
Fee: $4,167 per month.
Field Exam Fee: $750 per day, plus out-of-pocket expenses.
Term: Initial term of 150 days, subject to renewal by
Lender in its discretion for an additional 90 day
period and thereafter for an additional 120 day
period. Lender shall have the right to terminate
the DIP Facility if Borrower fails to exit from
Chapter 11 at the end of any term of the DIP
Facility.
DIP Facility
Continuation Fee: If Borrower does not exit from Chapter 11 by the
end of the initial term and Lender elects to renew
the DIP Facility as described above, then $250,000
shall be payable to continue the DIP Facility for
days 151-240 and the interest rate shall be
increased to Reference Rate + 1.25%.
Additional DIP Facility
Continuation Fee: If Borrower does not exit from Chapter 11 at the
end of the 151-240 day term and Lender elects to
renew the DIP Facility as described above, then
$250,000 shall be payable to continue the DIP
Facility for days 241-360 and the interest rate
shall be increased to Reference Rate + 1.75%.
Early Termination Fee: $250,000 if Lender is paid out in full during the
DIP Facility as a result of Borrower refinancing
with another lender.
Liquidation of
Inventory: In connection with any liquidation of the
inventory at the nonPerry ▇▇▇▇▇ business units not
being conducted in connection with a sale of any
such business unit as a going concern, the party
who liquidates the inventory of the non-▇▇▇▇▇
▇▇▇▇▇ business units shall be satisfactory to
Lender.
Remittance of Net
Proceeds from Sale of
Non-▇▇▇▇▇ ▇▇▇▇▇ Units: All net proceeds of sale of non-▇▇▇▇▇ ▇▇▇▇▇
business units shall, subject to any existing
prior liens, be remitted to Lender for application
to Borrower's obligations.
Security: All loans and other financial accommodations,
whether made before or during Borrower's Chapter
11 case, shall, subject only to any existing prior
liens, be secured by a first priority lien on and
security interest in all assets of Borrower and
its subsidiaries, whether now owned or hereafter
acquired, with super-priority administrative claim
status over any and all administrative expenses in
Borrower's Chapter 11 case, subject only to a
carve-out for allowed professional fees as set
forth above.
Conditions Precedent: Conditions precedent customary for this type of
financing, including, but not limited to, the
following:
(a) Financing Orders satisfactory to Lender
approving on an interim and final basis the
DIP loan documents and transactions
contemplated thereunder, including the grant
of first priority liens, administrative claim
super-priority and cross-collateralization;
(b) Legal documentation satisfactory to Lender;
(c) The non-occurrence of any Event of Default
under the CIT Credit Agreement (including,
without limitation, any Event of Default
arising from the breach of Section 7.15
Compliance with ERISA of the CIT Credit
Agreement) other than Events of Default in
existence on the date hereof of which Lender
has knowledge and other than any Event of
Default arising solely by reason of the
commencement by Borrower of a case under
chapter 11 of the Bankruptcy Code;
(d) Any other information (financial or
otherwise) reasonably requested by Lender;
and
Expenses: Borrower shall be liable for all costs and
expenses of Lender incurred in connection with the
DIP Facility, including, without limitation,
Lender's attorney's fees and expenses, whether or
not the DIP Facility closes.
TERM SHEET
November 30, 1998
▇▇▇▇▇▇ CORPORATION
CHAPTER 11 EXIT FINANCING - SYNDICATED REVOLVING CREDIT FACILITY
Borrower: ▇▇▇▇▇▇ Corporation.
Guarantors: All subsidiaries.
Lender: The CIT Group/Commercial Services, Inc.
Syndication: CIT shall have the right to syndicate the
facility.
Agent: CIT.
Amount of Facility: $85,000,000 Syndicated Revolving Credit Facility.
Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible
accounts, plus (ii) 60% of eligible finished goods
inventory, not to exceed $25,000,000 at any time
outstanding; and (b) $85,000,000. Eligibility with
respect to finished goods inventory shall be
mutually agreed upon between Borrower and Lender.
Letter of Credit
Subfacility: $30,000,000. (Reserve against the facility will be
taken with respect to (i) documentary letters of
credit opened for the purpose of acquiring
eligible inventory, to the extent of (A) 100% of
the undrawn amount of such outstanding letters of
credit opened for the purpose of acquiring
eligible inventory minus (B) the percentage equal
to the then ----- current percentage rate of
advance against eligible inventory and (ii) with
respect to all other letters of credit, to the
extent of 100% of the undrawn amount of such
letters of credit.)
Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender may
in Its sole discretion make loans to Borrower in
excess of the applicable lending formulae but
within the 85,000,000 Syndicated Revolving Credit
Facility and all such loans shall be repayable on
demand.
Interest Rate: Reference Rate + 0.50% (No LIBOR Option);
provided, however, that if Borrower meets certain
mutually agreed upon financial tests, including,
but not limited to, liquidity and debt to equity
tests, based upon Borrower's opening financial
statements, then upon satisfaction of such
financial tests the interest rate shall be
Reference Rate + 0.25% or LIBOR + 2.25%.
Default Rate: 1.50% over Reference Rate plus applicable margin.
Letter of Credit Fees: (a) Documentary L/Cs: 1/8 of 1.0% on issuance; 1/8
of 1.0% on negotiation.
(b) Standby L/Cs: 1.0% per annum plus bank charges.
Collections: Collections shall be credited to Borrower's loan
account upon Lender's receipt of a wire transfer
of federal funds into Lender's payment account
designated for such purpose.
Commitment Fee: $325,000 payable upon Borrower's acceptance of
Lender's commitment to provide the facility.
Unused Line Fee: .25%
Agency Fee: $100,000 for each of years 2 and 3 only.
Collateral Management
Fee: $8,333 per month.
Field Exam Fee: $750 per day plus out of pocket expenses
Term: Three years
No Factoring: Revolving Credit Agreement will not provide for
any factoring of accounts through CIT or
otherwise.
Security: First and only lien on all assets of Borrower and
its subsidiaries, subject to customary permitted
encumbrances.
Conditions Precedent: Conditions precedent for this type of financing,
including, but not limited to, the following:
(a) CIT's satisfaction in all respects with the
structure and terms, and all financial,
accounting and tax aspects of Borrower's
Chapter 11 plan (the "Plan") and the
transactions contemplated thereby.
(b) CIT's satisfaction in all respects with the
capitalization and capital structure of
Borrower and its subsidiaries following
consummation of the Plan.
(c) CIT shall be satisfied with the existing and
projected liquidity of Borrower and its
subsidiaries and their ability to fund their
ongoing working capital and other cash
requirements.
(d) Resolution satisfactory to CIT of any failure
by Borrower or any of its subsidiaries to
comply with any law or regulation to which
any of their respective pension plans are
subject.
(e) Bankruptcy Court shall have entered orders
(the "Orders") satisfactory in substance to
Lenders approving confirmation of the Plan
and the definitive credit agreement for the
Exit Facility and all related documentation
contemplated thereunder, and there shall not
be in effect any appeal or stay of the
Orders.
(f) Borrowers' debt restructuring shall have been
completed and shall be satisfactory to CIT.
(g) CIT shall have completed its due diligence.
(h) Legal documentation satisfactory to CIT which
shall include financial covenants, including,
but not limited to, minimum equity, maximum
loss, interest coverage, debt-to-equity and
capital expenditure limitations.
(i) Approval of Exit Facility by CIT's Executive
Credit Committee.
(j) Closing of Exit Facility no later than June
30, 1999.
Expenses: Borrower shall be liable for all costs and
expenses of Lenders incurred in connection with
the Exit Facility, including, without limitation,
Lenders' attorneys fees and expenses, whether or
not the Exit Facility closes.
