Exhibit 10.90.6
[LOGO]
Commercial
Credit LLC
March , 2002
Tarrant Apparel Group
Tag Max. Inc.
Fashion Resource (TLC), INC.
United Apparel Ventures, LLC
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Ladies/Gentlemen:
Reference is made to the Revolving Credit, Factoring and Security
Agreement between us dated as of January 21, 2000 as amended and
supplemented (the "Agreement"). All capitalized terms not otherwise
defined herein shall have such meaning as are set forth under the
Agreement.
This letter shall (among other things) serve to confirm that you
will within 10 Business Days from the date hereof deliver to us the
necessary documents ("Blocked Account Documents"), required by the banks
where your depository accounts are established to establish, a lock box,
and blocked account in our favor on terms which are reasonably
acceptable us, so as to establish the direct remittance to us of the
collected payments of your Receivables. You will thereupon have 30 days
from the date you deliver such documentation to us to demonstrate to us
that the establishment of such a procedure would cause a material
adverse effect upon your cash flow. If you are not able to demonstrate
to our satisfaction you agree to immediately secure the Blocked Account
Documents which shall be delivered to the banks to establish the lock
box and blocked accounts in our favor. Provided that you comply with the
provisions of this paragraph above we agree that the Agreement shall be
amended in the following manner.
1. For the fiscal periods ending March 31, 2002 through
December 31, 2002 only, the Tangible Net Worth financial covenant
requirement set forth in section 7.5(a) of the Agreement shall be
amended to require a Tangible Net Worth of not less than the amounts
indicated below for the corresponding dates set forth below:
March 31, 2002 $91,500,000
June 30, 2002 $94,500,000
September 30, 2002 $98,500,000
December 31, 2002 $98,500,000
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resource (TCL), Inc.
March , 2002
Page 2
2. For the fiscal periods ending March 31, 2002 through December 31,
2002 only, the Fixed Charge Coverage Ratio financial covenant requirement set
forth in section 7.5(b) of the Agreement shall be amended to require a Fixed
Charge Coverage Ratio of not less than the ratios indicated below for the
corresponding dates set forth below:
March 31, 2002 0.4 to 1
June 30, 2002 1.0 to 1
September 30, 2002 1.1 to 1
December 31, 2002 1.1 to 1
3. For the fiscal periods ending March 31, 2002 through December 31,
2002 only, the Interest Coverage Ratio financial covenant requirement set forth
in section 7.5(c) of the Agreement shall be amended to require an Interest
Coverage Ratio of not less than the ratios indicated below for the corresponding
dates set forth below:
March 31, 2002 1.5 to 1
June 30, 2002 3.0 to 1
September 30, 2002 3.2 to 1
December 31, 2002 3.2 to 1
4. For the fiscal periods ending March 31, 2002 through December 31,
2002 only, the Total Leverage Ratio financial covenant requirement set forth in
section 7.5(d) of the Agreement shall be amended to require a Total Leverage
Ratio of not more than the ratios indicated below for the corresponding dates
set forth below:
March 31, 2002 2.0 to 1
June 30, 2002 2.0 to 1
September 30, 2002 2.0 to 1
December 31, 2002 1.6 to 1
It is also hereby agreed that in part consideration of the
accommodations provided by us to you by the provisions of this letter you hereby
agree as follows:
(a) You shall pay us an accommodation fee of $25,000 payment of
which shall be effectuated immediately by our charging your loan account with
us.
(b) You agree that you shall pay us a facility fee (the "Facility
Fee") of $100,000 during each year the Agreement is in effect, payment of which
shall commence
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resource (TCL), Inc.
March ,2002
Page 3
retroactive to January 1, 2002 and which shall be payable each year in four (4)
equal quarterly installments due on the first day of each calendar quarter.
Payment of such fee shall be effectuated by our charging your loan account with
us.
(c) You hereby agree that commencing as of January 21, 2002 the
aggregate dollar amount of the Receivables which you shall factor with us (the
"Volume") in each Contract Year (the 12 month period from one anniversary of the
effective date of the Agreement to the next anniversary thereof) shall not be
less than Twenty Million Dollars ($20,000,000), and that to the extent that your
actual Volume is less than such amount, you agree to pay us the difference
between the factoring commission we earned on your actual Volume during the
applicable Contract Year and the commission which we would have earned had your
Volume during such Contract Year been Twenty Million Dollars ($20,000,000) (the
"Deficiency Charge"). Payment of the Deficiency Charge (if any) shall be paid
by our charging your loan account with us after the calculation thereof can be
made.
(d) The definition of "Applicable LIBOR Rate Margin" appearing
on page 2 of the Agreement shall be amended by deleting the grid appearing in
the definition and by substituting the following grid in its place and stead:
Applicable LIBOR Rate Margin
Total Leverage Ratio For LIBOR Rate Advances
-------------------- -----------------------------
greater than 2.00:1 3.50%
greater than 1.5:1 but less 3.00%
than 2:1
greater than 1:1 but less 2.50%
than 2:1
less than 1:1 2.00%
(e) A new definition of "Alternate Base Rate Margin" shall be
inserted in its applicable alphabetical order on page 2 of the Agreement, the
text of which definition shall state:
"Applicable Alternate Base Rate Margin" means with respect to any
-------------------------------------
Base Rate Advance, the applicable per annum percentage set forth
below opposite the Total Leverage Ratio, as determined in accordance
with the Compliance Certificate most recently delivered pursuant to
Section 10.8 hereof.
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resources (TCL), Inc.
March , 2002
Page 4
Applicable Alternate Base Rate
------------------------------
Total Leverage Ratio Margin For Base Rate Advances
-------------------- -----------------------------
greater than 2.00:1 1.00%
greater than 1.5:1 but less 0.50%
than 2:1
greater than 1:1 but less 0.25%
than 2:1
less than 1:1 0.00%
Any reduction or increase in the Applicable Alternate Base Rate Margin
shall be effective beginning on the date that is three (3) days following the
date on which Agent receives Borrower's Compliance Certificate pursuant to
section 10.8 hereof. In the event Borrower does not timely deliver a
Compliance Certificate pursuant to Section 10.8 below, in addition to any
rights and remedies Lenders may have against Borrower as a result of its
failure to provide such Compliance Certificate the Applicable Alternate Base
Rate Margin shall be deemed to be 1% from the date such Compliance
Certificate was due until the third day following the receipt thereof by the
Agent, at which date the Applicable Alternate Base Rate Margin shall be
established pursuant to the grid set forth above."
(f) The definition of "Base Rate Advance" shall be amended
by deleting the text therein and by inserting the following text in its place
and stead:
"Base Rate Advance" shall mean each Revolving Advance bearing interest
-----------------
at the Alternate Base Rate plus the Applicable Alternate Base Rate
Margin"
(g) The text of Section 4.1(a) of the Agreement shall be
deleted and the following text shall be inserted in its place and stead:
"with Respect to a Base Rate Advance, equal to the sum of the
Alternate Base Rate from time to time in effect plus the Applicable
Alternate Base Rate Margin; or"
(h) Section 4.1 shall be amended by adding thereto a
Section 4.1(c) which shall immediately follow Section 4.1(b) and the text of
which shall state:
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resource (TCL), Inc.
March , 2002
Page 5
"(c) Revolving Advances at any time outstanding which are in
excess of $45,000,000 shall be deemed to be Base Rate Advances."
(i) Section 4.1 shall also be amended on Sep. 30, 2002
by deleting the text of the final paragraph thereof and by adding
the following text thereto which shall state:
"In no event shall the LIBOR RATE plus the Applicable LIBOR Rate
Margin nor the Alternate Base Rate plus the Applicable Alternate
Base Rate Margin (which ever is applicable as the case may be) be
less than 6% for the purposes of calculating Interest on
outstanding Revolving Credit Advances and other Obligations under
this Agreement. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, the Obligations
hereunder shall bear interest at the Alternate Base Rate plus the
Applicable Alternate Base Rate Margin plus any increased charges
(if applicable) assessed pursuant to Section 2.2 hereof plus two
percent (2%) per annum (the "Default Rate")."
(i) Section 2.2 of the Agreement shall be amended by
deleting the last sentence therein (as inserted by the Third Amendment to
the Agreement dated as of February 2001, and by inserting the following
sentence in its place and stead:
"Should at any time any overadvance outstanding under this
Agreement exceed that which is permitted under the Agreement
(regardless of whether same is as a result of scheduled
overadvance reductions, monthly charges, Borrowing Base
Collateral reductions, or for any other reason), Borrower shall
have 5 days to repay such excess and failure to do so shall
constitute an Event of Default hereunder."
It is also hereby agreed that the temporary discretionary overadvance
of Ten Million Dollars ($10,000,000) which was to be outstanding from the
15th day of each month to the 5th Business Day of the following month
(referred to in our letter agreement of November 2001 as the "Monthly
Overadvance") shall be amortized at the rate of One Million Dollars
($1,000,000) per month commencing April 15, 2002 and on the 15th day of
each consecutive month thereafter. In the event that you are able to close
a loan transaction with UPS Financial to finance your assets located in
Mexico (the terms of which must be satisfactory to us) then in such event
any then remaining balance then outstanding on the Monthly Overadvance
shall be paid in two (2) equal consecutive monthly installments commencing
on the 15th of the month
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resources (TCL), Inc.
March , 2002
Page 6
immediately following your closing with UPS Financial and on the 15th day
of the next month following thereafter.
Additionally you agree that effective August 31, 2002 the reduction of
the Overadvance Limit and the overadvance outstanding thereunder shall be
accelerated and that the amortization payment thereof shall be increased
such that the amount outstanding thereunder on August 31, 2002 (projected
to be $16,500,000) shall be ammortized in 24 equal monthly amortization
payments commencing from August 31, 2002 and continuing on the last day of
each month thereafter until fully paid.
Except as hereby or heretofore modified or amended all of the
provisions of the Agreement shall continue to remain in full force and
effect in accordance with their original terms.
If the foregoing correctly set forth the agreement between us please
execute a copy of this letter in the space provided below and return an
executed copy of this letter to the undersigned.
Very truly yours,
GMAC COMMERCIAL CREDIT LLC
By: /s/ XXXXX XXXXXXXX
---------------------------
Name
Title
READ AND AGREED TO:
TARRANT APPAREL GROUP
By: /s/ X. Xxxx
------------------------
Name: X. Xxxx
Title: CFO
GMAC Commercial Credit LLC
Tarrant Apparel Group
Tag Mex, Inc.
Fashion Resource (TCL), Inc.
March , 2002
Page 7
TAG MEX, INC.
By: /s/ X. Xxxx
-----------------------------
Name: X. XXXX
Title: C F O
FASHION RESOURCE (TCL), INC.
By: /s/ X. Xxxx
-----------------------------
Name: X. XXXX
Title: C F O
UNITED APPAREL VENTURES, LLC
By: /s/ Xxxx Xxxx
----------------------------
Name: Xxxx XXXX
Title: Director
