SECOND AMENDMENT AGREEMENT
SECOND AMENDMENT AGREEMENT (this "Agreement") dated as of September 24,
1997 by and among (1) Starter Corporation ("Starter"), (2) Starter Galt, Inc.
("Starter Galt"), (3) Bank of Boston Connecticut ("BankBoston"), CoreStates
Bank, N.A. ("CoreStates"), People's Bank, National Bank of Canada, Sanwa
Business Credit Corporation, KeyBank National Association, BTM Capital
Corporation, Firstrust Savings Bank and PNC Bank, N.A. as lenders (collectively,
the "Lenders" and individually, a "Lender"), (4) BankBoston as administrative
agent (the "Administrative Agent") for the Lenders and (5) CoreStates as
syndication agent (the "Syndication Agent") for the Lenders, with respect to a
certain Second Amended and Restated Credit Agreement dated as of May 13, 1997 by
and among the Borrowers, the Lenders and the Agents, as amended by a certain
First Amendment Agreement dated as of July 16, 1997 (as amended, the "Credit
Agreement").
WITNESSETH:
WHEREAS, the Borrowers have requested that the Lenders and the Agents
amend certain provisions of the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ss.1. Definitions. Capitalized terms used herein without definition that
are defined in the Credit Agreement shall have the same meanings herein as
therein.
ss.2. Ratification of Existing Agreements. All of the Borrowers'
obligations and liabilities to the Lenders and the Agents as evidenced by or
otherwise arising under the Credit Agreement, the Notes and the other Loan
Documents, are, by each Borrower's execution of this Agreement, ratified and
confirmed in all respects. In addition, by each Borrower's execution of this
Agreement, each Borrower represents and warrants that no counterclaim, right of
set-off or defense of any kind exists or is outstanding with respect to such
obligations and liabilities.
ss.3. Representations and Warranties. All of the representations and
warranties made by the Borrowers in the Credit Agreement, the Notes and the
other Loan Documents are true and correct on the date hereof as if made on and
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as of the date hereof, except to the extent that any of such representations and
warranties relate by their terms to a prior date.
ss.4. Amendments to the Credit Agreement
(a) Addition of Exhibit F to the Credit Agreement. The Credit
Agreement is hereby amended by adding a new Exhibit F thereto to read as set
forth on Exhibit F attached hereto and made a part hereof.
(b) Amendment to Schedule 1 of the Credit Agreement. Schedule 1 of
the Credit Agreement is hereby amended in its entirety as set forth on Schedule
1 attached hereto and made a part hereof.
(c) Amendments to Schedule 2 of the Credit Agreement.
(i) The chart set forth in the definition of "Applicable
Margin" appearing in Schedule 2 of the Credit Agreement is hereby amended
in its entirety to read as follows:
LIBOR Facility Fee
"Level Interest Coverage Ratio Applicable Margin Rate
------ ----------------------- ----------------- ----
Greater Than But Less
Or Equal To Than
Level 1 4.00:1 - 1.000% 0.250%
Xxxxx 0 3.25:1 4.00:1 1.375% 0.250%
Xxxxx 0 2.50:1 3.25:1 1.625% 0.375%
Xxxxx 0 2.00:1 2.50:1 2.000% 0.375%
Xxxxx 0 l.50:1 2.00:1 2.125% 0.500%
Xxxxx 0 - 1.50:1 2.375% 0.50O%
(ii) The definition of "Obligations" appearing in Schedule 2
of the Credit Agreement is hereby amended by inserting the following
sentence at the end of such definition:
"Notwithstanding anything to the contrary in the foregoing,
the term "Obligations" shall in no event include any indebtedness,
obligations or liabilities of the Borrowers or their respective
Subsidiaries to BankBoston, N.A. arising or incurred under that certain
Letter of Credit Reimbursement and Security Agreement dated as of
September 24, 1997 between BankBoston, N.A. and Starter Corporation (the
"Letter of Credit Agreement"), which Letter of Credit Agreement was
entered into in connection with the $6,400,000 (original principal amount)
City of New Haven Facility Variable Rate Demand Revenue Bonds (Starter
Sportswear Project - 1986 Series), or any other agreement, instrument or
document executed and/or delivered solely in connection with the Letter of
Credit Agreement."
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(iii) The definition of "Permitted Acquisition" appearing in
Schedule 2 of the Credit Agreement is hereby amended in its entirety to
read as follows:
"Permitted Acquisition. Shall mean any acquisition of all or
substantially all the assets of, or shares or other equity interests in, a
Person or division or line of business of a Person (including, without
limitation, by way of merger) if (a) prior to giving effect thereto, the
ratio of Earnings Before Interest and Taxes to Consolidated Total Interest
Expense for the period of four (4) fully completed consecutive fiscal
quarters of the Borrowers ending immediately prior to such acquisition is
greater than 1.50 to 1 and (b) immediately after giving effect thereto:
(i) no Default or Event of Default shall have occurred and be continuing
or would result therefrom, (ii) all transactions related thereto shall be
consummated in accordance in all material respects with applicable laws,
(iii) the assets, shares or other equity interests or division or line of
business acquired shall be in the same or similar line of business of the
Borrowers, (iv) the Administrative Agent shall have received evidence that
the board of directors (or Persons performing similar functions) of such
Person shall have approved such acquisition, such evidence of approval to
be in form and substance reasonably satisfactory to the Administrative
Agent in all respects, (v) the payment of the total consideration for such
acquisition shall not exceed $5,000,000, (vi) one hundred percent (100%)
of the capital stock or other equity interests of any acquired or newly
formed corporation, partnership, association or other business entity is
owned directly by either Borrower or a Subsidiary of either Borrower and
all actions shall have been taken with respect to such acquired or newly
formed Subsidiary to cause such Subsidiary to execute and deliver to the
Administrative Agent a guaranty of the Obligations and to take all such
action as may be required to grant to the Administrative Agent, for the
benefit of the Lenders, a first priority perfected security interest in
all of the assets of such Subsidiary and (vii)(A) the Borrowers and their
Subsidiaries shall be in compliance, on a pro forma basis after giving
effect to such acquisition or formation, with the covenants contained in
ss.10 recomputed as at the last day of each relevant period for testing
such compliance, and the Borrowers shall have delivered to the
Administrative Agent an officer's certificate to such effect, together
with all relevant financial information for such Subsidiary or assets, and
(B) any acquired or newly formed Subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by ss.9.1 hereof)."
(iv) The definition of "Permitted Overadvance Amount"
appearing in Schedule 2 of the Credit Agreement is hereby amended in its
entirety to read as follows:
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"Permitted Overadvance Amount. For the periods set forth below, an
amount (in addition to the amount permitted under the Borrowing Base)
equal to the lesser of (a) the dollar amounts set forth opposite such
period set forth below and (b) an amount equal to the applicable advance
rate set forth in the table below multiplied by the sum of (i) the face
amount of the issued and undrawn documentary Letters of Credit
specifically supporting the production of the applicable inventory of the
Borrowers and (ii) the net book value (determined on a first-in first-out
basis at lower of cost or market) of all Eligible Inventory, both as set
forth below for the relevant time of reference thereto as more
particularly set forth in Exhibit F attached hereto and made a part
hereof.
Period Advance Rate Amount
------ ------------ ------
8/1/97 - 8/31/97 30% $37,500,000
9/1/97 - 9/30/97 25% $30,000,000
10/1/97 - 10/31/97 25% $25,000,000
11/1/97 - 11/15/97 20% $20,000,000
11/16/97 - 11/30/97 15% $15,000,000
12/1/97 - 4/14/98 0% $0.00
4/15/98 - 4/30/98 15% $15,000,000
5/1/98 - 6/15/98 25% $30,000,000
6/16/98 - 8/31/98 30% $37,500,000
9/1/98 - 9/30/98 25% $30,000,000
10/1/98 - 10/31/98 25% $25,000,000
11/1/98 - 11/15/98 20% $20,000,000
11/16/98 - 11/30/98 15% $15,000,000
12/1/98 - 4/14/99 0% $0.00
4/15/99 - 4/30/99 15% $15,000,000
5/1/99 - 6/15/99 25% $30,000,000
6/16/99 - 8/31/99 30% $37,500,000
9/1/99 - 9/30/99 25% $30,000,000
10/1/99 - 10/31/99 25% $25,000,000
11/1/99 - 11/16/99 20% $20,000,000
11/16/99 - 11/30/99 15% $15,000,000
12/1/99 - Maturity 0% $0.00"
Date
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(d) Amendment to Section 2.5(a). Section 2.5(a) of the Credit
Agreement is hereby amended in its entirety to read as follows:
"(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
each Interest Period with respect thereof at the rate of one-quarter of
one percent (0.25%) per annum above the Base Rate from time to time in
effect."
(e) Amendment to Section 3.3. Section 3.3 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"ss.3.3 Optional Repayments of Loans. The Borrowers shall have the
right, at their election, to repay the outstanding amount of the Loans, as
a whole or in part, at any time, subject to the premium set forth below,
provided that any full or partial prepayment of the outstanding amount of
any LIBOR Rate Loans pursuant to this ss.3.3 may be made only on the last
day of the Interest Period relating thereto unless, contemporaneously with
such prepayment, the Borrowers shall have paid to the Administrative Agent
all amounts due under ss.5.9 hereof. The Borrowers shall give the
Administrative Agent, no later than 10:00 a.m., Hartford time, not less
than one (1) and not more than five (5) Business Days' prior written
notice of any proposed prepayment pursuant to this ss.3.3 of Base Rate
Loans, and not less than three (3) and not more than five (5) LIBOR
Business Days' notice of any proposed prepayment pursuant to this ss.3.3
of LIBOR Rate Loans, in each case specifying the proposed date of
prepayment of Loans and the principal amount to be prepaid. Each such
partial prepayment of the Loans shall be in an integral multiple of
$1,000,000, shall be accompanied by the payment of accrued interest on the
principal prepaid to the date of prepayment and shall be applied, in the
absence of instruction by the Borrowers, first to the principal of Base
Rate Loans and then to the principal of LIBOR Rate Loans. Each partial
prepayment shall be allocated among the Lenders, in proportion, as nearly
as practicable, to the respective unpaid principal amount of each Lender's
Note, with adjustments to the extent practicable to equalize any prior
repayments not exactly in proportion. If the Borrowers terminate the Total
Commitment, whether in one transaction or a series of transactions, the
Borrowers shall pay a premium with respect to such termination in an
amount determined in accordance with the percentages set forth in the
following table opposite the period during which the termination occurs:
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Period Terminated Amount Due
----------------- ----------
Effective Date through
first anniversary thereof 3% of the Total Commitment
First anniversary of Effective
Date through second
anniversary of Effective Date 2% of the Total Commitment
Second anniversary of Effective
Date through Maturity Date 1% of the Total Commitment
Notwithstanding the foregoing, the premium set forth in the table
above shall not be due and payable if the Total Commitment is terminated and the
outstanding principal amount of the Obligations are paid with the proceeds of
financing pursuant to which Bank of Boston Connecticut is the administrative
agent and the interests of the financial institutions participating in such
financing constitute more than 50% of the then holders of the Total Commitment
at the time of such termination.
(f) Amendment to Section 10.1. Section 10.1 of the Credit Agreement
is hereby amended in its entirety to read as follows:
"ss.10.1 Liabilities to Worth Ratio. The Borrowers will not permit
the ratio of Consolidated Total Liabilities to Consolidated Tangible Net
Worth for any fiscal quarter ending during any period described in the
table set forth below to exceed the ratio set forth opposite such period
below:
Period Ratio
------ -----
April 1, 1997 through September 30, 1997 1.75 to 1
October 1, 1997 through March 31, 1998 1.05 to 1
April 1, 1998 through June 30, 1998 1.75 to 1
July 1, 1998 through September 30, 1998 1.90 to 1
October 1, 1998 through March 31, 1999 1.00 to 1
April 1, 1999 through June 30, 1999 2.10 to 1
July 1, 1999 through September 30, 1999 1.90 to 1
October 1, 1999 through March 31, 2000 1.00 to 1"
(g) Amendment to Section 10.2. Section 10.2 of the Credit Agreement
is hereby amended in its entirety to read as follows:
"ss.10.2 EBIT to Total Interest Expense Ratio. The Borrowers will
not permit the ratio of Earnings Before Interest and Taxes to
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Consolidated Total Interest Expense for any period of four (4) consecutive
fiscal quarters of the Borrowers ending on the dates set forth below to be
less than (or exceed in the case of a loss) the ratio set forth opposite
such date below:
Date Ratio
---- -----
September 30, 1997 (0.35) to 1
December 31, 1997 (0.75) to 1
March 31, 1998 (0.60) to 1
June 30, 1998 (0.40) to 1
September 30, 1998 1.10 to 1
December 31, 1998 1.50 to 1
Thereafter 1.75 to 1"
(h) Amendment to Section 10.4. Section 10.4 of the Credit Agreement
is hereby amended in its entirety to read as follows:
"ss.10.4 Net Income. The Borrowers will not permit Consolidated Net
Income (or loss) for the periods set forth below ending on the dates set
forth below to be less than (or exceed in the case of a loss) the amount
set forth opposite such date in the table set forth below:
Test Date Consolidated Net
--------- Income (loss)
Cumulative Year to
Date
----
Three fiscal quarters ending September 30, 1997 ($2,800,000.00)
Four fiscal quarters ending December 31, 1997 ($7,400,000.00)
One fiscal quarters ending March 31, 1998 ($3,300,000.00)
Two fiscal quarters ending June 30, 1998 ($7,500,000.00)
Three fiscal quarters ending September 30, 1998 $4,000,000.00
Four fiscal quarters ending December 31, 1998 $2,000,000.00
One fiscal quarters ending March 31, 1999 ($1,200,000.00)
Two fiscal quarters ending June 30, 1999 ($5,700,000.00)
Three fiscal quarters ending September 30, 1999 $4,000,000.00
Four fiscal quarters ending December 31, 1999 $1.00
One fiscal quarters ending March 31, 2000 $1,200,000.00"
(i) Amendment to Schedule 9.1. Schedule 9.1 of the Credit Agreement
is hereby amended in its entirety as set forth on Schedule 2 attached hereto and
made a part hereof.
(j) Amendment to Schedule 9.2. Schedule 9.2 of the Credit Agreement
is hereby amended in its entirety as set forth on Schedule 3 attached hereto and
made a part hereof.
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ss.5. Additional Provisions. The parties hereto additionally covenant and
agree as follows:
(a) On or before October 1, 1997, the Administrative Agent shall
receive the results of the inventory appraisal performed by Xxxxxx Xxxxxxxx
Partners, Inc. (the "Inventory Valuation"). If, in the sole discretion of the
Administrative Agent and the Lenders, the Inventory Valuation fails to support
the existing inventory advance rate, then such advance rate shall be lowered to
an amount supported by such Inventory Valuation, as determined in the
Administrative Agent's and the Lenders' sole discretion.
(b) The Borrowers shall cooperate in all respects with such
Inventory Valuation and shall pay all costs and expenses in connection with such
Inventory Valuation and any fees and expenses incurred in connection with any
required further amendment of the Loan Documents.
Each of the Borrowers expressly acknowledges and agrees that any failure
by either Borrower to comply with the terms and conditions of this ss.5 or any
other provision contained in this Agreement shall constitute an Event of Default
under the Credit Agreement.
ss.6. Conditions Precedent. The effectiveness of the amendments
contemplated herein shall be subject to the satisfaction on or before the date
hereof of each of the following conditions precedent:
(a) All of the representations and warranties made by the Borrowers
herein, whether directly or incorporated by reference, shall be true and correct
on the date hereof, except as provided in ss.3 hereof.
(b) The Borrowers shall have paid an amendment fee in an amount
equal to $250,000 to the Administrative Agent for accounts of the Lenders in
accordance with their respective Commitment Percentages.
(c) The Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that no Default or Event of Default
shall have occurred and be continuing.
ss.7. Miscellaneous Provisions.
(a) Except as otherwise expressly provided by this Agreement, all of
the respective terms, conditions and provisions of the Credit Agreement, the
Notes and the other Loan Documents shall remain the same. It is declared and
agreed by each of the parties hereto that the Credit Agreement, the Notes and
the other Loan Documents, each as amended hereby, shall continue in full force
and effect, and that this Agreement and the Credit Agreement, the Notes and the
other Loan Documents, as applicable, shall be read and construed as one
instrument.
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(b) This Agreement is intended to take effect under, and shall be
construed according to and governed by, the laws of the State of Connecticut.
(c) This Agreement may be executed in any number of counterparts,
but all such counterparts shall together constitute but one instrument. In
making proof of this Agreement it shall not be necessary to produce or account
for more than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.
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IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and behalf by its duly authorized officer as of the
date first written above.
STARTER CORPORATION
By: /s/ Xxxx X. Xxxxxx
----------------------------
Xxxx X. Xxxxxx
Its Senior Vice President
STARTER GALT, INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------
Xxxx X. Xxxxxx
Its Senior Vice President
BANK OF BOSTON CONNECTICUT,
Individually and as Administrative Agent
By: /s/ [ILLEGIBLE]
----------------------------
Its Vice President
CORESTATES BANK, N.A.,
Individually and as Syndication Agent
By:
----------------------------
Its
PEOPLE'S BANK
By:
----------------------------
Its
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IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and behalf by its duly authorized officer as of the
date first written above.
STARTER CORPORATION
By:
----------------------------
Xxxx X. Xxxxxx
Its Senior Vice President
STARTER GALT, INC.
By:
----------------------------
Xxxx X. Xxxxxx
Its Senior Vice President
BANK OF BOSTON CONNECTICUT,
Individually and as Administrative Agent
By:
----------------------------
Its
CORESTATES BANK, N.A.,
Individually and as Syndication Agent
By: /s/ [ILLEGIBLE]
----------------------------
Its Vice President
PEOPLE'S BANK
By:
----------------------------
Its
00
XXXXXXXX XXXX XX XXXXXX
By:
--------------------------------
Its
SANWA BUSINESS CREDIT CORPORATION
By:
--------------------------------
Its
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------
Its
BTM CAPITAL CORPORATION
By:
--------------------------------
Its
FIRSTRUST SAVINGS BANK
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Its Chief Credit Policy Officer
PNC BANK, N.A.
By:
--------------------------------
Its
