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EXHIBIT 10.24
CONSENT, WAIVER AND AMENDMENT NO. 12
TO
LOAN AND SECURITY AGREEMENT
THIS CONSENT, WAIVER AND AMENDMENT NO. 12 ("Amendment") is
entered into as of August 11, 1999, by and between APPAREL VENTURES, INC., a
Delaware corporation having its chief executive office and principal place of
business at 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 ("Borrower")
and FLEET CAPITAL CORPORATION ("Lender").
BACKGROUND
Borrower and Lender are parties to a Loan and Security Agreement
dated as of May 23, 1994 (as amended, supplemented, restated or otherwise
modified from time to time, the "Loan Agreement") pursuant to which Lender
provided Borrower with certain financial accommodations.
Borrower has requested that Lender (i) waive Events of Default
resulting from Borrower's failure to comply with certain financial covenants
contained in the Loan Agreement, (ii) consent to the restructuring of Borrower
and Holdings and subsequent merger of Holdings into Borrower and (iii) amend
certain provisions of the Loan Agreement and Lender is willing to do so on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant
of credit heretofore or hereafter made to or for the account of Borrower by
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to the satisfaction of
the conditions precedent set forth in Section 5 below, the Loan Agreement is
hereby amended as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended as
follows:
(i) the following defined terms are hereby added in their
appropriate alphabetical order:
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Equipment - with respect to Borrower, all machinery,
apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal Property (other than
Inventory) of every kind and description used in
Borrower's operations or owned by Borrower, or in which
Borrower has an interest, whether now owned or hereafter
acquired by Borrower and wherever located, and all parts,
accessories and special tools and all increases and
accessions thereto and substitutions and replacements
therefor.
Second Supplemental Indenture - the amendment of the
Indenture dated as of August 11, 1999 between Borrower and
Firstar Bank of Minnesota, N.A., as trustee.
JZEP - JZ Equity Partners PLC, a public limited liability
company incorporated in England and Wales under the
Companies Act (1985).
New Merger Documents - the certificate, plan or agreement
for filing with the Secretary of State of Delaware
pursuant to which Holdings shall merge with and into
Borrower with Borrower surviving the merger.
Senior Note Repurchase Agreement - collectively, the Offer
to Purchase and Consent Solicitation by Borrower, dated
June 29, 1999, relating to the Senior Notes and all
amendments and waivers thereto and the letter agreement,
dated June 29, 1999, among Borrower and holders of
approximately 96.5% of the aggregate outstanding principal
amount of the Senior Notes to tender the Senior Notes.
Subordinated Note Purchase Agreement - the Purchase
Agreement including all exhibits and attachments thereto
dated as of August 11, 1999 among Borrower, JZEP, Xxxxxx
X. Xxxxxxx and each of the Jordan Parties (as such term is
defined therein).
Subsidiary Stock - all of the issued and outstanding
shares of stock of each subsidiary (Excluding the Mexican
Subsidiary) owned by Borrower or any Subsidiary of
Borrower or any of its respective Subsidiaries.
(ii) the following defined term is hereby amended in its
entirety to
provide as follows:
Change of Control means (i) the sale, assignment,
transfer, conveyance or other disposition of all or
substantially all the assets of Borrower to any Person
other than the Principals and their Related Parties, (ii)
the liquidation or dissolution of Borrower or the adoption
of a plan of liquidation by Borrower, (iii) the
acquisition by any Person (other than the
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Principals and their Related Parties) of a direct or
indirect majority in interest (more than 50%) of the
Voting Stock of Borrower by way of merger or consolidation
or otherwise; (iv) any transaction the result of which is
that any Person beneficially owns, directly or indirectly,
more of the Voting Stock of Borrower than is owned
beneficially, directly or indirectly, by the Principals
and their Related Parties, (v) after the first sale of
common equity by Borrower pursuant to a registration
statement under the Securities Act of 1933, as amended
that results in at least 20% of the then outstanding
common equity of Borrower being held by the public, the
Principals and their Related Parties own beneficially,
directly or indirectly, less than 25% of the aggregate
amount of Voting Stock or (vi) after the first sale of
common equity by Borrower pursuant to a registration
statement under the Securities Act of 1933, as amended,
that results in at least 20% of the then outstanding
common equity of Borrower being held by the public, during
any period of two consecutive years, individuals who at
the beginning of such period constituted the board of
directors of Borrower (together with any new directors
whose election by such board of directors or whose
nomination for election by the stockholders of Borrower
was approved by a vote of at least 66 2/3% of the
directors then still in office who were either directors
at the beginning of such period or whose election or
nomination for election was previously so approved) cease
for any reason to constitute a majority of the board of
directors of Borrower then in office.
Fixed Charge Coverage Ratio - shall mean, for any period,
with respect to the period then ended, the ratio of (I)(A)
EBITDA of Borrower for such period minus (B) actual
non-financed Capital Expenditures of Borrower during such
period to (ii)(A) cash interest expense of Borrower during
such period plus (B) the sum of the aggregate of payments
of regularly scheduled principal with respect to
Indebtedness for Money Borrowed (including, without
limitation in respect of Capital Lease Obligations) during
such period plus (C ) cash income taxes actually paid by
Borrower during such period plus (D) without duplication,
all Distributions actually made during such period in
accordance with 7.2(K) of the Loan Agreement.
(b) Section 4.1 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
"Security Interest in Collateral. To secure the prompt
payment and performance to Lender of the
Obligations, Borrower hereby grants to Lender a continuing
security interest and Lien upon all of Borrower's assets,
including all of the following Property and interests in
Property of Borrower, whether now owned or existing or
hereafter created, acquired or arising and wheresoever
located:
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(A) Accounts;
(B) Inventory;
(C) Equipment;
(D) General Intangibles;
(E) All monies and other Property of any kind now or at
any time or times hereafter in the possession or under the
control of Lender or a bailee or Affiliate of Lender;
(F) All Subsidiary Stock;
(G) All investment property;
(H) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (A)
through (G) above, including, without limitation, proceeds of and
unearned premiums with respect to insurance policies insuring any
of the Collateral; and
(I) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs,
and other computer materials and records) of Borrower pertaining
to any of (A) through (H) above."
(c) Section 6.1(AE) of the Loan Agreement is hereby amended to
provide as follows:
(i) the word "and" is deleted before clause (c); and
(ii) the following language is added before the period
at the end of clause (c):
", and (d) the Senior Note Repurchase Agreement,
the First Supplemental Indenture, the Subordinated
Note Purchase Agreement and the New Merger
Documents.
(d) Section 7.2(B) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"(B) Loans. Make any loans or other advances of money
(other than for salary, travel advances, advances against
commissions and other similar advances in the ordinary
course of business) to any Person, including, without
limitation, any of Borrower's Affiliates, officers or
employees, except for (a) loans or other advances to AVE
together with the value of all assets transferred to AVE
by Borrower at any time outstanding
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("Advances to AVE") and (b) loans or other advances to
Mexican Subsidiary together with the value of all assets
transferred to Mexican Subsidiary by Borrower at any time
outstanding ("Advances to Mexican Subsidiary") that in the
aggregate (collectively (a) and (b)) do not exceed at any
time $6,500,000."
(e) Section 7.2(C)(iii) of the Loan Agreement is hereby amended
in its entirety to provide as follows:
"(iii) Subordinated Debt including the Subordinated Debt
issued pursuant to the Subordinated Note Purchase
Agreement which Indebtedness may only be paid in
accordance with the terms of Section 7.2(I);"
(f) Section 7.2(I) of the Loan Agreement is hereby amended in its
entirety to provide as follows:
"(I) Subordinated Debt. Make, take any action to authorize
or effect or permit any Subsidiary to(a) make any payment
of any part or all of any Subordinated Debt (I) in
violation of any subordination agreement of the
subordination provision provided in the Senior Note
Repurchase Agreement relating to such Subordinated Debt or
(ii) if a Default or Event of Default exists or would
exist after giving effect to the payment then proposed to
be made on a pro forma basis based on the most recent
financial statements furnished to Lender by Borrower in
accordance with Section 7.1(k)(ii) of this Agreement or,
(b) voluntarily prepay any Subordinated Debt or otherwise
repurchase, redeem or retire any instrument evidencing any
such Subordinated Debt prior to maturity or, (c) enter
into any agreement (oral or written) which could in any
way be construed to amend, modify, alter or terminate any
one or more instruments or agreements evidencing or
relating to any Subordinated Debt."
(g) Section 7.2 (V) of the Loan Agreement is hereby amended in
its entirety to provide as follows:
"Stock of Subsidiary, Etc. (I) Sell or otherwise dispose
of any shares of capital stock of any Subsidiary or permit
any Subsidiary to issue any additional shares of it
capital stock except director's qualifying shares or
shares sold to Borrower or (ii) pledge, assign,
hypothecate or transfer any shares of stock of the Mexican
Subsidiary."
(h) Section 7.3 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
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"7.3. Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there any Obligations to Lender,
Borrower covenants that, unless otherwise consented to by Lender in writing, it
shall:
(A) Minimum Adjusted Tangible Net Worth. Maintain at all
times an Adjusted Tangible Net Worth of not less than the amount ("Net Worth
Amount") shown below for the period corresponding thereto:
Period Amount
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8/31/99 through 12/30/99 $7,500,000
12/31/99 through 1/30/00 $8,500,000
1/31/00 through 2/27/00 $9,000,000
2/28/00 through 3/30/00 $10,000,000
3/31/00 through 4/29/00 $12,000,000
From 4/30/00 and thereafter $13,000,000
(B) Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage
Ratio, to be measured as of the end of each quarter for the periods described
below, of not less than:
(i) 1.25 to 1.0 for the three consecutive fiscal quarter
period ending March 31, 2000; and
(ii) 1.25 to 1.0 for the four consecutive fiscal quarter
period ending on June 30, 2000, and for the four consecutive fiscal quarter
period ending on each fiscal quarter thereafter.
(C) Minimum EBITA. Maintain EBITDA, measured as of the end
of each month, of not less than the amount shown below for the period
corresponding thereto:
Period Amount
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2 months ended 8/31/99 ($2,554,000)
3 months ended 9/30/99 ($3,411,000)
4 months ended 10/31/99 ($4,349,000)
5 months ended 11/30/99 ($4,173,000)
6 months ended 12/31/99 ($3,141,000)
7 months ended 1/31/00 ($1,000,000)
8 months ended 2/28/00 $1,537,000
thereafter not applicable"
3. Waiver. Subject to satisfaction of the conditions precedent
set forth in Section 5 below, Lender hereby waives the following Events of
Default which have occurred as a
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result of Borrower's non-compliance with the following provisions of the Loan
Agreement solely with respect to periods ending on or prior to June 30, 1999:
(a) Section 7.3(A) as a result of Borrower's failure to
maintain an Adjusted Tangible Net Worth of not less than ($24,000,000).
(b) Section 7.3(B) as a result of Borrower's failure to
maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.0.
(c) Section 7.3(C) as a result of Borrower's failure to
maintain EBITDA of not less than $8,100,000.
4. Consent. Subject to satisfaction of the conditions precedent
set forth in Section 5 below, Lender hereby consents to each of the following:
(a) The repurchase, pursuant to the Senior Note Repurchase
Agreement, of the Senior Notes outstanding in an aggregate principal amount of
not less than $34,560,000 for $222.50 of each $1,000 of outstanding principal
solely with proceeds received from the issuance of equity securities and the
issuance of notes under the Subordinated Note Purchase Agreement.
(b) Issuance by Borrower of 10.0% subordinated promissory
notes in the aggregate principal amount of $8,750,000 pursuant to the
Subordinated Note Purchase Agreement.
(c) The merger of Holdings, pursuant to the New Merger
Documents, with and into Borrower with Borrower as the surviving Person.
5. Conditions of Effectiveness. This Amendment shall become
effective upon satisfaction of the following conditions precedent: Lender shall
have received (i) four (4) copies of this Amendment executed by Borrower and
Lender, (ii) the Senior Note Repurchase Agreement, the Second Supplemental
Indenture, the Subordinated Note Purchase Agreement, each of which shall be in
form and substance reasonably satisfactory to Lender and its counsel and
consummation of the transactions contemplated thereunder including, without
limitation, the conversion of all indebtedness of Holdings (excluding that
certain promissory note made by Holdings to Xxxxxxxxx Xxxxxx in the original
principal amount of $63,405) into equity prior to the merger of Holdings into
Borrower, and (iii) such other certificates, instruments, documents and
agreements as may be required by Lender or its counsel, each of which shall be
in form and substance reasonably satisfactory to Lender and its counsel.
6. Representations and Warranties. Borrower hereby represents and
warrants as follows:
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(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrower hereby
reaffirms all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to have been remade as
of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is continuing
or would exist after giving effect to this Amendment.
(d) Borrower has no defense, counterclaim or offset with respect
to the Loan Agreement.
7. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference in
the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided in Section 3, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments or agreements executed
and/or delivered under or in connection therewith.
8. Governing Law. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York.
9. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
10. Counterparts. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of
the day and year first written above.
APPAREL VENTURES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
FLEET CAPITAL CORPORATION
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
Title: Senior Vice President
