EXHIBIT 10.1
AMENDMENT NO. 6 TO THE COMPANY'S FINANCING AGREEMENT
SIXTH AMENDMENT
TO THE FINANCING AGREEMENT
SIXTH AMENDMENT, dated as of March 31, 1999 (this "Amendment"), to
the Financing Agreement, dated as of February 13, 1996, as amended by the First
Amendment dated as of February 13, 1997, the Second Amendment dated as of June
1, 1997, the Third Amendment dated as of October 1, 1997, the Fourth Amendment
dated as of November 28, 1997 and the Fifth Amendment dated as of March 25, 1998
(as so amended, the "Financing Agreement"), by and among Happy Kids Children's
Apparel Ltd., a New York corporation formerly known as Happy Kids, Ltd. ("Happy
Kids"), Happy Kids, Inc., a New York corporation formerly known as O'Boy Inc.
(the "Parent"), Talk of the Town Apparel Corp., a New York corporation ("TOT
Apparel"), O.P. Kids, Inc., a New Jersey corporation and successor by merger to
O.P. Kids, L.L.C. ("OP Inc.", and together with Happy Kids, the Parent and TOT
Apparel, each a "Borrower" and collectively, the "Borrowers"), the guarantors
listed on Schedule B to the Financing Agreement (each a "Guarantor" and
collectively, the "Guarantors"), the lenders listed on Schedule A to the
Financing Agreement (each a "Lender" and collectively the "Lenders") and The CIT
Group/Commercial Services, Inc., as agent for the Lenders (in such capacity, the
"Agent").
WHEREAS, the Borrowers, the Guarantors, the Lenders and the Agent
wish to amend the Financing Agreement to among other things (i) increase the
Credit Exposure (as defined in the Financing Agreement) and the Total Credit
Exposure (as defined in the Financing Agreement), (ii) extend the Termination
Anniversary Date (as defined in the Financing Agreement), (iii) change the
interest rate and provide for a Eurodollar interest rate option, and (iv) amend
certain other terms and conditions in the Financing Agreement. Accordingly, the
Borrowers, the Guarantors, the Lenders and the Agent hereby agree as follows:
1. DEFINITIONS. All terms which are defined in the Financing
Agreement and not otherwise defined herein are used herein as defined therein.
2. RECITALS. The first sentence in the Recitals is hereby amended in
its entirety to read as follows: "The Borrowers and the Guarantors have asked
the Lenders to extend credit to the Borrowers, from the date hereof through the
Final Maturity Date (as hereinafter defined), in the form of discretionary
revolving credit loans to the Borrowers at any time and from time to time prior
to the Final Maturity Date in an aggregate principal amount not in excess of
$50,000,000."
3. EXISTING DEFINITIONS. (a) The definition of the term "Business
Day" in Section 1.01 of the Financing Agreement is hereby amended in its
entirety to read as follows:
"'Business Day' means any day other than a Saturday,
Sunday or other day on which commercial banks in New York City are
required or authorized to close, provided, that with respect to
borrowing, payment, conversion to or continuation of, or
determination of interest rate on, Eurodollar Loans,
Business Day shall mean any Business Day on which dealings in United
States dollars may be carried on in the interbank eurodollar markets
in New York City and London."
(b) The definition of the term "Credit Exposure" in Section
1.01 of the Financing Agreement is hereby amended in its entirety to read as
follows:
"'Credit Exposure' means, with respect to each Lender,
the total credit exposure of such Lender as set forth on Schedule A
hereto, as the same may be adjusted from time to time pursuant to
Sections 10.01 or 11.01 hereof."
(c) The definition of the term "L/C Issuer" in Section 1.01 of
the Financing Agreement is hereby amended in its entirety to read as follows:
"'L/C Issuer' means The Chase Manhattan Bank or its
successors."
(d) The definition of the term "Post-Default Rate" in Section
1.01 of the Financing Agreement is hereby amended in its entirety to read as
follows:
"'Post-Default Rate' means a rate of interest per annum
equal to the rate of interest otherwise in effect plus 1-1/2% or, if
no other rate of interest is in effect, the Prime Rate plus 1%."
(e) The definition of the term "Termination Anniversary Date"
in Section 1.01 of the Financing Agreement is hereby amended in its entirety to
read as follows:
"'Termination Anniversary Date' means March 31, 2000 and
thereafter March 31 of each succeeding calendar year."
(f) The definition of the term "Total Credit Exposure" in
Section 1.01 of the Financing Agreement is hereby amended in its entirety to
read as follows:
"'Total Credit Exposure' means the sum of the Lenders'
Credit Exposures in Schedule A hereto, as the same may be adjusted
from time to time pursuant to Sections 10.01 or 11.01 hereof."
4. NEW DEFINITIONS. The following definitions of the terms
"Eurodollar Base Rate", "Eurodollar Loan", "Eurodollar Rate", "Interest Period",
"Prime Rate Loan", and "Reserve Requirements" are hereby added to Section 1.01
of the Financing Agreement:
"'Eurodollar Base Rate' means, with respect to each day
during each Interest Period pertaining to a Eurodollar Loan, the
rate of interest published in The Wall Street Journal, Eastern
Edition, two Business Days prior to such Interest Period as the
"London Interbank Offered Rate" applicable to one, two, three or six
months, as selected by the Administrative Borrower. In the event
that The Wall Street Journal, Eastern Edition is not published or
such rate does not appear in The Wall Street Journal, Eastern
Edition, the Eurodollar Base Rate shall
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be the rate determined by the Agent to be the rate at which deposits
in United States dollars are offered by The Chase Manhattan Bank to
first class banks in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect
of its eurodollar loans are then being conducted at approximately
11:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period, in an amount approximately equal
to the principal amount of the Eurodollar Loan to which such
Interest Period is to apply and for a period of time comparable to
such Interest Period."
"'Eurodollar Loan' means a Loan bearing interest based
on the Eurodollar Rate."
"'Eurodollar Rate' means with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, a rate per
annum determined for such day in accordance with the following
formula (rounded upward to the nearest 1/16 of 1%):
Eurodollar Base Rate
----------------------------
1.00 - Reserve Requirements"
"'Interest Period' means with respect to any Eurodollar
Loan, the period commencing on the borrowing date or the date of any
continuation of or conversion into such Eurodollar Loan, as the case
may be, and ending one, two, three or six months thereafter, in each
case as selected by the Administrative Borrower in the applicable
notice given to the Agent pursuant to Sections 2.03 or 2.10 hereof;
provided that (i) each Interest Period shall begin on the first
Business Day of a month, (ii) any Interest Period that would
otherwise end on a day that is not a Business Day shall be extended
to the next succeeding Business Day, unless such Business Day falls
in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day, (iii) no Interest Period for
any Eurodollar Loan shall end after the Final Maturity Date, and
(iv) no more than three (3) Interest Periods in the aggregate for
the Borrowers may exist at any one time."
"'Prime Rate Loan' means a Loan bearing interest at the
Prime Rate."
"'Reserve Requirements' means, for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect
on such day (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the
Board of Governors of the Federal Reserve System) maintained by a
member bank of the Federal Reserve
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System. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without
benefit of or credit for proration, exceptions or offsets which may
be available from time to time to any Lender or the Affiliate of any
Lender under Regulation D of the Board of Governors of the Federal
Reserve System."
5. CREDIT EXPOSURE. The second sentence of Section 2.01 of the
Financing Agreement is hereby amended in its entirety to read as follows:
"Notwithstanding the foregoing, the aggregate principal
amount of Loans outstanding at any time to the Borrowers shall not
exceed the lowest of (i) the difference between (A) the Total Credit
Exposure, and (B) the aggregate Letter of Credit Obligations, (ii)
the difference between (A) the then current Borrowing Base and (B)
the aggregate Letter of Credit Obligations, and (iii) $40,000,000."
6. MAKING THE LOANS. Section 2.03 of the Financing Agreement is
hereby amended in its entirety to read as follows:
"SECTION 2.03. Making the Loans. The Administrative
Borrower, on behalf of itself or any other Borrower, shall give the
Agent prior written or telephone notice (which notice, if requested
by the Agent, must be promptly confirmed in writing in substantially
the form of Exhibit I hereto (a "Notice of Borrowing")) (i) not
later than 12:00 noon (New York City time) on the date of the
proposed borrowing, in the case of a borrowing consisting of Prime
Rate Loans, or (ii) not later than 12:00 noon (New York City time)
three Business Days prior to such proposed borrowing in the case of
a borrowing consisting of Eurodollar Loans, provided that Eurodollar
Loans will only be made on the first Business Day of a month. Such
Notice of Borrowing shall be irrevocable and shall specify the
principal amount of the proposed borrowing (which, in the case of a
Eurodollar Loan, must be in a minimum amount of $1,500,000 and in
multiples of $500,000 in excess thereof), whether such Loan is
requested to be a Prime Rate Loan or a Eurodollar Loan and, in the
case of a Eurodollar Loan, the initial Interest Period for such
Eurodollar Loan and the proposed borrowing date, which must be a
Business Day and, in the case of a Eurodollar Loan, the first
Business Day of a month, and, if the Agent agrees in its sole and
absolute discretion to make such Loan to a Borrower, such Borrower
shall be bound to make a borrowing in accordance therewith. The
Agent may act without liability upon the basis of written, telecopy
or telephone notice believed by the Agent in good faith to be from
the Administrative Borrower (or from any officer thereof designated
in writing to the Agent), and the Borrowers hereby waive the right
to dispute the Agent's record of the terms of any such telephonic
Notice of Borrowing."
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7. FUNDING AND SETTLEMENT. (a) The second sentence of Section
2.05(a)(i) of the Financing Agreement is hereby amended in its entirety to read
as follows:
"If either (1) the Administrative Borrower gives a
Notice of Borrowing requesting a Eurodollar Loan and the Agent has
agreed to make such Loan or (2) the Administrative Borrower gives a
Notice of Borrowing requesting a Prime Rate Loan and the Agent
agrees to make such Loan and elects not to fund such Loan on behalf
of the Lenders, then promptly after receipt of the Notice of
Borrowing requesting such Loan, the Agent shall notify each Lender
of the specifics of the requested Loan and that it will not fund the
requested Loan on behalf of the Lenders. If the Agent notifies the
Lenders that it will not fund a requested Loan on behalf of the
Lenders, each Lender shall make its Pro Rata Share of the Loan
available to the Agent, in immediately available funds, at the
Payment Office no later than 3:00 p.m. (New York City time)
(provided that the Agent requests payment from such Lender not later
than 12:00 noon) on the date of the proposed Loan."
(b) The first sentence of Section 2.05(b)(i) of the Financing
Agreement is hereby amended in its entirety to read as follows:
"With respect to each Eurodollar Loan, on the first and
the last date of each Interest Period, and with respect to all
periods for which the Agent, on behalf of the Lenders, has funded
Prime Rate Loans pursuant to subsection 2.05(a), on the first
Business Day after the last day of each week, or such shorter period
as the Agent may from time to time select (any such week or shorter
period being herein called a "Settlement Period"), the Agent shall
notify each Lender of the average daily unpaid principal amount of
the Loans outstanding during such Settlement Period."
8. INTEREST. Paragraphs (a) and (c) of Section 2.06 of the Financing
Agreement are hereby amended in their entirety to read as follows:
"(a) Revolving Credit Loans. Each Loan which is a
Eurodollar Loan shall bear interest on the principal amount thereof
from time to time outstanding from the date of such Loan until such
principal amount becomes due, at a rate per annum equal to the
Eurodollar Rate for the Interest Period in effect for such Loan plus
2.00%. Each Loan which is a Prime Rate Loan shall bear interest on
the principal amount thereof from time to time outstanding from the
date of such Loan, until such principal amount becomes due, at a
rate per annum equal to the Prime Rate minus .50%."
"(c) Interest Payment. Interest on each Eurodollar Loan
shall be payable in arrears on the last day of each Interest Period
of such Eurodollar Loan and, in the case of any Eurodollar Loan of
six month duration, the day that interest would have been paid if
such Eurodollar Loan had an interest period of three months.
Interest on each Prime Rate Loan shall be payable monthly, in
arrears,
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on the first day of each month, commencing on the first day of the
month following the month in which such Loan is made, and at
maturity (whether upon demand, by acceleration or otherwise).
Interest at the Post-Default Rate shall be payable on demand. The
Borrowers hereby authorize the Agent to, and the Agent may, from
time to time, charge the Loan Account pursuant to Section 4.02
hereof with the amount of any interest payment due hereunder."
9. PREPAYMENTS. Paragraph (g) of Section 2.07 of the Financing
Agreement is hereby amended by adding the following at the end thereof:
"Notwithstanding the foregoing in this Section 2.07,
prepayments of Eurodollar Loans shall be subject to the following
additional requirements: (i) all prepayments of Eurodollar Loans
shall be subject to the terms of Section 2.09 of this Agreement,
(ii) prepayments of Eurodollar Loans shall be made upon at least
three (3) Business Days irrevocable notice to the Agent, and (iii)
no partial prepayment of a Eurodollar Loan shall be permitted."
10. EURODOLLAR PROVISIONS. The following new Sections 2.08, 2.09 and
2.10 are hereby added to the Financing Agreement:
"SECTION 2.08. Eurodollar Rate Not Determinable;
Illegality or Impropriety.
(a) In the event, and on each occasion, that on or
before the day on which the Eurodollar Rate is to be determined for
a borrowing that is to include Eurodollar Loans, the Agent has
determined in good faith that, or has been advised by the Required
Lenders that, (i) the Eurodollar Rate cannot be determined for any
reason, (ii) the Eurodollar Rate will not adequately and fairly
reflect the cost of maintaining Eurodollar Loans or (iii) United
States dollar deposits in the principal amount of the applicable
Eurodollar Loans are not available in the interbank eurodollar
market where the eurodollar and foreign currency and exchange
operations in respect of the Lenders' Eurodollar Loans are then
being conducted, the Agent shall, as soon as practicable thereafter,
give written notice of such determination to the Administrative
Borrower and the other Lenders. In the event of any such
determination, any request by the Administrative Borrower for a
Eurodollar Loan pursuant to Section 2.03 shall, until, in the case
of such a determination by the Required Lenders, the Agent has been
advised by the Required Lenders and the Agent has so advised the
Administrative Borrower that, or in the case of a determination by
the Agent, the Agent has advised the Administrative Borrower and the
other Lenders that, the circumstances giving rise to such notice no
longer exist, be deemed to be a request for a Prime Rate Loan. Each
determination by the Agent and/or the Required Lenders hereunder
shall be conclusive and binding absent manifest error.
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(b) In the event that it shall be unlawful or improper
for any Lender to make, maintain or fund any Eurodollar Loan as
contemplated by this Agreement, then such Lender shall forthwith
give notice thereof to the Agent and the Administrative Borrower
describing such illegality or impropriety in reasonable detail.
Effective immediately upon the giving of such notice, the obligation
of such Lender to make Eurodollar Loans shall be suspended for the
duration of such illegality or impropriety and, if and when such
illegality or impropriety ceases to exist, such suspension shall
cease, and such Lender shall notify the Agent and the Administrative
Borrower. If any such change shall make it unlawful or improper for
any Lender to maintain any outstanding Eurodollar Loan as a
Eurodollar Loan, such Lender shall, upon the happening of such
event, notify the Agent and the Administrative Borrower, and the
Administrative Borrower shall immediately, or if permitted by
applicable law, rule, regulation, order, decree, interpretation,
request or directive, at the end of the then current Interest Period
for such Eurodollar Loan, convert each such Eurodollar Loan into a
Prime Rate Loan.
SECTION 2.09. Indemnity.
(a) The Borrowers hereby jointly and severally indemnify
each Lender against any loss or expense that such Lender actually
sustains or incurs (including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund or maintain
any Eurodollar Loan, and including loss of anticipated profits) as a
consequence of (i) any failure by the Borrowers to fulfill on the
date of any borrowing hereunder the applicable conditions set forth
in Article V, (ii) any failure by the Borrowers to borrow any
Eurodollar Loan hereunder, to convert any Prime Rate Loan into a
Eurodollar Loan or to continue a Eurodollar Loan as such after
notice of such borrowing, conversion or continuation has been given
pursuant to Section 2.03 or Section 2.10 hereof, (iii) any payment,
prepayment (mandatory or optional) or conversion of a Eurodollar
Loan required by any provision of this Agreement or otherwise made
on a date other than the last day of the Interest Period applicable
thereto, (iv) any default in payment or prepayment of the principal
amount of any Eurodollar Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due date
thereof, by notice of prepayment or otherwise), or (v) the
occurrence of any Event of Default, including, in each such case,
any loss (including, without limitation, loss of anticipated
profits) or reasonable expense sustained or incurred in liquidating
or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such
loss or reasonable expense shall include but not be limited to an
amount equal to the excess, if any, as reasonably determined by such
Lender, of (i) its cost of obtaining the funds for the Loan being
paid or prepaid or converted or continued or not borrowed or
converted or continued (based on the Eurodollar Rate applicable
thereto) for the period from the date of such payment, prepayment,
conversion, continuation or failure to
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borrow, convert or continue on the last day of the Interest Period
for such Loan (or, in the case of a failure to borrow, convert or
continue, the last day of the Interest Period for such Loan that
would have commenced on the date of such failure to borrow, convert
or continue) over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in
re-employing the funds so paid, prepaid, converted or continued or
not borrowed, converted or continued for such Interest Period. A
certificate of any Lender setting forth in reasonable detail any
amount or amounts that such Lender is entitled to receive pursuant
to this Section 2.09 and the basis for the determination of such
amount or amounts shall be delivered to the Administrative Borrower
and shall be conclusive and binding absent manifest error.
(b) Notwithstanding paragraph (a) of this Section 2.09,
the Agent will use reasonable efforts to minimize or reduce any such
loss or expense resulting from the mandatory prepayments required by
Section 2.07 of this Agreement by (i) applying all payments and
prepayments to Loans bearing interest at the Prime Rate prior to any
application of payments to Loans bearing interest at the Eurodollar
Rate and (ii) after all Prime Rate Loans have been paid in full,
calculating any such loss or expense based upon the net decrease in
Eurodollar Loans on a day after giving effect to all prepayments and
all Loans made on such day.
SECTION 2.10. Continuation and Conversion of Loans.
(a) Subject to Section 2.08 hereof, the Borrowers shall
have the right, at any time, on three (3) Business Days' prior
irrevocable written or telecopy notice to the Agent, to continue any
Eurodollar Loan, or any portion thereof, into a subsequent Interest
Period or to convert any Prime Rate Loan or portion thereof into a
Eurodollar Loan, or on one (1) Business Day's prior irrevocable
written or telecopy notice to the Agent, to convert any Eurodollar
Loan or portion thereof into a Prime Rate Loan, subject to the
following:
(i) no Eurodollar Loan may be continued as such
and no Prime Rate Loan may be converted into a Eurodollar Loan, when
any Event of Default or Default shall have occurred and be
continuing at such time;
(ii) in the case of a continuation of a Eurodollar
Loan as such or a conversion of a Prime Rate Loan into a Eurodollar
Loan, the aggregate principal amount of such Eurodollar Loan shall
not be less than $1,500,000 and in multiples of $500,000 if in
excess thereof;
(iii) in the case of a conversion from a
Eurodollar Loan to a Prime Rate Loan accrued interest on the Loan
(or portion thereof) being converted shall be jointly and severally
paid by the Borrowers at the time of conversion;
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(iv) a Prime Rate Loan may be converted into a
Eurodollar Loan only on the first Business Day of a month;
(v) any portion of a Loan maturing or required to
be repaid in less than one month may not be converted into or
continued as a Eurodollar Loan; and
(vi) if any conversion of a Eurodollar Loan shall
be effected on a day other than the last day of an Interest Period,
the Borrowers shall jointly and severally reimburse each Lender on
demand for any loss incurred or to be incurred by it in the
reemployment of the funds released by such conversion as provided in
Section 2.09 hereof.
In the event that the Administrative Borrower shall not give notice
to continue any Eurodollar Loan into a subsequent Interest Period,
such Loan shall automatically become a Prime Rate Loan at the
expiration of the then current Interest Period."
11. FEES. Section 4.01 of the Financing Agreement is hereby amended
by deleting paragraph (c) thereof in its entirety and substituting in lieu
thereof the following new paragraph (c):
"(c) L/C ISSUER FEE. The Borrowers agree to pay to the
Agent for the account of the L/C Issuer a non-refundable L/C
Issuer's fee in the amount of $25,000 per annum, which L/C Issuer's
fee is earned in full by the L/C Issuer on March 31, 1999 and on the
31st day of each March thereafter and is payable in twelve
consecutive monthly installments of $2,083.33 on April 1, 1999 and
on the first day of each month thereafter."
12. FINANCIAL COVENANTS. Section 7.01(l) of the Financing Agreement
is hereby amended in its entirety to read as follows:
"(l) FINANCIAL COVENANTS.
(i) TANGIBLE NET WORTH. Maintained Consolidated
Tangible Net Worth (before any LIFO adjustments made for the prior
fiscal year in accordance with GAAP) of not less than $28,000,000 at
all times.
(ii) NET LOSS. Not incur a Cumulative Net Loss
(before any LIFO adjustments made for the prior fiscal year in
accordance with GAAP) for the Parent and its Subsidiaries at the end
of any fiscal quarter of the Parent."
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13. ROYALTY PAYMENTS. Clause (viii) of Section 7.02(b) of the
Financing Agreement is hereby amended in its entirety to read as follows:
"(viii) Indebtedness represented by minimum royalty
payments under any License Agreement entered into by any Borrower in
the ordinary course of business;"
14. OPERATING LEASES. Subclause B of Section 7.02(g) of the
Financing Agreement is hereby amended in its entirety to read as follows:
"(B) Operating Lease Obligations incurred in the
ordinary course of business of the Borrowers and the Corporate
Guarantors and their Subsidiaries."
15. CAPITAL EXPENDITURES. Section 7.02(h) of the Financing Agreement
is hereby amended by deleting the amount "$200,000" and substituting in lieu
thereof "$2,000,000 in any calendar year."
16. DELIVERY OF NOTES. Each Lender shall deliver to the Agent, for
delivery to and cancellation by the Borrowers, all Notes issued by the Borrowers
and held by the Lenders under the Financing Agreement (collectively, the "Old
Notes"). The Borrowers shall execute and deliver to the Agent for the account of
each Lender the Notes which such Lender is entitled to receive pursuant to
Section 2.04 of the Financing Agreement, in the form of Exhibit A thereto and in
the principal amount for each Lender equal to its Pro Rata Share of the Total
Credit Exposure, as set forth in Annex I to this Amendment (the "New Notes" and
together with this Amendment, the "Amendment Documents"). The Agent shall
release and deliver the Old Notes to the Borrowers for cancellation and deliver
the New Notes to the Lenders.
17. SCHEDULE A. Schedule A to the Financing Agreement is hereby
amended by deleting such Schedule in its entirety and substituting in lieu
thereof new Schedule A, which is attached hereto as Annex I.
18. CONDITIONS. This Amendment shall become effective only upon
satisfaction in full of the following conditions precedent (the first date upon
which all such conditions have been satisfied being herein called the "Amendment
Effective Date"):
(a) Representations and Warranties; No Event of Default. The
representations and warranties contained herein, in Section 6.01 of the
Financing Agreement and in each other Loan Document and certificate or other
writing delivered to the Agent and the Lenders pursuant hereto on or prior to
the Amendment Effective Date shall be correct on and as of the Amendment
Effective Date as though made on and as of such date (except to the extent that
such representations and warranties expressly relate solely to an earlier date
in which case such representations and warranties shall be true and correct on
and as of such date); and no Potential Default or Event of Default shall have
occurred and be continuing on the Amendment Effective Date or would result from
this Amendment becoming effective in accordance with its terms.
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(b) Delivery of Documents. The Agent shall have received on or
before the Amendment Effective Date the following, each in form and substance
satisfactory to the Agent and, unless indicated otherwise, dated the Amendment
Effective Date:
(i) counterparts of this Amendment, duly executed by
the Borrowers, the Guarantors and the Lenders;
(ii) a copy of the resolutions of each Borrower and each
Corporate Guarantor, certified as of the Amendment Effective Date by an
authorized officer thereof, authorizing the execution of this Amendment
and the transactions contemplated hereby;
(iii) a certificate of an authorized officer of each
Borrower and each Corporate Guarantor, certifying the names and true
signatures of the representatives of such Person authorized to sign this
Amendment, together with evidence of the incumbency of such authorized
officers;
(iv) a certificate of the chief executive officer or the
chief financial officer of the Parent, certifying as to the matters set
forth in subsection (a) of this Section 18;
(v) the New Notes, duly executed by each of the
Borrowers; and
(vi) such other agreements, instruments, approvals,
opinions and other documents as the Agent may reasonably request.
(c) Proceedings. All proceedings in connection with the
transactions contemplated by the Amendment Documents, and all documents
incidental thereto, shall be satisfactory to the Agent and its special counsel,
and the Agent and such special counsel shall have received all such information
and such counterpart originals or certified copies of documents, and such other
agreements, instruments, approvals, opinions and other documents, as the Agent
or such special counsel may reasonably request.
(d) Fee. The Borrowers shall have paid the Agent for the
account of the Lenders in accordance with the Lenders' respective Pro Rata
Shares (or the Agent may charge the Loan Account pursuant to Section 4.02) a fee
of $37,000, which fee shall be earned in full on the date of this Amendment.
19. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers and the
Corporate Guarantors represents and warrants as follows:
(a) Each Borrower and Guarantor (i) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its organization and (ii) has all requisite power, authority and legal right to
execute, deliver and perform the Amendment Documents and to perform the
Financing Agreement, as amended hereby.
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(b) The execution, delivery and performance by it of the
Amendment Documents and the performance by it of the Financing Agreement, as
amended hereby (i) have been duly authorized by all necessary action, (ii) do
not and will not violate or create a default under its articles of organization,
by-laws or any applicable law or any contractual restriction binding or
otherwise affecting it or any of its properties, and (iii) except as provided in
the Loan Documents, do not and will not result in or require the creation of any
Lien upon or with respect to its property.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with (i) the due execution, delivery and performance by
it of the Amendment Documents and (ii) the performance by it of the Amendment
Documents and the Financing Agreement, as amended hereby.
(d) Each of the Amendment Documents and the Financing
Agreement, as amended hereby, is a legal, valid and binding obligation of each
Borrower and Corporate Guarantor that is a party thereto enforceable against
each such Person in accordance with the terms thereof.
(e) The representations and warranties contained in Article VI
of the Financing Agreement are correct on and as of the Amendment Effective Date
as though made on and as of the Amendment Effective Date (except to the extent
such representations and warranties expressly relate to an earlier date in which
case such representations and warranties shall be true and correct as of such
earlier date), and no Event of Default or Potential Default has occurred and is
continuing on and as of the Amendment Effective Date or will result from this
Amendment becoming effective in accordance with its terms.
20. CONTINUED EFFECTIVENESS OF THE FINANCING AGREEMENT. Each of the
Borrowers and the Corporate Guarantors hereby confirms and agrees that (i) each
Loan Document to which it is a party is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects except that on
and after the Amendment Effective Date all references in any such Loan Document
to "the Financing Agreement", "thereto", "thereof", "thereunder" or words of
like import referring to the Financing Agreement shall mean the Financing
Agreement as amended by this Amendment, and (ii) to the extent any such Loan
Document purports to assign or pledge to the Agent, or to grant to the Agent a
Lien on any collateral as security for the Obligations of the Borrowers or the
Guarantors from time to time existing in respect of the Financing Agreement and
the Loan Documents, such pledge, assignment and/or grant of the Lien is hereby
ratified and confirmed in all respects.
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21. MISCELLANEOUS. (a) This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(d) The Borrowers will pay on demand all reasonable fees,
costs and expenses of the Agent in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, the reasonable
fees, disbursements and other charges of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to
the Agent.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWERS:
----------
HAPPY KIDS CHILDREN'S APPAREL LTD.,
formerly known as Happy Kids, Ltd.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
HAPPY KIDS INC., formerly known as
O'Boy Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
TALK OF THE TOWN APPAREL CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
O.P. KIDS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
GUARANTORS:
-----------
H.O.T. KIDZ, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
HAWK INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
J&B 18 CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title:
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
AGENT AND LENDER:
-----------------
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Title: Vice President
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
LENDERS:
--------
THE CHASE MANHATTAN BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Title: Vice President
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Title: Vice President
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Title: Senior Vice President
Name: ▇▇▇▇▇ ▇▇▇▇
REPUBLIC NATIONAL BANK OF NEW YORK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Title: Vice President
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Annex I
SCHEDULE A
----------
Lender Exposure Percentage
------ -------- ----------
The CIT Group/Commercial Services, Inc. $14,815,000 29.63%
The Chase Manhattan Bank $20,565,000 41.13%
Israel Discount Bank of New York $ 6,640,000 13.28%
Republic National Bank of New York $ 7,980,000 15.96%
------------ --------
$50,000,000 100.00%