TWELFTH AMENDMENT AND FORBEARANCE AGREEMENT
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TWELFTH AMENDMENT AND FORBEARANCE AGREEMENT, dated as of March 2,
1998 (this "Amendment"), with respect to the Revolving Credit, Factoring
and Security Agreement, dated as of September 20, 1993, as amended by
letter agreement Re: Amendment to Credit Agreement with respect to the
Mississippi Property, dated June 14, 1994 (the "First Amendment") and by
letter agreement Re: Amendment to Credit Agreement with respect to
Additional Guarantors, dated August 24, 1994 (the "Second Amendment"), and
by the Third Amendment to Credit Agreement, dated as of February 28, 1995
(the "Third Amendment"), and by the Fourth Amendment to Credit Agreement,
dated as of March 1, 1995 (the "Fourth Amendment"), and by the Fifth
Amendment to Credit Agreement, dated as of June 28, 1995 (the "Fifth
Amendment"), and by the Sixth Amendment to Credit Agreement, dated as of
August 15, 1995 (the "Sixth Amendment"), and by the Seventh Amendment to
Credit Agreement, dated as of March 27, 1996 (the "Seventh Amendment"), and
by the Eighth Amendment to Credit Agreement, dated as of June 1, 1996 (the
"Eighth Amendment"), and by the Ninth Amendment to Credit Agreement, dated
as of August 16, 1996 (the "Ninth Amendment"), and by the Tenth Amendment
to Credit Agreement, dated as of February 20, 1997 (the "Tenth Amendment"),
and by the Eleventh Amendment to Credit Agreement, dated as of August 8,
1997 (the "Eleventh Amendment") (as so amended, and as further amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), between THE CIT GROUP/COMMERCIAL SERVICES, INC. ("Lender") and
▇▇▇▇▇▇ CORPORATION ("Borrower").
W I T N E S S E T H:
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WHEREAS, Lender and Borrower are parties to the Credit Agreement;
WHEREAS, certain Events of Default described below have occurred
and are continuing under the Credit Agreement;
WHEREAS, Borrower has requested that Lender (a) waive, as of
January 3, 1998, the Covenant Defaults (as defined below) and, with respect
to the Payment Default (as defined below), forbear for a limited period of
time from exercising any of its rights and remedies with respect to such
existing Event of Default under the Credit Agreement; (b) agree to continue
(i) making loans, advances and other financial accommodations to Borrower
and (ii) factoring the Factored Accounts, all on and subject to the terms
and conditions set forth in the Credit Agreement, as amended by this
Amendment; and (c) amend certain provisions of the Credit Agreement,
including increasing the advance rate for Revolving Loans in respect of
Eligible Inventory; and
WHEREAS, Lender is willing to agree to the foregoing requests of
Borrower upon the terms and subject to the conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree, effective as of the Effective Date, as defined below,
as follows:
1. Defined Terms. Initially capitalized terms used and not otherwise
defined herein shall have their respective meanings as defined in the
Credit Agreement.
2. Events of Default. Borrower acknowledges, confirms and agrees that
(a) as of January 3, 1998, Borrower defaulted under the financial covenants
set forth in Section 7.19 (Stockholders' Equity) and Section 7.22 (Maximum
Loss) of the Credit Agreement (the "Covenant Defaults") and (b) Borrower
elected not to pay the interest due and payable on March 2, 1998 on the New
Public Secured Notes, exclusive of any grace period provided with respect
thereto in the New Public Secured Notes or in the New Public Secured Notes
Indenture (the "Payment Default") in contemplation of the proposed
conversion into equity of the Public Secured Notes on the terms set forth
in the letter agreement and term sheet appended thereto, a copy of which is
attached hereto as Exhibit A (the "Notes Agreement").
3. Waiver and Forbearance. In response to Borrower's request for a
waiver of the Covenant Defaults as recited above, Lender hereby waives the
Covenant Defaults as of January 3, 1998. In addition, in response to
Borrower's request for Lender to forbear with respect to the Payment
Default which is continuing, Lender agrees, subject to the terms and
conditions set forth below, (a) to forebear from exercising any of its
rights and remedies arising from the Payment Default (whether such rights
and remedies arise under the Credit Agreement, any other Financing
Agreement or applicable law) for the purpose of collecting any of the
Obligations, and (b) to continue making loans, advances and other financial
accommodations to Borrower and to factor the Factored Accounts, all on and
subject to the terms and conditions set forth in the Credit Agreement, as
amended by this Amendment. Such forbearance shall terminate on July 1,
1998, or earlier upon the happening of:
(i) the occurrence of any Event of Default other than the
Payment Default; or
(ii) the failure of Borrower on or before June 1, 1998, to
(A) execute and deliver to Lender, a commitment letter executed by
Lender providing for the agreement between Lender (as Agent for itself
and other lenders) and Borrower to enter into a new $135 million
syndicated credit facility (in replacement of the financing and
factoring arrangements provided by Lender pursuant to the Credit
Agreement) on terms and conditions satisfactory to Lender or (B)
deliver to Lender a copy of a commitment letter executed between
another lender and Borrower providing for a credit facility to
Borrower which by its terms provides for closing and funding thereof
on or before July 1, 1998, and enables Borrower upon such closing and
funding to simultaneously terminate the Credit Agreement and all other
Financing Agreements and to satisfy in full all of its then existing
Obligations to Lender (either such credit facility, the "Replacement
Credit Facility"); or
(iii) the exercise of any right or remedy with respect to
any of the Collateral by any holder of any New Public Secured Note or
by the Trustee under the New Public Secured Notes Indenture; or
(iv) the payment of any interest on the New Public Secured
Notes in respect of which the Payment Default arose or otherwise.
4. Continuation of Eurodollar Loans. Notwithstanding the certification
by Borrower contained in each Notice of Borrowing with respect to a
Eurodollar Loan requested by Borrower, provided no Event of Default other
than the Payment Default shall have occurred, Lender agrees to continue
making Eurodollar Loans to Borrower on and subject to all the terms and
conditions applicable to Eurodollar Loans set forth in the Credit
Agreement.
5. Addition of Defined Terms. Section 1 of the Credit Agreement is
hereby amended to add the following defined terms thereto:
(a) "1.21A 'Covenant Trigger Date' shall mean the last day of
any fiscal month of Borrower on which Borrower first fails
to maintain Excess Availability of at least $5,000,000,
except that for Borrower's June fiscal month, such amount
shall be at least $4,500,000."
(b) "1.26A 'EBITDA' shall mean, for any period, the sum (without
duplication) of (i) net income, (ii) provision for taxes
based on income, (iii) Interest Expense, and (iv) to the
extent net income has been reduced thereby, amortization
expense, depreciation expense and other non-cash expenses,
less extraordinary items (including, without limitation, all
costs and expenses of Borrower and its Subsidiaries in
connection with the negotiation, execution and performance
of the Twelfth Amendment and in connection with the
negotiation, execution and consummation of the transactions
contemplated by the Notes Agreement), all as determined on a
consolidated basis for Borrower and its Subsidiaries in
accordance with GAAP."
(c) "1.34A 'Excess Availability' shall mean at any time, the
amount by which Revolving Loans and Letter of Credit
Accommodations available to Borrower under the Advance
Formulas, within applicable sublimits and after deducting
all applicable reserves, exceed the aggregate amount of
Revolving Loans, Letter of Credit Accommodations and all
other Obligations then outstanding."
(d) "1.46A 'Interest Coverage Ratio' shall mean, with respect to
any period, the ratio of (i) EBITDA to (ii) Interest
Expense."
(e) "1.46B 'Interest Expense' shall mean, for any period,
interest expense with respect to all outstanding
Indebtedness of Borrower and its Subsidiaries for such
period, exclusive of interest with respect to the New Public
Secured Notes."
(f) "1.78A 'Twelfth Amendment' shall mean the Twelfth Amendment
and Forbearance Agreement, dated as of March 2, 1998,
executed between Lender and Borrower.
6. Amendment of Section 3.1(a)(iii). Section 3.1(a)(iii) of the Credit
Agreement is amended in its entirety to read as follows:
"(iii) Sixty percent (60%) of the value of Eligible Inventory"
7. Amendment of Section 3.1(e). Section 3.1(e) of the Credit Agreement
is amended in its entirety to read as follows:
"(e) Notwithstanding anything to the contrary contained in this
Agreement or in any of the other Financing Agreements, during the
period from the second day through and including the day
immediately prior to the last day of each of Borrower's March,
April, May, and June, 1998 fiscal months, at the request of
Borrower, Lender may, in its sole discretion, subject to the
Maximum Credit, make Revolving Loans and Letter of Credit
Accommodations to Borrower in excess of the aggregate amount
available under the Advance Formulas of up to $3,000,000 at any
time outstanding (the "Seasonal Overadvance Subfacility");
provided, that, any amount outstanding under the Seasonal
Overadvance Subfacility in excess of the Advance Formulas shall
be repaid in full on the last day of each fiscal month during
said period, provided further, that, no Revolving Loans shall be
made under the Seasonal Overadvance Subfacility in any fiscal
month unless (i) any amount outstanding under the Seasonal
Overadvance Subfacility in the immediately preceding calendar
month has been repaid in full when due, and (ii) there is some
Excess Availability on the last day of the fiscal month in which
such repayment in full is made. If Borrower fails to pay any
amounts outstanding under the Seasonal Overadvance Subfacility
when due, Borrower shall pay to Lender a non-refundable fee of
$12,500 on each occasion on which it fails to make such payment
when due."
8. Amendment of Section 3.3. Section 3.3 of the Credit Agreement is
amended in its entirety to read as follows:
"3.3 Maximum Credit
The aggregate principal amount of the Revolving Loans and Letter
of Credit Accommodations at any time outstanding shall not exceed
$120,000,000 (the "Maximum Credit")."
9. Amendment of Section 7.19.Section 7.19 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"[Intentionally Deleted]"
10. Amendment of Section 7.22. Section 7.22 of the Credit Agreement is
deleted in its entirety and replaced with the following:
"7.22 Monthly Loss Covenant; Interest Coverage Ratio. If Borrower
fails to maintain Excess Availability of at least $5,000,000 on
the last day of any fiscal month of Borrower other than
Borrower's June fiscal month, for which month such amount shall
be at least $4,500,000, then, from and after the Covenant Trigger
Date, Borrower shall at all times be in compliance with the
financial covenants set forth below:
(a) Maximum Net Loss. The aggregate net loss (exclusive of costs
and expenses of Borrower incurred in connection with the
negotiation, execution and performance of the Twelfth Amendment
and the negotiation, execution and consummation of the
transactions contemplated by the Notes Agreement incurred by
Borrower in (i) any fiscal month set forth below plus (ii) the
immediately preceding eleven (11) months shall not exceed the
amount set forth below opposite each such month:
Fiscal Month Maximum Net Loss
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March, 1998 $19,000,000
April, 1998 $18,100,000
May, 1998 $15,000,000
June, 1998 $ 7,000,000
(b) Minimum Interest Coverage Ratio. Borrower shall at all times
cause to be maintained as of the end of each fiscal period set
forth below an Interest Coverage Ratio of not less than the
Interest Coverage Ratio set forth opposite such fiscal period end
set forth below:
Fiscal Month Minimum Interest Coverage Ratio
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March, 1998 1.60 to 1.00
April, 1998 1.20 to 1.00
May, 1998 1.32 to 1.00
June, 1998 0.60 to 1.00"
11. Additional Events of Default. Section 8.1 of the Credit Agreement
is amended by deleting the period at the end of Section 8.1(r) and
substituting a semicolon followed by the word "or" therefor and by adding
thereto the following Sections 8.1(s) and 8.1(t) as follows:
"(s) Ernst & Young LLP ceases to be business consultant to the
Company and is not replaced within 5 days by a business
consultant satisfactory to Lender; or
(t) Any event or circumstance occurs from and after March 2, 1998
that materially and adversely affects the business, properties,
operations or condition, financial or otherwise, of Borrower."
12. Amendment of Section 8.2(iii). Section 8.2(iii) of the Credit
Agreement is amended by deleting therefrom the defined term "Interest Rate"
and substituting therefor the defined term "Effective Prime Rate."
13. Waiver, Forbearance and Amendment Fee. In consideration of
Lender's waiver of the Covenant Defaults and forbearance with respect to
the Payment Default and other agreements set forth in this Amendment and
for other valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged by Borrower, Borrower shall pay Lender a
forbearance and amendment fee in the amount of $150,000, which shall be
paid and fully earned upon execution of this Amendment. In addition, in
consideration of the Replacement Credit Facility proposed by Lender to
Borrower, Borrower agrees to pay Lender $1,050,000 as a non-refundable and
fully earned fee as of the date hereof, payable in three (3) equal
installments of $350,000 each on April 1, May 1, and June 1, 1998. Such fee
shall not be refundable in whole or in part for any reason whatsoever, and
may be charged, at Lender's sole option, to any account of Borrower
maintained by Lender. Notwithstanding the foregoing, Lender and Borrower
agree that, (a) if and when the Replacement Credit Facility extended by
Lender becomes effective, such $1,050,000 fee shall thereupon be deemed
paid and shall be applied by Lender on account of the closing fee that will
be due and payable by Borrower to Lender upon closing of the Replacement
Credit Facility (such portion of the fee allocated by Lender to the payment
of such closing fee under the Replacement Credit Facility being hereinafter
referred to as the "Allocated Replacement Facility Fee"), and no other
closing fee or facility fee shall be due or payable in connection with any
Replacement Credit Facility extended by Lender or in connection with any
debtor-in-possession financing provided by Lender to Debtor in connection
with a case commenced with respect to Debtor under Chapter 11 of Title 11
of the United States Code, and (b) if (and only if) Lender does not extend
a Replacement Credit Facility because Lender's Executive Credit Committee
fails to give credit approval for such Replacement Credit Facility, then a
portion of the Allocated Replacement Facility Fee in the amount of $600,000
shall be refunded, without interest, to Borrower.
14. Representations and Warranties. Borrower hereby represents and
warrants to Lender that the representations and warranties set forth in
Section 6 of the Credit Agreement are true on and as of the date hereof as
if made on and as of the date hereof after giving effect to this Amendment,
except to the extent any such representation or warranty expressly relates
to a prior date, and breach of any of the representations and warranties
made in this paragraph 14 shall constitute an Event of Default under
Section 8.1(b) or 8.1(c) of the Credit Agreement, as applicable. Borrower
further represents and warrants that, (a) after giving effect to this
Amendment, other than the Payment Default, no Event of Default or event
which, with the lapse of time or the giving of notice or both, would become
an Event of Default has occurred and is continuing, and (b) the terms and
conditions pursuant to which Borrower proposes that the New Public Secured
Notes shall be converted into equity interests in Borrower, as outlined in
the Term Sheet therefor delivered by Borrower to Lender, have been agreed
to in principle by a majority of the holders of the New Public Secured
Notes.
15. Effectiveness. This Amendment shall become effective on the date
(the "Effective Date") Lender shall have received each of the following:
(a) The written consent of all Participants to the execution and
delivery of this Amendment by Lender.
(b) Counterparts of this Amendment, duly executed and delivered
by Borrower and Lender.
(c) A duly executed copy of the Consent of Guarantors
substantially in the form of Exhibit B hereto.
(d) The agreement in principle attached hereto as Exhibit A
shall have been executed by Borrower, Apollo Apparel
Partners, L.P. and Magten Asset Management Corp. and Lender
shall have received a fully executed copy thereof.
16. Effect of this Agreement. This Amendment 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 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 limit, impair or affect
any of Lender's rights and remedies with respect thereto (subject, however,
to the terms of the forbearance provided for in paragraph 3 of this
Agreement), all of which Borrower acknowledges and agrees have been
heretofore and are hereby further expressly reserved by Lender.
17. Counterparts. This Amendment may be executed in counterparts, and
all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
18. Governing Law. This Amendment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered in New York, New York by their proper and
duly authorized officers as of the day and year first above written.
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: /s/ Senior Vice President
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▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇
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Title: Executive Vice President
& General Counsel
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EXHIBIT A
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Filed as Exhibit 10.48
CONSENT OF GUARANTORS
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Each of the undersigned, CLANTEXPORT, INC., ▇▇▇▇▇▇ ▇▇▇▇▇, INC., FROST
BROS. ENTERPRISES, INC., SLT SOURCING, INC., each a Guarantor under its
respective Guarantee, each dated as of September 20, 1993, and ▇▇▇▇▇▇
CANADA INC. and ▇.▇. ▇▇▇▇▇▇ CLOTHING INC., each a guarantor under its
respective Guaranty (Unlimited Liability), each dated as of September 20,
1994 (individually, in the case of each of the foregoing Guarantors, its
"Guarantee"), made in favor of The CIT Group/Commercial Services, Inc.
("Lender"), pursuant to the Credit Agreement as defined in the Twelfth
Amendment and Forbearance Agreement, dated as of March 2, 1998 between
Lender and ▇▇▇▇▇▇ Corporation (the "Amendment"), to which this Consent is
attached, hereby consents to the Amendment and the matters contemplated
thereby, and hereby confirms and agrees that its Guarantee 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 effective date of
the Amendment, each reference in its Guarantee to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended
by the Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed and delivered by its authorized officer this
___ day of March, 1998.
CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
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Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
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▇▇▇▇▇▇ ▇▇▇▇▇, INC. SLT SOURCING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
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Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
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▇▇▇▇ LICENSING, INC. ▇▇▇▇▇▇ CANADA INC..
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇
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Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
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▇.▇. ▇▇▇▇▇▇ CLOTHING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
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Title: Executive Vice President
& General Counsel
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