SEVENTH AMENDMENT
TO THE FINANCING AGREEMENT
SEVENTH AMENDMENT, dated as of April 13, 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, the Fifth Amendment dated as of March 25, 1998
and the Sixth Amendment dated as of March 31, 1999 (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, concurrently with the execution and delivery of this
Amendment, the Parent is entering into an Asset Purchase Agreement (the "D.
Glasgow Asset Purchase Agreement") with D. Glasgow & Sons, Inc., a New York
corporation ("D. Glasgow & Sons"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the sole shareholder of
all of the issued and outstanding capital stock of D. Glasgow & Sons.
WHEREAS, D. Glasgow & Sons is engaged principally in the business of
designing, manufacturing and selling children's apparel products (the
"Business").
WHEREAS, pursuant to the terms of the D. Glasgow Asset Purchase
Agreement, the Parent will purchase certain of the assets and the Business for
the consideration set forth in the D. Glasgow Asset Purchase Agreement and the
assumption by the Parent of certain of D. Glasgow & Sons' liabilities.
WHEREAS, in connection with the D. Glasgow Asset Purchase Agreement
and the transactions contemplated thereby (the "Asset Purchase Transactions"),
the Borrowers, the Guarantors, the Lenders and the Agent wish to amend the
Financing Agreement to, among other things, permit the Asset Purchase
Transactions.
Accordingly, the Borrowers, the Guarantors, the Lenders and the Agent
hereby agree as follows:
1. Definitions. All terms which are defined in the Financing
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Agreement and not otherwise defined herein are used herein as defined therein.
2. Existing Definitions.
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(a) The definition of the term "License Agreements" in Section
1.01 of the Financing Agreement is hereby amended in its entirety to read as
follows:
"'License Agreements' means the BUM License Agreement, the
Jordache License Agreements, the LA Gear License Agreement, the OP
License Agreement, the D. Glasgow License Agreements and each license
agreement entered into by any Borrower or Corporate Guarantor after
the Effective Date."
(b) The definition of the term "Licensor" in Section 1.01 of
the Financing Agreement is hereby amended in its entirety to read as follows:
"'Licensor' means BUM, ▇▇▇▇▇ ▇▇▇▇▇▇▇, LA Gear, Jeanjer,
Jordache, the D. Glasgow Licensors and any Person entering into a
license agreement with any Borrower or Corporate Guarantor after the
Effective Date".
3. New Definitions. The following definitions of the terms "D.
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Glasgow Asset Purchase Agreement", "D. Glasgow License Agreement", "D. Glasgow
Licensor" and "Seventh Amendment" are hereby added to Section 1.01 of the
Financing Agreement:
"'D. Glasgow Asset Purchase Agreement' means the Asset
Purchase Agreement among the Parent, D. Glasgow & Sons, Inc., a New
York corporation ('D. Glasgow & Sons') and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the sole
shareholder of all of the issued and outstanding capital stock of D.
Glasgow & Sons."
"'D. Glasgow License Agreement' means each license
agreement acquired by the Parent from D. Glasgow & Sons pursuant to
the D. Glasgow Asset Purchase Agreement, as more fully described on
Annex I to the Seventh Amendment."
"'D. Glasgow Licensor' means each licensor party to a D.
Glasgow License Agreement, as more fully described on Annex II to the
Seventh Amendment."
"'Seventh Amendment' means the Seventh Amendment, dated as
of April 13, 1999, to the Financing Agreement."
4. Liens. Section 7.02(a) of the Financing Agreement is hereby
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amended by (i) deleting the word "and" at the end of clause (viii) thereof, (ii)
redesignating clause (ix) thereof as clause (x), and (iii) adding the following
new clause (ix):
"(ix) Liens on assets (other than Accounts Receivable
and Inventory) acquired by the Parent pursuant to the D. Glasgow Asset
Purchase Agreement, as described on Annex III to the Seventh
Amendment, but not the extension of coverage thereof to other property
or the extension of maturity, refinancing or other modification of the
terms thereof or of the Indebtedness secured thereby; and"
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5. Investment. Section 7.02(f) of the Financing Agreement is hereby
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amended by (i) deleting the words "and" at the end of clause (ii) thereof, (ii)
redesignating clause (iii) thereof as clause (iv), and (iii) adding the
following new clause (iii):
"(iii) investments by the Parent in the assets of D.
Glasgow & Sons pursuant to the D. Glasgow Asset Purchase Agreement;
and"
6. Capital Expenditures. Section 7.02(h) of the Financing Agreement
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is hereby amended in its entirety to read as follows:
"(h) Capital Expenditures. Make or be committed to make,
or permit any of its Subsidiaries to make or be committed to make, any
expenditure (by purchase or capitalized lease) for fixed or capital
assets other than (i) expenditures made by the Parent pursuant to the
D. Glasgow Asset Purchase Agreement or (ii) expenditures (including
obligations under Capitalized Leases) which would not cause the
aggregate amount of all such expenditures to exceed $2,000,000 in any
calendar year."
7. Schedules. Schedule 6.01(e), Schedule 6.01(s) and Schedule
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6.01(y) to the Financing Agreement are each hereby amended by adding the
information contained on each of Annex IV, Annex V and Annex VI, respectively,
to the Schedule to which such Annex relates.
8. Conditions. This Amendment shall become effective only upon
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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.
(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) an Assignment for Security (Trademarks), duly executed
executed by the Parent, granting to the Agent, for the benefit of the
Lenders, a security interest
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in all right, title and interest of the Parent in, to and under the
Trademarks listed on Annex VI hereto;
(iii) certified copies of requests for copies of
information on Form UCC-11, listing all effective financing statements
which name as debtor D. Glasgow & Sons, together with copies of such
financing statements, none of which, except as otherwise agreed in
writing by the Agent, shall cover any of the Collateral, and results
of searches for any tax and judgment Liens filed against D. Glasgow &
Sons or its property, which results, except as otherwise agreed to in
writing by the Agent, shall not show any such Liens;
(iv) a certificate of the chief executive officer or the
chief financial officer of the Parent, certifying that attached
thereto are complete and correct copies of the D. Glasgow Asset
Purchase Agreement and all other agreements, instruments and other
documents executed and delivered in connection therewith as requested
by the Agent;
(v) a certificate of an authorized officer of each
Borrower and Corporate Guarantor, certifying the names and true
signatures of the representatives of such Person authorized to sign
this Amendment and the other documents to be executed and delivered by
such Person in connection herewith, together with evidence of the
incumbency of such authorized officers;
(vi) 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 8;
(vii) a copy of each of the D. Glasgow License
Agreements as in effect on the Amendment Effective Date, certified as
a true and correct copy thereof by the chief executive officer or the
chief financial officer of the Parent;
(viii) evidence of the insurance coverage required by
the terms of Section 7.01(h) of the Financing Agreement and the other
Loan Documents naming the Agent an additional insured or loss payee
thereunder as specified by the Agent on all assets acquired pursuant
to the D. Glasgow Asset Purchase Agreement; and
(ix) 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 this Amendment, and all documents incidental
hereto, 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.
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9. Representations and Warranties. Each of the Borrowers and the
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Corporate Guarantors represents and warrants as follows:
(a) Each Borrower and Corporate 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 this Amendment, and to perform the
Financing Agreement, as amended hereby.
(b) The execution, delivery and performance by it of this
Amendment 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 this Amendment and (ii) the performance by it of the Financing Agreement,
as amended hereby.
(d) Each of this Amendment 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.
10. Continued Effectiveness of the Financing Agreement. Each of the
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Borrowers and the Corporate Guarantors hereby confirms and agrees that, except
as otherwise provided in Section 9, (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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11. Miscellaneous. (a) This Amendment may be executed in any number
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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 and all documents incidental hereto, 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:
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HAPPY KIDS CHILDREN'S APPAREL LTD.,
formerly known as Happy Kids, Ltd.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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HAPPY KIDS INC., formerly known as
O'Boy Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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TALK OF THE TOWN APPAREL CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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O.P. KIDS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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GUARANTORS:
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H.O.T. KIDZ, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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HAWK INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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J&B 18 CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
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AGENT AND LENDER:
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THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: Vice President
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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LENDERS:
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THE CHASE MANHATTAN BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Vice President
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Vice President
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
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By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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Title: Vice President
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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REPUBLIC NATIONAL BANK OF NEW YORK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Vice President
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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ANNEX I
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[D. Glasgow License Agreements]
ANNEX II
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[D. Glasgow Licensors]
ANNEX III
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[D. Glasgow Liens]
ANNEX IV
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Inventory Locations
ANNEX V
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Operating Lease Obligations
ANNEX VI
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Tradenames