WAIVER AND AMENDMENT NO. 2 TO THE FIVE-YEAR CREDIT AGREEMENT
EXHIBIT 10.1
WAIVER AND AMENDMENT NO. 2 TO THE
FIVE-YEAR CREDIT AGREEMENT
Dated as of June 10, 2003
WAIVER AND AMENDMENT NO. 2 TO THE FIVE-YEAR CREDIT AGREEMENT (this "Amendment") among ▇▇▇▇▇ Apparel Group USA, Inc., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the banks, financial institutions and other institutional lenders parties to the Five-Year Credit Agreement referred to below (collectively, the "Lenders") and Wachovia Bank, National Association (as successor to First Union National Bank), as agent (the "Administrative Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Additional Obligors, the Lenders and the Administrative Agent have entered into a Five-Year Credit Agreement dated as of June 15, 1999 (the "Five-Year Credit Agreement"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Five-Year Credit Agreement.
(2) The Borrower has requested that the Lenders agree to amend representations contained in Article VII of the Five-Year Credit Agreement and to waive certain provisions of the Five Year Credit Agreement.
(3) The Required Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrower and the Borrower and the Required Lenders have agreed to amend and waive the Five-Year Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Five-Year Credit Agreement. The Five-Year Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3, hereby amended as follows:
(a) Section 7.1(g) is amended by inserting at the beginning of the second sentence thereof the phrase: "Except as disclosed on Schedule 7.1(g),".
(b) Section 7.1(n) is amended by inserting at the beginning thereof the phrase: "Except as disclosed on Schedule 7.1(g),".
(c) A new Schedule 7.1(g) is added to the Five-Year Credit Agreement to read as set forth on Schedule 7.1(g) to this Amendment.
(d) Schedule 7.1(n) is amended in full to read as set forth on Schedule 7.1(n) to this Amendment.
(e) Schedule 7.1(q) is amended in full to read as set forth on Schedule 7.1(q) to this Amendment.
SECTION 2. Waiver to Five-Year Credit Agreement. Section 12.1(g) of the Five-Year Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3, hereby waived to the extent that any Default or Event of Default may result from any breach of a representation made by the Borrower under the 364-Day Credit Agreement arising solely as a result of the matters described on Schedule 7.1(g) hereto.
SECTION 3. Conditions of Effectiveness. This Amendment shall become effective as of the date first above written when, and only when, on or before June 10, 2003 the Administrative Agent shall have received counterparts of this Amendment executed by the Credit Parties and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment. This Amendment is subject to the provisions of Section 14.11 of the Five-Year Credit Agreement.
SECTION 4. Representations and Warranties of the Credit Parties. The Credit Parties represent and warrant as follows:
(a) Each of the Credit Parties is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation.
(b) The execution, delivery and performance by each Credit Party of this Amendment and the performance by each Credit Party of its obligations under the Five-Year Credit Agreement, as amended hereby, do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any of the Credit Parties or any of their Subsidiaries to obtain any Governmental Approval not otherwise already obtained or violate any Applicable Law relating to the Credit Parties or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Credit Parties or any of their Subsidiaries or any indenture or other material agreement or instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person except as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any material Lien upon or with respect to any property now owned or hereafter acquired by such Person other than a Lien permitted under the terms of the Loan Documents.
(c) Each of the Credit Parties has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Amendment and the performance of its obligations the Five-Year Credit Agreement, as amended hereby, in accordance with their respective terms. This Amendment has been duly executed and delivered by the
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duly authorized officers of the Credit Parties and such document constitutes, and each of the Loan Documents does and continues to constitute, the legal, valid and binding obligation of the Credit Parties and, if applicable, each of their Subsidiaries party thereto, enforceable in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies.
(d) Except for matters existing on the Closing Date and set forth on Schedule 7.1(q) to the Five-Year Credit Agreement, as amended hereby, there are no actions, suits or proceedings pending nor, to the knowledge of the Credit Parties, threatened against or affecting the Credit Parties or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority, which could reasonably be expected to have a Material Adverse Effect or which relate to the enforceability of this Amendment or any Loan Documents, as amended hereby.
SECTION 5. Reference to and Effect on the Five-Year Credit Agreement and the Loan Documents. (a) On and after the effectiveness of this Amendment, each reference in the Five-Year Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Five-Year Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Five-Year Credit Agreement, shall mean and be a reference to the Five-Year Credit Agreement, as amended by this Amendment.
(b) The Five-Year Credit Agreement, as specifically amended by this Amendment, the Notes and each of the other Loan Documents, are and shall continue, following the effectiveness of this Amendment, to be in full force and effect and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Five-Year Credit Agreement, nor constitute a waiver of any provision of the Five-Year Credit Agreement.
SECTION 6. Costs and Expenses. The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent) in accordance with the terms of Section 14.2 of the Five-Year Credit Agreement.
SECTION 7. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate
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counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement, binding upon all parties, their successors and assigns. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment.
SECTION 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
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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.
| ▇▇▇▇▇ APPAREL GROUP USA, INC. as Borrower By: /s/ ▇▇▇▇▇▇ ▇. Card ▇▇▇▇▇ APPAREL GROUP, INC. By: /s/ ▇▇▇▇▇▇ ▇. Card ▇▇▇▇▇ APPAREL GROUP HOLDINGS, INC. By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇ NINE WEST GROUP INC.
|
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| WACHOVIA BANK, NATIONAL ASSOCIATION as Administrative Agent and Lender By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Title: Director CITIBANK, N.A. BANK OF AMERICA,
N.A. JPMORGAN CHASE
BANK FLEET NATIONAL
BANK SUNTRUST BANK Israel Discount
Bank of New York
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇ |
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Schedule 7.1(g)
Intellectual Property Matters
See Attached
Attachment 1 To
Schedule 7.1(g)
▇▇▇▇▇ APPAREL GROUP FILES $550 MILLION BREACH OF CONTRACT SUIT AGAINST ▇▇▇▇ ▇▇▇▇▇ LAUREN AND FORMER ▇▇▇▇▇ PRESIDENT ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ OVER LAUREN LICENSE
New York, New York -- June 3, 2003 -- ▇▇▇▇▇ Apparel Group, Inc. (NYSE: JNY) announced today that its discussions with ▇▇▇▇ ▇▇▇▇▇ Lauren Corporation (Polo) regarding the interpretation of the Lauren by ▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇▇▇) license have reached an impasse and that, as a result, ▇▇▇▇▇ has filed a suit in New York State Supreme Court alleging breach of contract against Polo and its affiliates and former ▇▇▇▇▇ Apparel Group President ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇. ▇▇▇▇▇ is asking the Court to enter a judgment for compensatory damages of $550 million as well as punitive damages and to enforce the non-compete and confidentiality clauses in ▇▇. ▇▇▇▇▇▇▇'▇ employment agreement.
The complaint alleges that the defendants embarked on an unlawful plan to take the Lauren license back from the Company by claiming that the license ends at the end of 2003, although ▇▇▇▇▇ believes that under the Lauren agreements ▇▇▇▇▇ owns the exclusive U.S. and Canadian rights to use the Lauren trademark through the end of 2006. The complaint further alleges that Polo embarked on this plan even though it lacks the expertise and resources to design, manufacture, or market the Lauren line. The complaint details that Polo solicited assistance from ▇▇. ▇▇▇▇▇▇▇ in order to gain this expertise. Polo is alleged to have induced ▇▇. ▇▇▇▇▇▇▇ to breach the confidentiality and non-compete provisions of her employment agreement with the Company, and ▇▇. ▇▇▇▇▇▇▇ is alleged to have induced Polo to breach the Lauren agreements, in order to produce future lines of Lauren products. ▇▇▇▇▇ believes that upon leaving the Company in March 2002, ▇▇. ▇▇▇▇▇▇▇ took with her confidential ▇▇▇▇▇ information on the Lauren line and then misused this information as a consultant for Polo. A letter of notification was delivered to ▇▇▇▇▇ ▇▇▇▇▇▇, the Chief Executive Officer of Polo, by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Chief Executive Officer of ▇▇▇▇▇, and is attached as Exhibit 1.
▇▇▇▇▇ asserts within the complaint that Polo's actions fully discharge ▇▇▇▇▇' obligations under the Lauren agreements. Because of the impasse, ▇▇▇▇▇ is not prepared to put product into work for the Lauren line for Spring 2004. The Company will be pursuing other opportunities, both internal brands as well as other licensing options that the Company has previously been precluded from exploring.
The question of when the Lauren license ends originally arose during discussions at the end of 2002 between the companies regarding the extension of the ▇▇▇▇▇ license for Ralph by ▇▇▇▇▇ ▇▇▇▇▇▇ Apparel (Ralph), which will end on December 31, 2003. During the course of the discussions concerning the ▇▇▇▇▇ ▇▇▇▇▇, Polo asserted that the expiration of the ▇▇▇▇▇ contract in 2003 will cause the Lauren license to end on December 31, 2003, instead of December 31, 2006. ▇▇▇▇▇ believes that this is an improper interpretation and that the expiration of the ▇▇▇▇▇ license does not cause the Lauren license to end.
Net sales of Lauren were $548 million and net sales of ▇▇▇▇▇ were $37 million for the year ended December 31, 2002. As previously reported, terminating the Lauren license at the end of 2003 will have a material adverse impact on ▇▇▇▇▇' results of operations after 2003. However, it will not materially adversely impact ▇▇▇▇▇ Apparel Group's liquidity, and ▇▇▇▇▇ will continue to have a strong financial position. The expiration of the Ralph license will not be material to ▇▇▇▇▇ Apparel Group in any respect.
The dispute between ▇▇▇▇▇ Apparel Group and Polo does not relate to the Polo Jeans license, and an expiration of the Lauren and the ▇▇▇▇▇ licenses does not end ▇▇▇▇▇' longer term Polo Jeans license or otherwise adversely affect the Polo Jeans license in the United States.
The Company will host a conference call to discuss the contents of this release at 1:30 p.m. EDT today, which is accessible by dialing ▇▇▇-▇▇▇-▇▇▇▇ or through a webcast at ▇▇▇.▇▇▇.▇▇▇.
▇▇▇▇▇ Apparel Group, Inc. (▇▇▇.▇▇▇.▇▇▇), a Fortune 500 Company, is a leading designer and marketer of branded apparel, footwear and accessories. The Company's nationally recognized brands include: ▇▇▇▇▇ New York; Lauren by ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ by ▇▇▇▇▇ ▇▇▇▇▇▇, and Polo Jeans Company, which are licensed from ▇▇▇▇ ▇▇▇▇▇ Lauren Corporation; ▇▇▇▇-▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Erika, l.e.i., Energie, Currants, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇. The Company also markets costume jewelry under the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ brand licensed from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Corporation and the Givenchy brand licensed from Givenchy Corporation, and footwear and accessories under the ESPRIT brand licensed from Esprit Europe, B.V. Celebrating more than 30 years of service, the Company has built a reputation for excellence in product quality and value, and in operational execution.
Certain statements herein are "forward-looking statements'' made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements represent the Company's expectations or beliefs concerning future events that involve risks and uncertainties, including the strength of the economy and the overall level of consumer spending, the performance of the Company's products within the prevailing retail environment, and other factors which are set forth in the Company's 2002 Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
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Exhibit 1
June 3, 2003
▇▇▇▇ ▇▇▇▇▇ Lauren Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Dear ▇▇▇▇▇:
In your letter of February 11, 2003 you stated Polo's intention not to perform its obligations under the license and design agreements for the Lauren line for the full duration of their effective term, which does not end until December 31, 2006. This repudiation constitutes a material breach of the Lauren agreements. Furthermore, it has come to our attention that Polo has been conspiring with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the former President of ▇▇▇▇▇ Apparel, in clear violation of the confidentiality and non-compete provisions of her agreement with ▇▇▇▇▇, and that Polo tortiously induced ▇▇. ▇▇▇▇▇▇▇'▇ violations.
It is not feasible for ▇▇▇▇▇ to continue the design, manufacture, marketing or sale of Lauren products in light of Polo's material breach. I am therefore writing to notify you that ▇▇▇▇▇ will treat the Lauren agreements as terminated as of December 31, 2003. Because of your repudiation of the agreements, ▇▇▇▇▇ has ceased all work relating to the design, manufacture, marketing or sale of any Lauren products for the Spring 2004 season and will do nothing more with respect to the Spring line.
This is a regrettable but necessary outcome in light of Polo's stated intention not to fulfill its obligations under the Lauren agreements after December 31, 2003 and its tortious interference with ▇▇▇▇▇'▇ agreement with ▇▇. ▇▇▇▇▇▇▇. ▇▇▇▇▇ intends to pursue vigorously its claims against Polo resulting from your breach and wrongful actions.
Sincerely,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Attachment 2 To
Schedule 7.1(g)
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ to Enforce its Contractual Right to Reclaim Key Licenses from ▇▇▇▇▇ Apparel Group
NEW YORK, Jun 3, 2003 (BUSINESS WIRE) -- ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Corporation (NYSE: RL) today announced it has filed a complaint in the Supreme Court of the State of New York against ▇▇▇▇▇ Apparel Group, Inc seeking among other things an injunction and a declaratory judgment that the Lauren license agreements terminate as of December 31, 2003 pursuant to the express terms of a separate cross-default agreement executed by the parties.
The Cross-Default Agreement executed by the companies on or about May 11, 1998 provides that the "termination or expiration" of any of the Lauren Agreements or ▇▇▇▇▇ Agreements "shall result in the simultaneous termination or expiration" of all such agreements. ▇▇▇▇ ▇▇▇▇▇ Lauren believes that the Cross-Default Agreement was triggered when ▇▇▇▇▇ failed to meet its minimum aggregate net sales volume for the period of January 1, 2002 to December 31, 2002 required to permit the renewal of the Ralph license agreements. ▇▇▇▇▇ admits that the Ralph license agreement terminate effective December 31, 2003.
▇▇▇▇▇ ▇▇▇▇▇, President and Chief Operating Officer of ▇▇▇▇ ▇▇▇▇▇ Lauren, said, "We regret taking this action, but we felt we had no choice but to seek immediate Court relief from what we believe is obstructionist behavior from a business partner that may irreparably damage our brands. We believe that we are well within our legal right to reclaim our licenses. We are confident that the Court will enforce our clear contractual rights enabling us to serve our customers without interruption."
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Corporation is a leader in the design, marketing and distribution of premium lifestyle products in four categories: apparel, home, accessories and fragrances. For 35 years, Polo's reputation and distinctive image have been consistently developed across an expanding number of products, brands and international markets. The Company's brand names, which include "Polo", "Polo by ▇▇▇▇▇ Lauren", "▇▇▇▇▇ ▇▇▇▇▇▇ Purple Label", "Polo Sport", "▇▇▇▇▇ Lauren", "▇▇▇▇▇", "▇▇▇▇▇▇", "Polo Jeans Co.", "RL", "Chaps", and "Club Monaco" among others, constitute one of the world's most widely recognized families of consumer brands. For more investor information, go to ▇▇▇▇://▇▇▇▇▇▇▇▇.▇▇▇▇.▇▇▇.
Schedule 7.1(n)
No Material Adverse Change
See Schedule 7.1(g)
Schedule 7.1(q)
Litigation
See Schedule 7.1(g)