February 27, 1998
London Fog Industries, Inc.
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Pacific Trail, Inc.
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The Scranton Outlet Corporation
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Re: Amendment No. 1 to Loan and Security Agreement
Gentlemen:
Reference is made to the Loan and Security Agreement (the "Loan
Agreement"), dated as of May 15, 1997, by and among Congress Financial
Corporation ("Lender"), London Fog Industries, Inc. ("LFI"), Pacific Trail, Inc.
("PTI") and The Scranton Outlet Corporation ("SCO"; and together with LFI and
PTI, collectively, "Borrowers"), together with all other agreements, documents,
supplements and instruments now or at any time hereafter executed and/or
delivered by Borrowers or any other person, with, to or in favor of Lender in
connection therewith (all of the foregoing, together with this Agreement and the
other agreements and instruments delivered hereunder, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"). All capitalized terms used
herein and not otherwise defined herein shall have the meanings given to them in
the Loan Agreement.
Borrowers and Guarantors have requested that Lender (a) consent to certain
transactions to be effected pursuant to the 1998 Restructuring Agreements (as
hereinafter defined), to the extent requiring Lender's consent, (b) permit LFI
and the other Borrowers and Guarantors to incur the indebtedness evidenced by
the New LFI Subordinated Notes and certain related indebtedness, (c) permit the
indebtedness evidenced by the New LFI Subordinated Notes (as hereinafter
defined) and certain related indebtedness to be secured by certain assets and
properties of Borrowers and Guarantors pursuant to the New LFI Subordinated Note
Agreements (as hereinafter defined), (d) increase the Maximum Credit from
$150,000,000 to $200,000,000, (e) increase from $125,000,000 to $150,000,000,
the maximum aggregate amount of Primary Loans in respect of Eligible Inventory
and Supplemental B Loans that may at any one time be outstanding, (f) make
available to Borrowers Letter of Credit Accommodations in the form of banker's
acceptances of up to $10,000,000 at any one time outstanding, (g) increase from
$80,000,000 to $90,000,000 the maximum aggregate amount of Letter of Credit
Accommodations that may at any one time be outstanding, (h) amend certain
covenants and conditions of the Loan Agreement with respect to the amount of
outstanding Loans, (i) amend the definition of EBITA, and (j) extend the Renewal
Date to April 30, 2001. Lender is willing to do so to the extent and subject to
the terms and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained in this Amendment No. 1 to Loan and Security Agreement (this
"Amendment"), and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, Borrowers, Guarantors and Lender
agree as follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any of the other
Financing Agreements, the following terms shall have the respective meanings
given to them below, and the Loan Agreement shall be deemed and is hereby
amended to include, in addition and not in limitation, each of the following
definitions:
(i) "Existing Subordinated Lenders" shall mean, individually
and collectively, the Subordinated Lenders and The Chase Manhattan Bank, as
agent for such lenders, pursuant to the Existing Subordinated Loan Documents,
and their respective successors and assigns.
(ii) "Existing Subordinated Loan Documents" shall mean,
individually and collectively, (A) the Existing LFI Subordinated Notes, (B) the
Master Restructuring Agreement dated as of May 31, 1995, the Term Loan Agreement
and the Note Agreement, each dated as of May 31, 1995, and the Credit Agreement,
dated as of May 20, 1994, each as amended through the date hereof, among the
Existing Subordinated Lenders and LFI, and (C) all agreements, documents and
instruments related thereto, including, without limitation, all agreements,
documents or instruments that evidence the obligations and indebtedness of LFI
and its subsidiaries to the Existing Subordinated Lenders or secure or support
payment or performance thereof.
(iii) "Existing LFI Capital Stock" shall mean, collectively,
all Capital Stock (including warrants, options and capital stock issued upon
exercise thereof), of LFI
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issued and outstanding immediately before the effectiveness of the 1998
Restructuring Agreements.
(iv) "Existing LFI Subordinated Notes" shall mean the
promissory note(s) issued pursuant to the Term Loan Agreement and the Note
Agreement, each dated as of May 31, 1995, each as amended through the date
hereof, among the Existing Subordinated Lenders and LFI, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
(v) "LFI Equity Agreements" shall mean, collectively, (A)
the Amended and Restated Certificate of Incorporation of LFI, (B) the 1998
Master Restructuring Agreement, (C) the Management Equity Agreements, and (D)
all other agreements, documents and instruments related to the issuance of the
New LFI Equity, as the same now exist among hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(vi) "LFI Restructuring Merger" shall mean the merger of LFI
Merger Corp., a Delaware corporation, with and into LFI, with LFI as the
surviving corporation, effected pursuant to the 1998 Master Restructuring
Agreement, the Agreement of Merger, dated as of the date hereof, between LFI and
LFI Merger Corp., and the Certificate of Merger filed by the Secretary of State
of the State of Delaware.
(vii) "LFI Subordinated Note Indenture" shall mean the
Indenture, dated of even date herewith, between LFI and the LFI Subordinated
Note Trustee with respect to the New LFI Subordinated Notes, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(viii) "LFI Subordinated Note Trustee" shall mean IBJ
▇▇▇▇▇▇▇▇ Bank & Trust Company, a New York banking corporation, as trustee for
the benefit of the New Subordinated Debtholders, and its successors and assigns,
and any successor or replacement trustee and/or collateral agent appointed
pursuant to the terms and conditions of the LFI Subordinated Note Indenture and
the instruments and agreements thereunder.
(ix) "Management Equity Agreements" shall mean,
collectively, (i) the 1998 Stock Option Plan of London Fog Industries, Inc.,
effective as of the date hereof, and the individual stock option agreements
entered into thereunder between LFI and members of LFI's senior management, (ii)
the Management Anti-Dilution Warrants issued to recipients of the options issued
under the Plan referred to in clause (i), and (iii) the Deferred Compensation
Plan of London Fog Industries, Inc., dated as of the date hereof, relating to
the Plan and
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agreements referred to in clause (i), as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(x) "New LFI Equity" shall mean, collectively, all of the
Capital Stock (including warrants, options and capital stock issued at any time
upon exercise thereof) of LFI issued pursuant to the LFI Equity Agreements, as
in effect on the date hereof.
(xi) "New LFI Subordinated Note Agreements" shall mean,
individually and collectively, (A) the New LFI Subordinated Notes, (B) the LFI
Subordinated Note Indenture, (C) all agreements, documents and instruments at
any time granting a security interest in or lien upon any property of Borrowers
or their subsidiaries as security for all or any part of the indebtedness of LFI
evidenced by the New LFI Subordinated Notes and/or the New LFI Subordinated
Indenture, or guarantees thereof, or as security for other amounts owed by
Borrowers or their subsidiaries to any New Subordinated Debtholder, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(xii) "New LFI Subordinated Notes" shall mean, individually
and collectively, the 10% Subordinated Notes due 2003 issued by LFI pursuant to
the LFI Subordinated Note Indenture, in the aggregate original principal amount
of $100,000,000, including the "Temporary Notes", the "Initial Notes" and any
"Exchange Notes" as defined in the LFI Subordinated Note Indenture, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, exchanged, restated or replaced.
(xiii) "New Subordinated Debtholders" shall mean,
individually and collectively, the LFI Subordinated Note Trustee, the holders
from time to time of the New LFI Subordinated Notes, and any other holders of
subordinated obligations of LFI and/or its subsidiaries arising out of, under or
in connection with the 1998 Restructuring Agreements, and their respective
successors and assigns.
(xiv) "1998 Master Restructuring Agreement" shall mean the
Master Restructuring Agreement, dated as of the date hereof, among LFI, certain
of LFI's subsidiaries, the Existing Subordinated Lenders, and certain members of
senior management of LFI.
(xv) "1998 Intercreditor and Subordination Agreement" shall
mean the Intercreditor and Subordination Agreement, dated of even date herewith,
between the LFI Subordinated Note Trustee and Lender, as acknowledged by
Borrowers and certain Guarantors, as the same now exists or may
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hereafter be amended, modified, supplemented, restated or replaced.
(xvi) "1998 Restructuring" shall mean the restructuring of
the indebtedness heretofore evidenced by or arising under the Existing
Subordinated Loan Documents, and the recapitalization of LFI, as provided for
under the 1998 Restructuring Agreements.
(xvii) "1998 Restructuring Agreements" shall mean,
collectively, (A) the New LFI Subordinated Note Agreements, (B) the 1998 Master
Restructuring Agreement, and (C) the other LFI Equity Agreements, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(xviii) "Securities Laws" shall mean the Securities Act of
1993, as amended, the Securities Exchange Act of 1934, as amended, the Trust
Indenture Act of 1939, as amended, and all rules, regulations and
interpretations issued pursuant thereto or in connection therewith, and all
State and local statutes, rules and regulations issued in connection therewith
or related thereto, as the same now exist or may hereafter be amended, modified,
interpreted, recodified or supplemented.
(b) Amendments to Definitions.
(i) EBITA. Section 1.16 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"1.16 "EBITA" shall mean, for any measurement period, the Net
Income (Loss) for such period, plus (a) to the extent deducted in
arriving at Net Income (Loss) for such period, Interest Expense,
write-off or amortization of deferred financing costs, provision for
Federal, state, local and foreign income taxes, amortization expense,
and any non-cash charges or non-cash losses (other than inventory
write-downs, but including, without limitation, increases in the
amount of multiemployer pension plan liabilities, non-cash loss
attributable to changes in accounting principles and non-cash loss on
sale or other disposition of assets not in the ordinary course of
business (other than non-cash loss on sale or other disposition of
inventory), non-cash expenses incurred by LFI under the Management
Equity Agreements, and the amount of non-cash restructuring expenses),
minus (b) to the extent included in determining Net Income (Loss) for
such period, gains attributable to the effect of change in accounting
principles adopted by Borrowers, income tax benefit, extraordinary
gains and other non-operating
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income, such as, but not limited to, gains from the sale or other
disposition of assets other than in the ordinary course of business,
or from the sale of shares of Capital Stock, or income or gains from
forgiveness or exchange of indebtedness or from reduction of
multiemployer pension plan liabilities or from reversal of
restructuring or other expenses and any non-cash gains, minus (c) any
payments made during such period in respect of multiemployer pension
plan liabilities in excess of the amount equal to $500,000 multiplied
by the number of fiscal quarters included in such period, plus (d)
with respect to the determination of EBITA for any period during or
consisting of the fiscal year ending the last Saturday in February
1998, (i) up to an aggregate of $2,000,000 of cash restructuring
charges paid during such period relating to the closing of LFI's
Baltimore, Maryland manufacturing facility, plus (ii) up to an
aggregate amount of $3,750,000 paid in cash during such period by LFI
to reimburse The Chase Manhattan Bank for amounts drawn by Messrs.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and C. ▇▇▇▇▇▇▇ ▇▇▇▇▇ under letters of credit
securing payment of certain obligations of LFI to such Persons; in
each case under clauses (a), (b) and (d), determined for Borrowers and
their subsidiaries for such period, on a consolidated basis in
accordance with GAAP."
(ii) Banker's Acceptances. Section 1.37 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
"1.37 "Letter of Credit Accommodations" shall mean the letters of
credit for the purchase of merchandise and banker's acceptances issued
with respect to drafts presented under letters of credit for the
purchase of merchandise, and merchandise purchase or other guaranties
which are from time to time either (a) issued or opened by Lender for
the account of any Borrower or, in Lender's discretion, any Obligor or
(b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by a Borrower of its
obligations to such issuer."
(iii) Maximum Credit. Section 1.39 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"1.39 "Maximum Credit" shall mean $200,000,000."
2. Consents. Notwithstanding anything to the contrary contained in
Sections 9.7(a), 9.7(b), 9.7(e), 9.9(d),
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9.10(e) or 9.11 of the Loan Agreement as in effect prior to the effectiveness
hereof, and subject to the terms and conditions contained herein, to the extent
such consent is or may be required, Lender hereby consents to (i) the LFI
Restructuring Merger, and (ii) the issuance and exchange by LFI of the New LFI
Subordinated Notes and the New LFI Equity for the Existing LFI Subordinated
Notes and the cancellation of the Existing LFI Capital Stock, in each case as
provided in the 1998 Restructuring Agreements as in effect on the date hereof.
3. Supplemental B Loans.
(a) Section 2.1(a)(iv) of the Loan Agreement is hereby amended by
deleting the phrase "calendar years 1998 and 1999," appearing therein and
replacing such phrase with the following: "calendar years 1998, 1999 and 2000,".
(b) Sections 2.1(d)(i) and (ii) of the Loan Agreement are hereby
deleted in their entirety and replaced with the following:
"(i) [Intentionally Omitted];
(ii) Excess Availability shall have been greater than $15,000,000
for each of at least thirty (30) consecutive days during the
period from December 1 of the calendar year ending prior to the
request for Supplemental B Loans through and including March 31
of the then-current calendar year."
4. Sublimit on Primary Loans in respect of Eligible Inventory and
Supplemental B Loans. The reference to the amount "$125,000,000" contained in
Section 2.1(e) of the Loan Agreement is hereby deleted and replaced with the
following amount: "$150,000,000".
5. Letter of Credit Accommodation Fees; Availability Reserves for
Banker's Acceptances.
(a) Section 2.2(b) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations,
Borrowers shall pay to Lender (i) a letter of credit fee at a rate
equal to one and one-half (1 1/2%) percent per annum on the daily
outstanding balance of the Letter of Credit Accommodations, other than
banker's acceptances, for
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the immediately preceding month (or part thereof), (ii) an acceptance
fee at a rate equal to three (3%) percent per annum on the daily
outstanding balance of Letter of Credit Accommodations consisting of
or relating to banker's acceptances for the immediately preceding
month (or part thereof), in each case, payable in arrears as of the
first day of each succeeding month, except that Borrowers shall pay to
Lender such letter of credit fee under clause (i), at Lender's option,
without notice, at a rate equal to three and one-half (3 1/2%) percent
per annum, and such acceptance fee under clause (ii), at Lender's
option, without notice, at a rate equal to five (5%) percent per
annum, for (A) the period from and after the date of termination or
non-renewal hereof until Lender has received full and final payment of
all non-contingent Obligations and cash collateral (or a standby
letter of credit in favor of Lender acceptable to Lender in all
respects) sufficient to cover all Obligations in respect of
outstanding Letter of Credit Accommodations or relating thereto
(notwithstanding entry of a judgment against such Borrower) and (B)
the period from and after the date of the occurrence of an Event of
Default and for so long as such Event of Default is continuing. Such
letter of credit and acceptance fees shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and
the obligation of Borrowers to pay such fees shall survive the
termination or non-renewal of this Agreement."
(b) Section 2.2(c) of the Loan Agreement is hereby amended by
adding a new sentence as follows immediately prior to the final sentence of such
Section 2.2(c):
"Notwithstanding anything to the contrary in Section 2.2(c)(i) or (ii)
hereof, upon the issuance of a banker's acceptance pursuant to a
Letter of Credit Accommodation hereunder, Lender shall establish an
Availability Reserve in an amount equal to one hundred (100%) percent
of the face amount of such banker's acceptance plus, without
duplication, the fees, taxes/duty and other amounts that Lender
estimates must be paid in connection with the Inventory purchased
under the letter of credit in respect of which a draft has been
presented and made the subject of such banker's acceptance."
(c) The reference to "$80,000,000 appearing at the end of the
first sentence in Section 2.2(d) of the Loan Agreement is hereby deleted and
replaced with the following:
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"$90,000,000; provided, however, the aggregate amount of all
outstanding Letter of Credit Accommodations consisting of or relating
to banker's acceptances and any other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time
exceed $10,000,000."
6. Unused Line Fee. The reference to the amount "$110,000,000"
contained in Section 3.4 of the Loan Agreement is hereby deleted and replaced
with the following amount: "$145,000,000".
7. Liens. Section 9.8(f) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
"(f) subordinated liens and security interests of the LFI
Subordinated Note Trustee and/or the other New Subordinated
Debtholders securing indebtedness of LFI to the New Subordinated
Debtholders to the extent permitted in Section 9.9(d) hereof and
subject to the 1998 Intercreditor and Subordination Agreement;"
8. Indebtedness.
(a) Effective upon the effectiveness of the 1998 Restructuring,
Section 9.9(d) of the Loan Agreement shall be deleted in its entirety and
replaced with the following:
"(d) fully subordinated indebtedness of Borrowers to the New
Subordinated Debtholders pursuant to the New LFI Subordinated Note
Agreements (as in effect on the date of issuance of the New LFI
Subordinated Notes) not to exceed the aggregate principal amount of
$100,000,000; provided, that, (i) Borrowers may only make payments in
respect of such indebtedness in accordance with the terms of the New
LFI Subordinated Note Agreements as in effect on February 27, 1998 and
provided each such payment is permitted under the 1998 Intercreditor
and Subordination Agreement, (ii) Borrowers shall not, directly or
indirectly, (A) amend, modify, alter or change in any way adverse to
Lender or any Borrower or Obligor, the terms of such indebtedness or
any agreement, document or instrument related thereto as in effect on
the date hereof, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and (iii) Borrowers shall furnish to Lender
all notices or demands in connection with such indebtedness either
received by Borrowers or on their behalf, promptly after the receipt
thereof, or sent by Borrowers or on their
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behalf, concurrently with the sending thereof, as the case may be;"
(b) Effective upon the effectiveness of the 1998 Restructuring,
Section 9.9 of the Loan Agreement shall be amended by deleting the word "and"
appearing at the end of Section 9.9(g), by deleting the period at the end of
Section 9.9(h) and replacing it with "; and" and by adding a new Section 9.9(i)
immediately following Section 9.9(h), as follows:
"(i) indebtedness of LFI to certain employees of LFI pursuant to
the Management Equity Agreements as in effect on the date
hereof."
9. Dividends and Redemptions. Effective upon the effectiveness of the
1998 Restructuring, Section 9.11 of the Loan Agreement shall be deleted in its
entirety and replaced with the following:
"9.11 Dividends and Redemptions. No Borrower shall, directly or
indirectly, declare or pay any dividends on account of any shares of
any class of Capital Stock of any Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise
acquire any shares of any class of Capital Stock (or set aside or
otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock, or apply or set apart any sum,
or make any other distribution (by reduction of capital or otherwise)
in respect of any such shares, or agree to do any of the foregoing,
(other than by delivery of a subordinated note evidencing indebtedness
permitted under Section 9.9(g) hereof) except that, provided no Event
of Default, and no event or state of facts that would, with notice or
passage of time or both, constitute an Event of Default, exists or has
occurred and is continuing, or would exist or occur after giving
effect to such redemption or repurchase or any payment therefor, LFI
may, out of legally available funds therefor: (i) redeem and/or
repurchase certain shares and options to purchase shares of Capital
Stock of LFI owned by certain employees of LFI, pursuant to the
exercise of the put options described in Section 9.9(g) hereof
("Management Put Repurchases"), but not to exceed the aggregate amount
which, when added to the amounts expended as permitted under clauses
(ii) and (iii) hereof in a given fiscal year of LFI, does not exceed
the amount of $250,000 so expended in such fiscal year, (ii)
repurchase fractional shares, or make payments in lieu of issuing
fractional shares, of common stock of
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LFI upon the exercise of stock options or warrants issued to employees
of LFI to the extent not issued in violation hereof, but not to exceed
the amount of $100,000 so expended in any one fiscal year of LFI, and
(iii) repurchase common stock of LFI in open market transactions
involving cash expenditures of not more than $100,000 in any fiscal
year of LFI, where such stock is used in such fiscal year to pay
directors' fees to outside directors of LFI. Any amount permitted to
be paid under clauses (i), (ii) or (iii) and not so used in any fiscal
year of LFI may be carried over under the respective clauses to
succeeding fiscal years, but in no event may the amounts carried
forward from any fiscal year under all such clauses exceed $250,000 in
the aggregate, and in no event may the amounts paid under all such
clauses in a given fiscal year of LFI, including any amounts carried
over from prior years, exceed $500,000 in the aggregate."
10. Amendments to Cleanup and Excess Availability Provisions. Section
9.18 of the Loan Agreement is hereby deleted in its entirety and replaced with
the following:
"9.18 Excess Availability. For at least thirty (30) consecutive
days during the period between December 1 of each calendar year and
March 31 of the immediately following calendar year, Borrowers shall
maintain Excess Availability of greater than $15,000,000."
11. Term.
(a) The first sentence of Section 12.1(a) of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
"(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page and shall
continue in full force and effect for a term ending on April 30, 2001
(the "Renewal Date") and from year to year thereafter, unless sooner
terminated pursuant to the terms hereof."
(b) Subsections 12.1(c)(i) through (iii) of the Loan Agreement
are hereby deleted in their entirety and replaced with the following:
"Amount Period
(i) Two (2%) percent From the date
of Maximum Credit hereof to and including
April 30, 1998.
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(ii) One (1%) percent of From May 1, 1998 to
Maximum Credit and including April 30,
1999.
(iii) One (1%) percent of From May 1, 1999 to
the daily average but not including
of outstanding Loans April 30, 2001."
and Letter of Credit
Accommodations for
the twelve (12)
months immediately
preceding the effective
date of termination.
12. Amendment to Schedule 8.4 to Loan Agreement. Effective upon the
effectiveness of the 1998 Restructuring, Schedule 8.4 to the Loan Agreement
shall be deemed amended by replacing the references to "Chemical Bank" with "IBJ
▇▇▇▇▇▇▇▇ Bank & Trust Company, as Trustee".
13. Line Increase Fee. In addition to all other fees, charges,
interest and expenses payable by Borrowers to Lender hereunder and under the
other Financing Agreements, Borrowers shall pay to Lender a fee in respect of
the increase in the Maximum Credit provided for hereunder. Such fee shall be in
the amount of $375,000, which amount is fully earned as of the date hereof, of
which $125,000 is payable on the date hereof, $125,000 is payable on May 15,
1998, and $125,000 is payable on May 15, 1999; provided, that the installments
payable on May 15, 1998 and May 15, 1999 shall, at Lender's option, become
immediately due and payable upon or at any time after an Event of Default or any
termination or non-renewal hereof. Each portion or installment of such fee, when
payable as provided in this Section 13, may be charged directly to Borrowers'
loan account maintained by Lender.
14. Amendment Fee. In addition to all other fees, charges, interest
and expenses payable by Borrowers to Lender hereunder and under the other
Financing Agreements, Borrowers shall pay to Lender a fee for entering into this
Amendment in the amount of $125,000, which amount is fully earned and payable as
of the date hereof and may be charged directly to Borrowers' loan account
maintained by Lender.
15. Additional Event of Default. Without in any way limiting the
events or conditions constituting Events of Default as set forth in Section 10
of the Loan Agreement, any default under any of the 1998 Restructuring
Agreements that is not cured or waived within any applicable grace or cure
period thereunder shall constitute an Event of Default under the Loan Agreement
and other Financing Agreements.
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16. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers or Guarantors to Lender pursuant to the other Financing
Agreements, Borrowers and Guarantors hereby represent, warrant and covenant with
and to Lenders as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) The 1998 Restructuring Agreements and the transactions
contemplated thereunder have, contemporaneously herewith, been duly executed,
delivered and performed in accordance with their terms by the respective parties
thereto in all respects, including the fulfillment (not merely the waiver) of
all conditions precedent set forth therein.
(b) The New LFI Subordinated Notes have, contemporaneously
herewith, been duly authorized, issued and delivered by LFI and all agreements,
documents and instruments related thereto, including, but not limited to, the
LFI Subordinated Note Indenture, have, contemporaneously herewith, been duly
authorized, executed and delivered and the transactions contemplated thereunder
performed in accordance with their terms by the respective parties thereto in
all respects, including the fulfillment (not merely the waiver) of all
conditions precedent set forth herein.
(c) All of the Existing LFI Subordinated Notes have,
contemporaneously herewith, been deemed cancelled in accordance with the terms
of the 1998 Restructuring Agreements, and all security interests in, and
mortgages and liens upon, any of the assets of Borrowers or any Guarantor
heretofore securing all or any part of the indebtedness or obligations evidenced
by or arising under the Existing Subordinated Loan Documents have,
contemporaneously herewith, been (i) amended and restated pursuant to the 1998
Restructuring Agreements, so as to be solely in favor of the LFI Subordinated
Note Trustee for the benefit of the New Subordinated Debtholders, and (ii) made,
together with all security interests, mortgages and liens securing any
obligations and indebtedness arising out of, under or in connection with the New
LFI Subordinated Note Agreements or any of the other 1998 Restructuring
Agreements, and the indebtedness and obligations at any time secured thereby,
expressly subject and subordinate to the security interests, mortgages and liens
held by Lender and subject and subordinate to the other rights and remedies of
Lender (including Lender's rights to prior payment of the Obligations) pursuant
to the 1998 Intercreditor and Subordination Agreement.
(d) All of the issued and outstanding Existing LFI Capital Stock
has, contemporaneously herewith, been cancelled, retired and converted in
accordance with the terms of the LFI
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Equity Agreements and the other 1998 Restructuring Agreements (except for
certain options to acquire common stock of LFI held by employees of LFI on the
date hereof), and all of the shares of the New LFI Capital Stock have been or,
in the case of shares issuable upon the exercise of options or warrants, when
issued will be, duly authorized, validly issued and fully paid and
non-assessable. All of the shareholders of LFI who own of record, or, to the
best of LFI's knowledge, directly or indirectly beneficially own, ten (10%)
percent or more of the issued and outstanding shares of the New LFI Capital
Stock are listed, and their percentage ownership of record and, to the best of
LFI's knowledge, beneficial ownership, is set forth next to such shareholder's
name, on Exhibit A attached hereto.
(e) All actions and proceedings required by the LFI 1998
Restructuring Agreements, applicable law and regulation have been taken and the
transactions required thereunder have, contemporaneously herewith, been duly and
validly taken and consummated.
(f) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of any of the
transactions described in the 1998 Restructuring Agreements, and no governmental
action or proceeding has been threatened or commenced seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
1998 Restructuring or any provision of the 1998 Restructuring Agreements.
(g) Borrowers and Guarantors have delivered, or caused to be
delivered, to Lender true, correct and complete copies of the 1998 Restructuring
Agreements.
(h) Neither the execution and delivery of the 1998 Restructuring
Agreements and the instruments and documents to be delivered pursuant thereto,
nor the consummation of the transactions therein contemplated, nor compliance
with the provisions thereof, (i) has violated or will violate any Securities
Laws or any other law or regulation or any order or decree of any court or
governmental instrumentality in any respect or (ii) does or will conflict with
or result in the breach of, or constitute a default in any respect under, any
indenture, mortgage, deed of trust, agreement or instrument to which any
Borrower or Guarantor is a party or may be bound, or (iii) result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property of Borrowers or Guarantors, except as specifically permitted hereunder
or under the other Financing Agreements, or (iv) does or shall violate any
provision of the Certificate of Incorporation or By-Laws of LFI or any other
Borrower or any Guarantor.
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(i) LFI Merger Corp. was incorporated under the laws of the State
of Delaware on February 13, 1998 and immediately prior to the LFI Restructuring
Merger shall own no assets (except for the preferred stock and common stock of
LFI contributed to LFI Merger Corp. by the holders thereof), and shall have no
liabilities, and shall have engaged in no business or transaction, except
becoming party to the 1998 Restructuring Merger.
(j) The 1998 Restructuring will not result in any material
current cash tax liability of LFI or its subsidiaries to the United States
Internal Revenue Service, except for liabilities pursuant to the alternative
minimum tax.
(k) No Event of Default exists on the date of this Amendment
(after giving effect to the consents under, and amendments to the Loan Agreement
provided in, this Amendment).
(l) This Amendment has been duly authorized, executed and
delivered by Borrowers and Guarantors, and the agreements and obligations of
Borrowers and Guarantors contained herein constitute legal, valid and binding
obligations of Borrowers and Guarantors enforceable against Borrowers and
Guarantors in accordance with their respective terms.
17. Conditions Precedent. The effectiveness of the consents and
amendments set forth herein shall be subject to the receipt by Lender of each of
the following, in form and substance satisfactory to Lender:
(a) an original of this Amendment, duly authorized, executed and
delivered by Borrowers and Guarantors;
(b) an original of the 1998 Intercreditor and Subordination
Agreement, between the LFI Subordinated Note Trustee and Lender, as acknowledged
by Borrowers and the Guarantors parties thereto, duly authorized, executed and
delivered by the LFI Subordinated Note Trustee, Borrowers and such Guarantors;
(c) all requisite corporate action and proceedings in connection
with this Amendment and the documents and instruments to be delivered hereunder
shall be in form and substance satisfactory to Lender, and Lender shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings which Lender
may have requested in connection therewith, such documents where requested by
Lender or its counsel to be certified by appropriate corporate officers or
governmental authorities;
(d) a pro-forma consolidated balance sheet of LFI and
subsidiaries, dated as of January 31, 1998, prepared so as to give pro-forma
effect to the consummation of the 1998
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Restructuring, accompanied by an officer's certificate dated as of the date
hereof, certified by the chief financial officer at LFI;
(e) evidence that the Certificate of Merger with respect to the
LFI Restructuring Merger and the Amended and Restated Certificate of
Incorporation of LFI have been filed by the Secretary of State of the State of
Delaware;
(f) opinion letters of counsel to Borrowers and Guarantors with
respect to the 1998 Restructuring Agreements and this Amendment, and such other
matters as Lender may request; and
(g) after giving effect to the consents under, and amendments to
the Loan Agreement provided in, this Amendment, no Event of Default shall exist
or have occurred and no event or condition shall have occurred or exist which
with notice or passage of time or both would constitute an Event of Default.
18. Effect of this Amendment. This Amendment and the instruments and
agreements delivered pursuant hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof, and supersede all
prior oral or written communications, memoranda, proposals, negotiations,
discussions, term sheets and commitments with respect to the subject matter
hereof and thereof. Except for the specific amendments and consents expressly
set forth herein, no other changes or modifications to or consents under the
Financing Agreements, and no waivers of any provisions thereof are intended or
implied, and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control. The Loan Agreement and this Amendment shall be read and construed as
one agreement.
19. Further Assurances. Borrowers shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
20. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York (without giving effect to
principles of conflicts of law).
21. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
22. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this
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Amendment, it shall not be necessary to produce or account for more than one
counterpart thereof signed by each of the parties hereto.
Please sign in the space provided below and return a counterpart of this
Amendment, whereupon this Amendment, as so agreed to and accepted, shall become
a binding agreement among Borrowers, Guarantors and Lender.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By:
---------------------------
Title:
------------------------
AGREED AND ACCEPTED:
LONDON FOG INDUSTRIES, INC.
By:
---------------------------
Title:
------------------------
PACIFIC TRAIL, INC.
By:
---------------------------
Title:
------------------------
THE SCRANTON OUTLET CORPORATION
By:
---------------------------
Title:
------------------------
CONSENTED TO:
PTI HOLDING CORP.
By:
---------------------------
Title:
------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
PTI TOP COMPANY, INC.
By:
---------------------------
Title:
------------------------
STAR SPORTSWEAR MANUFACTURING CORP.
By:
---------------------------
Title:
------------------------
▇▇▇▇▇▇▇ MANUFACTURING CO., INC.
By:
---------------------------
Title:
------------------------
WASHINGTON HOLDING COMPANY
By:
---------------------------
Title:
------------------------
CLIPPER MIST, INC.
By:
---------------------------
Title:
------------------------
LONDON FOG SPORTSWEAR, INC.
By:
---------------------------
Title:
------------------------
THE ▇▇▇▇▇▇▇ CORPORATION
By:
---------------------------
Title:
------------------------
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