EXECUTION COPY AMENDMENT NO. 2 AMENDMENT NO. 2, dated as of August 1, 2004 (this "Amendment"), to the Credit Agreement, dated as of February 4, 2003 (as amended by that certain Amendment No. 1, Consent and Waiver dated as of November 12, 2003 and as otherwise amended, supplemented or modified to the date hereof, the "Credit Agreement"), among WARNACO INC., a Delaware corporation (the "Borrower"), THE WARNACO GROUP, INC. ("Group"), the financial institutions from time to time party thereto as lenders (the "Lenders"), the financial institutions from time to time party thereto as issuers (the "Issuers"), CITICORP NORTH AMERICA, INC. ("CNAI"), as administrative agent and collateral agent for the Lenders and the Issuers (in such capacity, the "Administrative Agent"), JPMORGAN CHASE BANK, as syndication agent for the Lenders and the Issuers and BANK OF AMERICA, NA, THE CIT GROUP/COMMERCIAL SERVICES, INC., and CONGRESS FINANCIAL CORPORATION (CENTRAL), each as a co-documentation agent for the Lenders and Issuers. Capitalized terms used herein but not defined herein are used as defined in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Borrower, Group, the Lenders, the Issuers and the Administrative Agent are party to the Credit Agreement and the undersigned Lenders constitute the Requisite Lenders; WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders agree to reduce the Commitments of the Lenders ratably by $100,000,000 to $175,000,000 and to concurrently increase the amount of Facility Increase available under Section 2.18 of the Credit Agreement from $50,000,000 to $150,000,000; WHEREAS, the Borrower has also requested that the Administrative Agent and the Lenders constituting the Requisite Lenders agree to amend the Credit Agreement (i) to increase the amount of permitted other Indebtedness and permitted other Liens to $10,000,000, in each case; (ii) to increase certain permitted Investments by a Loan Party in Warnaco Entities that are not Loan Parties to $10,000,000, subject to the receipt by the Administrative Agent, for the benefit of the Secured Parties, of a perfected pledge of 100% of the Stock (or, in the case of a Foreign Subsidiary, no more than 65% of the Voting Stock) of any such Warnaco Entity; (iii) to permit the Borrower to make investments in investment grade debt securities; (iv) to permit the Borrower to pay dividends and repurchase debt and equity, up to an aggregate amount of $50,000,000 if, after giving effect to such payment, Cash on Hand is greater than or equal to $50,000,000; and (v) to permit an Asset Sale for 50% cash and 50% notes receivable in certain circumstances (which notes shall be in form and substance reasonably satisfactory to the Administrative Agent and pledged to the Administrative Agent, for the benefit of the Lenders); and WHEREAS, pursuant to Section 11.1 (Amendments, Waiver, Etc.) of the Credit Agreement, the consent of the Requisite Lenders is required to amend the provisions of the Credit Agreement as set forth herein; NOW, THEREFORE, in consideration of the premises and the covenants and obligations contained herein the parties hereto agree as follows: SECTION 1. REDUCTION OF COMMITMENTS; INCREASE IN AMOUNT OF FACILITY INCREASE Effective as of the Amendment Effective Date the Commitments shall be reduced to $175,000,000 ratably with respect to each Lender. SECTION 2. AMENDMENTS TO CREDIT AGREEMENT The Credit Agreement is, effective as of the Amendment Effective Date and subject to the satisfaction (or due waiver) of the conditions set forth in Section 3 (Conditions Precedent to the Effectiveness of this Amendment) hereof, hereby amended as follows: (a) INSERTION OF THE DEFINITION OF "INVESTMENT GRADE DEBT SECURITIES" IN ARTICLE I (DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS). The following definition of "Investment Grade Debt Securities" shall be inserted in the correct alphabetical order as follows: "Investment Grade Debt Securities" means any bond, debenture, note or other evidence of indebtedness which is rated at least BBB- by Standard & Poor's Rating Services and Baa3 by Moody's Investors Services, Inc. (b) AMENDMENTS TO SECTION 2.18 (FACILITY INCREASE). Section 2.18(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) The Borrower may (no more frequently than three times (in minimum increments of $50,000,000) during the term of the Facility) request the Lenders or other Eligible Assignees to provide additional Commitments up to an aggregate amount not in excess of $150,000,000 (a "Facility Increase"); provided, however, that (i) the Borrower shall have given the Administrative Agent at least 60 days notice of its intention to effect the Facility Increase and the desired amount of such Facility Increase, (ii) the conditions precedent to a Borrowing set forth in Section 3.2 are satisfied as of the Facility Increase Effective Date (as defined below), (iii) an opinion of counsel to the Loan Parties in form and substance and from counsel satisfactory to the Administrative Agent and addressed to the Administrative Agent, the Issuers and the Lenders dated the Facility Increase Effective Date and addressing such matters as the Administrative Agent may reasonably request shall be delivered to the Administrative Agent and (iv) the Borrower shall have paid to the Agents a fee to be determined (but in any event reasonably acceptable to Group) and to the Lenders providing the Facility Increase fees required in order to clear the market in an amount to be determined. (c) AMENDMENTS TO SECTION 8.1 (INDEBTEDNESS). (i) Section 8.1(n) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (n) other Indebtedness the aggregate Dollar Equivalent of the principal amount of which shall not exceed $10,000,000 at any time. (d) AMENDMENTS TO SECTION 8.2 (LIENS, ETC.). Section 8.2(l) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (l) other Liens not otherwise permitted under this Section 8.2, securing obligations in an amount not to exceed $10,000,000 in an aggregate amount outstanding at any time. (e) AMENDMENTS TO SECTION 8.3 (INVESTMENTS). (i) Section 8.3(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) Investments (i) by any Warnaco Entity in any Warnaco Entity in an amount not exceeding the amount outstanding on the date hereof and as set forth on Schedule 8.3, 2 and (ii) additional Investments by (A) any Warnaco Entity in a Loan Party, (B) any Warnaco Entity that is not a Loan Party in any other Warnaco Entity, and (C) any Loan Party in a Warnaco Entity that is not a Loan Party (1) to the extent required by applicable law to fulfill statutory capital requirements in a maximum aggregate amount up to $10,000,000, and (2) solely for the purposes of funding (x) the operations of such Foreign Subsidiary (including Standby Letters of Credit Issued for the benefit of such Foreign Subsidiaries), not to exceed in the aggregate $25,000,000 at any time outstanding under this subclause (a)(ii)(C)(2)(x), (y) up to $15,000,000 of investments in Lejaby SAS to fund costs associated with the reorganization of its European operations and (z) operating expenses of Foreign Subsidiaries in Hong Kong, Central America and Mexico and (3) to the extent necessary for such entity to pay taxes that are due and payable; provided, that in each case (other than investments made as capital contributions pursuant to subclause (ii)(C)(1)) such Investment shall be evidenced by a promissory note in form and substance satisfactory to the Administrative Agent, the Administrative Agent shall have a perfected security interest in such promissory note and no Event of Default shall have occurred and be continuing at the time such Investment is made or would result therefrom; provided, further, that in the case of investments made as capital contributions pursuant to subclause (ii)(C)(1) such Investment shall be permitted only to the extent that substantially concurrently with such Investment the Borrower shall have complied with the requirements of Section 7.11(b) (Additional Personal Property Collateral and Guaranties); (ii) Section 8.3(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (b) Investments in (i) cash and Cash Equivalents; provided that such cash and Cash Equivalents held by a Loan Party are held in a Blocked Account, a Restricted Account, a Control Account, or otherwise in compliance with Section 4.7 of the Pledge and Security Agreement, and (ii) Investment Grade Debt Securities; provided that Investment Grade Debt Securities held by a Loan Party are held in a Securities Account, or otherwise in compliance with Section 4.4 of the Pledge and Security Agreement; (iii) Section 8.3(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (d) Investments in payment intangibles, chattel paper (each as defined in the UCC) and Accounts, notes receivable (including but not limited to those notes receivable held by the Borrower or its Subsidiaries pursuant to clause (b) of Section 8.4) and similar items arising or acquired in the ordinary course of business consistent with the past practice of the Borrower and its Subsidiaries; (f) AMENDMENTS TO SECTION 8.4 (SALE OF ASSETS). Section 8.4(b) of the Credit Agreement is hereby amended and restated in its entirety as follows: (b) the sale of any asset or assets by a Warnaco Entity as long as (i) the purchase price paid to such Warnaco Entity for such asset shall be no less than the Fair Market Value of such asset at the time of such sale, (ii) not less than 100% of the purchase price for such asset shall be paid in cash (provided that (A) in the case of an Asset Sale consummated when no Loan or Loans or unreimbursed amounts in respect of drawn Letters of Credit are outstanding, 50% of the purchase price for such asset may be paid in cash and the remaining amount paid in notes receivable (which notes receivable shall be in form and substance reasonably satisfactory to the Administrative Agent and, if held by a Loan Party, pledged to the Administrative Agent, for the benefit of the Lenders), and 3 (B) in the case of an Asset Sale of all or substantially all the assets described on Schedule 8.4 (Permitted Asset Sales), the portion of the purchase price paid in cash shall be the greater of (x) 75% and (y) the value of the Borrowing Base relating to such assets plus any current liabilities relating to such assets which are not assumed by the purchaser thereof) to such Warnaco Entity, (iii) neither the seller of such assets nor any of its Affiliates shall have any subsequent payment obligations in respect of such sale, other than customary and standard indemnity obligations and as set forth in subclause (ii) above, (iv) no Default or Event of Default has occurred and is continuing at the time of such sale or would result from such sale, and (v) the aggregate purchase price paid to all Warnaco Entities for all assets sold pursuant to this clause (b) shall not exceed $20,000,000 in the aggregate; (g) AMENDMENTS TO SECTION 8.5 (RESTRICTED PAYMENTS). Section 8.5 (Restricted Payments) of the Credit Agreement is hereby amended by (i) deleting "and" at the end of clause (b), (ii) inserting "and" at the end of subclause (c)(iii) and (iii) inserting a new clause (d) immediately after subclause (c)(iii) thereof to read in its entirety as follows: (d) Restricted Payments by any Warnaco Entity up to an aggregate amount, together with any payment made under Section 8.6(b)(vi), of $50,000,000, if after giving effect to such Restricted Payment, Cash on Hand is at least equal to $50,000,000; (h) AMENDMENTS TO SECTION 8.6 (PREPAYMENT AND CANCELLATION OF INDEBTEDNESS). Section 8.6(b) of the Credit Agreement is hereby amended and restated in its entirety as follows: (b) Neither Group nor the Borrower shall, nor shall they permit any of their respective Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness; provided, however, that any Warnaco Entity may: (i) prepay the Obligations in accordance with the terms of this Agreement, (ii) make regularly scheduled or otherwise required repayments or redemptions of Indebtedness (other than the Second Lien Notes in respect of which payments may only be made subject to clause (c) and clause (d) below), (iii) prepay any intercompany Indebtedness payable to the Borrower or any of its Subsidiaries by the Borrower or any of its Subsidiaries, (iv) beginning on June 30, 2004 repurchase the Take-Out Securities in the open market using then available Cash On Hand in an aggregate amount not to exceed $10,000,000, (v) renew, extend, refinance and refund Indebtedness, as long as such renewal, extension, refinancing or refunding is permitted under Section 8.1(g) and (vi) prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof any Indebtedness of any Warnaco Entity up to an aggregate amount, together with any payment made under Section 8.5(d) (but not including any payments on Indebtedness permitted in clauses (i) through (v) above), of $50,000,000, if after giving effect to such payment, Cash on Hand is at least equal to $50,000,000. SECTION 3. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT This Amendment shall become effective as of the date first written above when, and only when, each of the following conditions precedent shall have been satisfied (the "Amendment Effective Date") or duly waived by the Administrative Agent: (a) CERTAIN DOCUMENTS The Administrative Agent shall have received each of the following, each dated the Amendment Effective Date (unless otherwise agreed by the Administrative Agent), in form and substance satisfactory to the Administrative Agent and in sufficient copies for each Lender: 4 (i) this Amendment, duly executed by the Borrower, Group, the Administrative Agent and Lenders constituting Requisite Lenders; (ii) the Consent, Agreement and Affirmation of Guaranty in form attached hereto as Exhibit A, duly executed by each of the Subsidiary Guarantors; and (iii) such additional documentation as the Administrative Agent may reasonably require. (b) REPRESENTATIONS AND WARRANTIES Each of the representations and warranties contained in Article IV (Representations and Warranties) of the Credit Agreement, the other Loan Documents or in any certificate, document or financial or other statement furnished at any time under or in connection therewith are true and correct in all material respects on and as of the date hereof and the Amendment Effective Date, in each case as if made on and as of such date and except to the extent that such representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date; provided, however, that references therein to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended by this Amendment and after giving effect to the amendments set forth herein. (c) NO DEFAULT OR EVENT OF DEFAULT After giving effect to this Amendment, no Default or Event of Default (except for those that may have been duly waived) shall have occurred and be continuing, either on the date hereof or on the Amendment Effective Date. (d) FEES AND EXPENSES PAID The Borrower shall have paid all Obligations due, after giving effect to this Amendment, on or before the later of the date hereof and the Amendment Effective Date and all costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Amendment and all other Loan Documents entered into in connection herewith (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto and all other Loan Documents) and all other costs, expenses and fees due under any Loan Document. SECTION 4. REPRESENTATIONS AND WARRANTIES On and as of the date hereof and as of the Amendment Effective Date, after giving effect to this Amendment, the Borrower hereby represents and warrants to the Administrative Agent and each Lender as follows: (a) this Amendment has been duly authorized, executed and delivered by the Borrower and Group and constitutes a legal, valid and binding obligation of the Borrower and Group, enforceable against the Borrower and Group in accordance with its terms and the Credit Agreement as amended by this Amendment and constitutes the legal, valid and binding obligation of the Borrower and Group, enforceable against the Borrower and Group in accordance with its terms; (b) each of the representations and warranties contained in Article IV (Representations and Warranties) of the Credit Agreement, the other Loan Documents or in any certificate, document or financial or other statement furnished at any time under or in connection therewith are true and correct in all material respects on and as of the date hereof and the Amendment Effective Date, in each case as if made on and as of such date and except to the extent that such 5 representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific date; provided, however, that references therein to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended hereby and after giving effect to the amendments set forth herein; (c) no Default or Event of Default has occurred and is continuing (except for those that are duly waived); and (d) no litigation has been commenced against any Loan Party or any of its Subsidiaries seeking to restraint or enjoin (whether temporarily, preliminarily or permanently) the performance of any action by any Loan Party required or contemplated by this Amendment, the Credit Agreement or any Loan Document, in each case as amended hereby (if applicable). SECTION 5. REFERENCE TO THE EFFECT ON THE LOAN DOCUMENTS (a) As of the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like import, and each reference in the other Loan Documents to the Credit Agreement (including, without limitation, by means of words like "thereunder," "thereof" and words of like import), shall mean and be a reference to the Credit Agreement as amended hereby, and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. Each of the table of contents and lists of Exhibits and Schedules of the Credit Agreement shall be amended to reflect the changes made in this Amendment as of the Amendment Effective Date. (b) Except as expressly amended hereby or specifically waived above, all of the terms and provisions of the Credit Agreement and all other Loan Documents are and shall remain in full force and effect and are hereby 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 the Lenders, Issuers, Arranger or the Administrative Agent under any of the Loan Documents, nor constitute a waiver or amendment of any other provision of any of the Loan Documents or for any purpose except as expressly set forth herein. (d) This Amendment is a Loan Document. SECTION 6. EXECUTION IN COUNTERPARTS This Amendment may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same document. Delivery of an executed counterpart by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 7. GOVERNING LAW This Amendment shall be governed by and construed in accordance with the law of the State of New York. 6 SECTION 8. SECTION TITLES The section titles contained in this Amendment are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto, except when used to reference a section. SECTION 9. NOTICES All communications and notices hereunder shall be given as provided in the Credit Agreement or, as the case may be, the Guaranty. SECTION 10. SEVERABILITY The fact that any term or provision of this Amendment is held invalid, illegal or unenforceable as to any person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation or jurisdiction or as applied to any person SECTION 11. SUCCESSORS The terms of this Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. SECTION 12. WAIVER OF JURY TRIAL EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT. 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be executed by their respective officers thereunto duly authorized, as of the date first above written. WARNACO INC., as Borrower By: /s/ Jay A. Galluzzo -------------------- Name: Jay A. Galluzzo Title: Vice President, General Counsel and Secretary THE WARNACO GROUP, INC., as Group By: /s/ Jay A. Galluzzo -------------------- Name: Jay A. Galluzzo Title: Vice President, General Counsel and Secretary CITICORP NORTH AMERICA INC., as Administrative Agent and a Lender By: /s/ Keith R. Gerding --------------------- Name: Keith R. Gerding Title: Vice President JPMORGAN CHASE BANK, as Syndication Agent and a Lender By: /s/ Illegible --------------------- Name: Illegible Title: Vice President BANK OF AMERICA, NA, as a Co-Documentation Agent, an Issuer and a Lender By: /s/ Kevin W. Corcoran ---------------------- Name: Kevin W. Corcoran Title: Vice President THE CIT GROUP/COMMERCIAL SERVICES, INC., as a Co-Documentation Agent and a Lender By: /s/ Charles M. Carbone ---------------------- Name: Charles M. Carbone Title: Vice President CONGRESS FINANCIAL CORPORATION (CENTRAL) as a Co-Documentation Agent and a Lender By: /s/ Anthony Vizgirda --------------------- Name: Anthony Vizgirda Title: First Vice President THE BANK OF NOVA SCOTIA, as an Issuer and a Lender By: /s/ Todd S. Meller ------------------ Name: Todd S. Meller Title: Managing Director AMSOUTH BANK, as a Lender By: ------------------- Name: Title: FLEET RETAIL FINANCE INC., as a Lender By: /s/ Sally A. Sheehan -------------------- Name: Sally A. Sheehan Title: Managing Director WELLS FARGO FOOTHILL (formerly, Foothill Capital Corporation), as a Lender By: /s/ Patrick McCormack ---------------------- Name: Patrick McCormack Title: Assistant Vice President GMAC COMMERCIAL FINANCE LLC, as a Lender By: /s/ Marline Alexander-Thomas ---------------------------- Name: Marline Alexander-Thomas Title: Vice President MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., as a Lender By: ------------------------------ Name: Title: NATIONAL CITY BUSINESS CREDIT, INC., as a Lender By: /s/ Michael Fine ----------------------------- Name: Michael Fine Title: Director LASALLE BUSINESS CREDIT, LLC, as a Lender By: /s/ Karoline Moxham ------------------------------ Name: Karoline Moxham Title: Vice President ORIX FINANCIAL SERVICES, INC., as a Lender By: /s/ Christopher L. Smith ------------------------ Name: Christopher L. Smith Title: Authorized Representative PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ------------------------- Name: Title: SIEMENS FINANCIAL SERVICES, INC., as a Lender By: /s/ Frank Amodio ------------------------- Name: Frank Amodio Title: Vice President - Credit WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: -------------------------- Name: Title: UPS CAPITAL CORPORATION, as a Lender By: -------------------------- Name: Title: EXHIBIT A CONSENT, AGREEMENT AND AFFIRMATION OF GUARANTY Each of the undersigned Guarantors hereby consents to the terms of the foregoing Amendment No. 2 in its capacity as a Guarantor under the Credit Agreement and agrees that the terms thereof shall not affect in any way its obligations and liabilities under the Loan Documents (as amended and otherwise expressly modified thereby), all of which obligations and liabilities shall remain in full force and effect and each of which is hereby reaffirmed (as amended and otherwise expressly modified thereby). 184 BENTON STREET, INC. A.B.S. CLOTHING COLLECTION, INC. ABBEVILLE MANUFACTURING COMPANY WARNACO SWIMWEAR INC. AUTHENTIC FITNESS ON-LINE, INC. WARNACO SWIMWEAR PRODUCTS, INC. AUTHENTIC FITNESS RETAIL INC. CALVIN KLEIN JEANSWEAR COMPANY CCC ACQUISITION CORP. C.F. HATHAWAY COMPANY CKJ HOLDINGS, INC. DESIGNER HOLDINGS LTD. GREGORY STREET, INC. JEANSWEAR HOLDINGS, INC. KAI JAY MANUFACTURING COMPANY MYRTLE AVENUE, INC. OUTLET HOLDINGS, INC. OUTLET STORES, INC. RIO SPORTSWEAR, INC. UBERTECH PRODUCTS, INC. WARNACO MEN'S SPORTSWEAR, INC. WARNACO PUERTO RICO, INC. WARNACO SOURCING INC. WARNACO U.S. INC. WARNER'S DE COSTA RICA INC., as Guarantors By: /s/ Jay A. Galluzzo -------------------- Name: Jay A. Galluzzo Title: Vice President PENHALIGON'S BY REQUEST, INC., as Guarantor By: /s/ Jay A. Galluzzo ------------------- Name: Jay A. Galluzzo Title: Vice President THE WARNACO GROUP, INC., as Guarantor By: /s/ Jay A. Galluzzo ------------------- Name: Jay A. Galluzzo Title: Vice President WARNACO INTERNATIONAL, LLC, as Guarantor By: /s/ Jay A. Galluzzo -------------------- Name: Jay A. Galluzzo Title: Vice President
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10-Q Filing
Warnaco (WAC) Inactive 10-Q2005 Q3 Quarterly report
Filed: 10 Nov 04, 12:00am