EXHIBIT 10.3
FIFTH AMENDMENT TO THIRD AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "AMENDMENT") is made and entered into this 18th day of December,
1998 (to be effective as of the relevant date hereinafter specified), by and
among FLEET CAPITAL CORPORATION ("FLEET"), a Rhode Island corporation, with an
office at 2711 Haskell Avenue, Suite 2100, LB 21, Dallas, Texas 75204,
BANKBOSTON, N.A. ("BOSTON"), a national banking association, with an office at
100 Federal Street, Boston, Massachusetts 02110 (Fleet and Boston are
collectively referred to as "LENDERS" or each individually a "LENDER"), FLEET,
as agent for Lenders (Fleet, in such capacity, the "AGENT"), BRAZOS SPORTSWEAR,
L.L.C. ("BRAZOS"), a Delaware limited liability company, with its chief
executive offices at 4101 Founders Boulevard, Batavia, Ohio 45103-2553, and
MORNING SUN, INC. ("MORNING SUN"), a Washington corporation, with its chief
executive offices at 3500 20th Street E., Building C, Tacoma, Washington 98401
(Brazos and Morning Sun being hereinafter individually and collectively referred
to as "BORROWER", as governed by the provisions of SECTION 1.5 and SECTION 1.6
of the Loan Agreement [as hereinafter defined]).
RECITALS
A. Brazos, Inc., a Texas corporation ("BRAZOS, INC."), Morning Sun, Agent
and Lenders entered into that certain Third Amended and Restated Loan and
Security Agreement, dated as of July 2, 1997, which Third Amended and Restated
Loan and Security Agreement has been amended by the following documents: (i)
First Amendment to Third Amended and Restated Loan and Security Agreement
("FIRST AMENDMENT"), dated September 29, 1997, executed by Brazos, Inc., Morning
Sun, Agent and Lenders, (ii) Forbearance Agreement and Second Amendment to Third
Amended and Restated Loan and Security Agreement ("FORBEARANCE AGREEMENT"),
executed on June 30, 1998, executed by Brazos (Brazos having succeeded by
operation of law to all right, title, interest, duties and obligations of
Brazos, Inc. in, to and under the Third Amended and Restated Loan and Security
Agreement), Morning Sun, Agent and Lenders, (iii) Third Amendment to Third
Amended and Restated Loan and Security Agreement ("THIRD AMENDMENT"), dated
November 16, 1998, executed by Brazos, Morning Sun, Agent and Lenders and (iv)
Amendment to Forbearance Agreement and Fourth Amendment to Third Amended and
Restated Loan and Security Agreement ("FOURTH AMENDMENT"), dated November 30,
1998, executed by Brazos, Morning Sun, Agent and Lenders (the Third Amended and
Restated Loan and Security Agreement, as heretofore amended, including, without
limitation, as amended by the First Amendment, the Forbearance Agreement, the
Third Amendment and the Fourth Amendment being hereinafter referred to as the
"LOAN AGREEMENT").
B. Borrower has requested that Lenders and Agent amend the Loan Agreement
in the manner set forth in this Amendment, and Lenders and Agent are willing to
do so upon the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
2.01 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; ADDITION OF NEW
DEFINITION. Effective as of the effective date of this Amendment, the following
new definitions are added to SECTION 1.1 of the Loan Agreement to read in their
entirety as follows:
"FIFTH AMENDMENT - that certain Fifth Amendment to Third Amended and
Restated Loan and Security Agreement executed in December of 1998 by Borrower ,
Lenders and Agent.
SEASONAL INVENTORY AMOUNT - during the period (BUT ONLY DURING THE
PERIOD) beginning the date of execution of the Fifth Amendment, and
continuing until the earlier to occur of (i) January 31, 1999, (ii)
termination of the Forbearance (as such term is defined in the Second
Amendment) or (iii) the date any petition for an order for relief shall be
filed by or against Borrowers under the United States Bankruptcy Code, THE
LESSER OF (a) $2,000,000.00 or (b) 5% (or such lesser percentage as
Lenders may in their discretion determine from time to time after the
occurrence of a Default) of the value of the Eligible Inventory consisting
of 'blank' finished goods inventory of Borrower at such date."
2.02 AMENDMENT TO SECTION 1.1 OF THE LOAN AGREEMENT; AMENDMENT OF
DEFINITION OF "BORROWING BASE". Effective as of the effective date of this
Amendment, the definition of "Borrowing Base" contained in SECTION 1.1 of the
Loan Agreement is amended as follows:
(a) CLAUSE (II) of PARAGRAPH (B) of the definition of "Borrowing Base" is
amended by adding at the end of such CLAUSE (II) and before the ".", the
following new phrase:
"PLUS (3) the Seasonal Inventory Amount as of the applicable Calculation
Date."
(b) The following new paragraph is added to the end of the definition of
"Borrowing Base":
"For purposes of the definition of 'Seasonal Inventory Amount', the
value of Eligible Inventory consisting of 'blank' furnished goods on a
date shall be calculated on the basis of the lower of cost or market. Cost
shall be calculated on a first-in, first-out basis."
2.03 FEE. In addition to all other amounts payable by Borrowers to Lenders
and Agent under the Loan Agreement, the Forbearance Agreement and the other Loan
Documents, in consideration of the establishment of the Seasonal Inventory
Amount, Borrowers agree to pay Agent, for the benefit of Lenders (and to be
distributed by Agent to each Lender on the basis agreed upon by Lenders), a fee
in the amount of $100,000, which fee shall be deemed fully earned and
nonrefundable as of the date hereof, $50,000 of which fee shall be due and
payable on the date hereof, with the remaining $50,000 of such fee to be due and
payable upon the earlier to occur of (i) January 31, 1999, (ii) termination of
the Forbearance or (iii) the date any petition for an order for relief shall be
filed by or against Borrowers under the United States Bankruptcy Code
("BANKRUPTCY PROCEEDINGS"). Borrowers confirm and agree that, at Agent's sole
option, the amount of such fee may be charged directly against the Loan Account,
that the amount of such fee shall constitute
a part of the Obligations secured by the Collateral, and that Agent and Lenders
shall be entitled to all rights and benefits of the Loan Agreement, the
Forbearance Agreement and the other Loan Documents with respect thereto. Each
Lender hereby agrees that in the event of Bankruptcy Proceedings and such Lender
subsequently provides financing to Borrowers during the Bankruptcy Proceedings,
the portion of the second $50,000 installment of this fee actually received by
such Lender pursuant to this SECTION 2.03 shall be applied as a credit against
the fees charged by such Lender in connection with providing such financing
during the Bankruptcy Proceedings.
2.04 NOTHING IN THIS AMENDMENT SHALL BE CONSTRUED TO BE AN AGREEMENT BY
LENDERS TO EXTEND THE FORBEARANCE. Borrower hereby agrees and acknowledges that
nothing in this Amendment shall be construed to obligate Lenders to extend the
Forbearance (as defined in the Forbearance Agreement); Borrower hereby agrees
and acknowledges that any extension of the Forbearance is at the sole discretion
of Lenders.
ARTICLE III
CONDITIONS
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lenders and Agent:
(a) Lenders shall have received each of the following, each of which
shall be in form and substance satisfactory to Lenders, in their sole
discretion:
(i) this Amendment, duly executed by Borrower, together with
the Consent, Ratification and Release duly executed by Brazos Sportswear,
Inc.;
(ii) a closing certificate signed by the President of
Borrower, dated as of the date of this Amendment, stating that (A) the
representations and warranties set forth in SECTION 8 of the Loan
Agreement, as amended by this Amendment, are true and correct as of such
date, other than for such representations and warranties which relate to a
specific date, (B) Borrower is on such date in compliance with all the
terms and provisions set forth in the Loan Agreement, as amended by this
Amendment, and (C) on such date no Default or Event of Default has
occurred or is continuing, except for the Existing Default (as defined in
the Forbearance Agreement);
(iii) a company general certificate, certified by the
Secretary or Assistant Secretary of the Borrower, acknowledging (A) that
the Borrower's Board of Directors has met and has adopted, approved,
consented to and ratified resolutions which authorize the execution,
delivery and performance by the Borrower of this Amendment and all other
Loan Documents to which the Borrower is or is to be a party, and (B) the
names of the officers of the Borrower authorized to sign this Amendment
and each of the other Loan Documents to which the Borrower is or is to be
a party hereunder (including the certificates contemplated herein)
together with specimen signatures of such officers; and
(iv) such additional documents, instruments and information as
Lenders or their legal counsel may request.
(b) Except for the Existing Default, no Default or Event of Default
shall have occurred and be continuing.
(c) The representations and warranties contained herein and in the
Loan Agreement, the Forbearance Agreement and the other Loan Documents, as each
is amended hereby, shall be true and correct as of the date hereof, as if made
on the date hereof, other than for such representations and warranties which
relate to a specific date.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lenders and Agent
and their legal counsel.
ARTICLE IV
NO WAIVER
Nothing contained in this Amendment shall be construed as a waiver by
Lenders or Agent of any covenant or provision of the Loan Agreement, the
Forbearance Agreement, the other Loan Documents, this Amendment, or of any other
contract or instrument between Borrower, Agent and/or any Lender, and the
failure of Agent and/or any Lender at any time or times hereafter to require
strict performance by Borrower of any provision thereof shall not waive, affect
or diminish any right of Agent and/or any Lender to thereafter demand strict
compliance therewith. Lenders and Agent hereby reserve all rights granted under
the Loan Agreement, the Forbearance Agreement, the other Loan Documents, this
Amendment and any other contract or instrument between Borrower, Agent and/or
any Lender.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Loan Agreement, the Forbearance Agreement and the other Loan Documents, and,
except as expressly modified and superseded by this Amendment, the terms and
provisions of the Loan Agreement, the Forbearance Agreement, and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Borrower, Lenders and Agent agree that the Loan Agreement, the
Forbearance Agreement, and the other Loan Documents, as amended hereby, shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lenders and Agent that (a) the execution, delivery and performance
of this Amendment and any and all other Loan Documents executed and/or delivered
in connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Articles of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, the Forbearance Agreement and any other Loan
Document are true and correct on and as of the date hereof and on and as of the
date of execution hereof, as though made on and as of each such date, other than
representations and warranties which relate to a specific date; (c) except for
the Existing Default, no Default or Event of Default under the Loan Agreement,
as amended hereby, or the Forbearance Agreement has occurred and is continuing,
unless such Default or Event of Default has been specifically waived in writing
by Lenders; (d) Borrower is in full compliance with all covenants and agreements
contained in the Loan Agreement, the Forbearance Agreement and the other Loan
Documents, as amended hereby, except as has been otherwise specifically
disclosed in writing by Borrower to Lenders; and (e) the execution, delivery,
and performance of this Amendment and any and all other Loan Documents executed
and/or delivered in connection herewith, does not violate any provision of the
Parent Senior Notes or any document executed in connection therewith, including
the Indenture.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in the Loan Agreement or the Forbearance Agreement or any other
Loan Document, including, without limitation, any document furnished in
connection with this Amendment, shall survive the execution and delivery of this
Amendment and the other Loan Documents, and no investigation by any Lender or
Agent or any closing shall affect the representations and warranties or the
right of any Lender or Agent to rely upon them.
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement, the
Forbearance Agreement, and the other Loan Documents, and any and all other
agreements, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as
amended hereby, are hereby amended so that any reference in the Loan Agreement,
the Forbearance Agreement, and such other Loan Documents to the Loan Agreement
shall mean a reference to the Loan Agreement, as amended hereby.
6.03 EXPENSES OF LENDERS AND AGENT. As provided in the Loan Agreement,
Borrower agrees to pay on demand all costs and expenses incurred by Lenders and
Agent in connection with the preparation, negotiation, and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including, without
limitation, the costs and fees of Lenders' and Agent's legal counsel, and all
costs and expenses incurred by Lenders and Agent in connection with the
enforcement or preservation of any rights under the Loan Agreement, as amended
hereby, or the Forbearance Agreement, or any other Loan Documents, including,
without, limitation, the costs and fees of Lenders' and Agent's legal counsel.
6.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lenders, Agent and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of Lenders
and Agent.
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by any
Lender or Agent to or for any breach of or deviation from any covenant or
condition by Borrower shall be deemed a consent to or waiver of any other breach
of the same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE FORBEARANCE AGREEMENT AND
THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE
EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE
THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE FORBEARANCE AGREEMENT AND
THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION,
RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT
SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWER, LENDERS AND
AGENT.
6.11 RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM ANY LENDER OR AGENT. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDERS AND AGENT, ITS PREDECESSORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS,
ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER,
KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST ANY LENDER OR AGENT, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR,
CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE
HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE LOAN AGREEMENT OR THE FORBEARANCE AGREEMENT OR OTHER LOAN DOCUMENTS, AND
NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
[The Remainder of this Page is Intentionally Left Blank]
IN WITNESS WHEREOF, this Amendment has been executed as of the date first
above-written, to be effective as of the respective date indicated above.
BRAZOS SPORTSWEAR, L.L.C.
By:
Name:
Title:
MORNING SUN, INC.
By:
Name:
Title:
FLEET CAPITAL CORPORATION,
as Agent
By:
Name:
Title:
FLEET CAPITAL CORPORATION,
in its individual capacity
By:
Name:
Title:
BANKBOSTON, N.A.
By:
Name:
Title:
CONSENT, RATIFICATION AND RELEASE
The undersigned hereby consents to the terms of the within and foregoing
Fifth Amendment to Third Amended and Restated Loan and Security Agreement
("AMENDMENT"), confirms and ratifies the terms of its guaranty agreement, and
acknowledges that its guaranty agreement is in full force and effect on the date
executed, that it has no defense, counterclaim, set-off or any other claim to
diminish its liability under such document, that its consent is not required to
the effectiveness of the within and foregoing document, and that no consent by
it is required for the effectiveness of any future amendment, modification,
forbearance or other action with respect to the Loans, the Collateral, or any
Loan Documents. THE UNDERSIGNED HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND
FOREVER DISCHARGES AGENT AND EACH LENDER, AND EACH OF ITS RESPECTIVE
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST AGENT AND EACH
LENDER, AND EACH OF ITS RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE AND ARISING FROM
ANY "LOANS," INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT, AS AMENDED HEREBY, OR THE FORBEARANCE AGREEMENT OR OTHER LOAN
DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
BRAZOS SPORTSWEAR, INC.,
a Delaware corporation
By:
Name:
Title: