THIRD AMENDMENT TO THE CREDIT AGREEMENT
THIRD AMENDMENT, dated as of December 12, 1997, among AUTHENTIC
FITNESS PRODUCTS INC. (the "Borrower"), AUTHENTIC FITNESS CORPORATION
("Parent"), the Lenders party to the Credit Agreement referred to below, THE
BANK OF NOVA SCOTIA ("Scotiabank") and GENERAL ELECTRIC CAPITAL CORPORATION ("GE
Capital"), as Agents (the "Agents") for the Lenders thereunder, SCOTIABANK, as
Administrative Agent and Paying Agent for the Lenders thereunder and as Swing
Line Bank and the Fronting Bank thereunder, GE CAPITAL, as Documentation Agent
and Collateral Agent for the Lenders thereunder, and SOCIETE GENERALE, as
Co-Agent for the Lenders thereunder.
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into that certain Credit
Agreement, dated as of September 6, 1996 (such Agreement, as amended,
supplemented or otherwise modified from time to time, being hereinafter referred
to as the "Credit Agreement," and capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined); and
WHEREAS, the Borrower desires to have the Lenders consent to a
certain transaction and amend certain provisions of the Credit Agreement; and
WHEREAS, the Lenders have agreed to such consent and amendment
upon the terms and subject to the conditions provided herein;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. Consent. The Lenders hereby consent to Parent and the
Borrower entering into the Stock Repurchase Program, subject to their compliance
with Section 5.02(g)(ii)(C) of the Credit Agreement and subject to Parent and
the Borrower not incurring any obligations or entering into any commitments
thereunder beyond what is permitted by such Section 5.02(g)(ii)(C). Any cash
payments made by Parent or the Borrower in connection therewith shall be treated
as a payment on account of the repurchase of shares of Parent's common stock,
whether or not such repurchase occurs, for purposes of Section 5.02(g)(ii)(C) of
the Credit Agreement. Notwithstanding anything
in the Loan Documents to the contrary, the security interest granted by the
Borrower to the Collateral Agent in the Borrower's right, title and interest in
and under the agreements relating to the Stock Repurchase Program shall be
limited to accounts receivable and general intangibles for money due or to
become due thereunder. The Borrower agrees that so long as an Event of Default
has occurred and is continuing, it shall take such actions under the Stock
Repurchase Program as the Collateral Agent shall instruct in writing.
SECTION 2. Amendments. The Lenders, the Agents, the Borrower and
Parent hereby agree to the following amendments to the Credit Agreement:
(a) The definition of "Adjusted Net Worth" in Section 1.01 of the
Credit Agreement is hereby amended to read as follows:
"Adjusted Net Worth" at any time means Net Worth at such time
plus extraordinary or non-recurring non-cash losses of Parent and
its Subsidiaries on a Consolidated basis in an aggregate amount
not to exceed $20,000,000 during the period from the Effective
Date to the Termination Date plus the aggregate amount (not to
exceed the amount permitted pursuant to Section 5.02(g)(ii)(C)
hereof) applied to repurchase common stock of Parent or make cash
payments under the Stock Repurchase Program in accordance with
the terms hereof."
(b) The definitions of "Borrowing Base," "Borrowing Base
Certificate" and "Net Receivables"in Section 1.01 of the Credit Agreement are
hereby deleted.
(c) Clause (a) of the definition of "Unused Revolving Credit
Commitment" in Section 1.01 of the Credit Agreement is hereby amended to read as
follows:
"(a) such Lender's Revolving Credit Commitment at such time
minus"
(d) The following definition shall be added to Section 1.01 of
the Credit Agreement in the appropriate alphabetical order:
"Stock Repurchase Program" means an arrangement to be entered
into between Parent and Citibank, N.A. whereby Parent
simultaneously sells and purchases offsetting put and call
options with maturities of up to one year. Under the program
Parent will from
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time to time enter into transactions which do not require Parent
to fund share repurchases on the trade date, but rather give
Parent the benefit of locking in a future purchase price for its
stock close to the current market price and the right to all or a
portion of any appreciation in the shares between the trade date
and the option expiration date. The options provide Parent with
the right to either fully purchase the shares on the option
expiration date at the agreed upon future price or to receive or
pay the difference between the agreed upon future price and the
market price at option expiration, in cash or in shares of its
stock. As part of the transaction, in order to minimize the
future price, the benefit of Parent's stock appreciation is
capped at a predetermined level. Any cash settlements will be
funded through dividends to be paid by the Borrower to Parent."
(e) Clause (B) of Section 2.05(b)(ii) of the Credit Agreement is
hereby amended to read as follows:
"(B) the Revolving Credit Commitments on such Business Day."
(f) Section 2.07(a) of the Credit Agreement is hereby amended by
deleting the phrase "(determined without regard to the Borrowing Base)" from the
fourth and fifth lines thereof.
(g) Section 5.02(g)(ii)(C) of the Credit Agreement is hereby
amended to read as follows:
"(C) after and subject to its achieving the minimum EBITDA
covenant for the three Fiscal Quarter period ending on or about
March 31, 1997 as set forth in Section 5.04(d) hereof, repurchase
shares of its common stock and make cash payments under the Stock
Repurchase Program in an aggregate amount not to exceed
$20,000,000, which amount shall be increased to $30,000,000 after
and subject to its achieving Consolidated EBITDA of Parent and
its Subsidiaries of at least $60,000,000 for any period of four
(4) consecutive Fiscal Quarters and a ratio of Total Debt to
Consolidated EBITDA of Parent and its Subsidiaries for such
period of not greater than 2.75:1.00, in each case plus the
amount of cash payments made by Citibank, N.A. to Parent under
the Stock Repurchase Program;"
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(h) Section 5.02(g)(iii)(A)(II) of the Credit Agreement is hereby
amended to read as follows:
"to be used by Parent to repurchase its common stock and to make
payments under the Stock Repurchase Program, in amounts not to
exceed the amounts permitted to be paid by Parent under Section
5.02(g)(ii)(C); provided, however, that as at the date any such
dividend is paid, Parent and the Borrower shall each deliver to
the Lenders a certificate dated as of such date, of the type
required by Section 3.01(f)(x),"
(i) The last sentence of Section 5.03(a) of the Credit Agreement
is hereby amended to read as follows:
"Upon the Collateral Agent's request, the Borrower shall deliver
to the Agents such other additional data as the Collateral Agent
shall request."
(j) The reference to "$100,000,000" on the second line of Section
5.04(b) of the Credit Agreement is hereby changed to "$82,000,000."
(k) Section 5.04(c) of the Credit Agreement is hereby amended to
read as follows:
"(c) Maximum Total Debt to EBITDA Ratio. Maintain, as of the end
of each fiscal month, a ratio of Total Debt to Consolidated
EBITDA of Parent and its Subsidiaries for such period of twelve
fiscal months ending at the end of each such fiscal month of not
greater than the amount set forth below for each fiscal month
ending during the period set forth below:
Twelve Fiscal Month Period
Ending on or About Ratio
------------------ -----
June 30, 1997 - August 31, 1997 3.25:1.00
September 30, 1997 - August 31, 1998 3.00:1.00
September 30, 1998 and thereafter 2.75:1.00
(l) Section 5.04(d) of the Credit Agreement is hereby amended by
deleting the Minimum EBITDA number for September 30, 1998 and thereafter and
substituting the following:
"September 30, 1998 $55,000,000
December 31, 1998 $55,000,000
March 31, 1999 and thereafter $66,000,000"
SECTION 3. Conditions to Effectiveness. This Amendment shall
become effective as of the date hereof when, and only when, the Agents shall
have received (a) counterparts of
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this Amendment executed by Parent, the Borrower and the Lenders or, as to the
Lenders, advice satisfactory to the Agents that such Lenders have executed this
Amendment, (b) a copy of the annexed Consent of Guarantors executed by the
parties thereto and (c) the fee referred to in the first sentence of Section 6
hereof.
SECTION 4. Representations and Warranties. Parent and the
Borrower hereby jointly and severally represent and warrant to the Lenders and
the Agents as follows:
(a) After giving effect to this Amendment, each of the
representations and warranties in Article IV of the Credit Agreement and in the
other Loan Documents are correct on and as of the date hereof as though made on
and as of such date, except to the extent any such representation or warranty
expressly relates to an earlier date.
(b) After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing as of the date hereof.
(c) The execution, delivery and performance by Parent and the
Borrower of this Amendment have been duly authorized by all necessary or proper
corporate action and do not require the consent or approval of any Person which
has not been obtained.
(d) This Amendment has been duly executed and delivered by the
Borrower and Parent and each of this Amendment and the Credit Agreement as
amended hereby constitutes the legal, valid and binding obligation of the
Borrower and Parent, enforceable against them in accordance with its terms.
SECTION 5. Reference to and Effect on the Loan Documents. (a)
Upon the effectiveness of this Amendment, on and after the date hereof, each
reference in the Credit Agreement and the other Loan Documents to "this
Agreement," "hereunder," "hereof," "herein," or words of like import, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except to the extent waived or amended herein, the provisions
of the Credit Agreement and all of the other Loan Documents 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 or the Agents under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 6. Fees, Costs and Expenses. Parent and the Borrower
agree to pay to the Administrative Agent for the benefit
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of the Lenders, based on their Pro Rata Shares, a fee in the amount of $500,000.
Parent and the Borrower further agree to pay on demand (i) all costs, fees and
expenses of the Agents in connection with the preparation, execution and
delivery of this Amendment and the other instruments and documents to be
delivered pursuant hereto, including the reasonable fees and out-of-pocket
expenses of counsel for the Agents with respect thereto, and (ii) all other
costs and expenses otherwise required under Section 8.04 of the Credit
Agreement.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto 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
instrument.
SECTION 8. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with the laws of the State of New York
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
-----------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
-----------------------------------
Name:
Title:
SOCIETE GENERALE
By:
-----------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA
By:
-----------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
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AUTHENTIC FITNESS PRODUCTS INC.
By:
-----------------------------
Name:
Title:
AUTHENTIC FITNESS CORPORATION
By:
-----------------------------
Name:
Title:
7
CONSENT OF GUARANTORS
The undersigned, a party to the Subsidiary Guaranty, Security
Agreement and Trademark, Patent and Copyright Security Agreement, each dated as
of September 6, 1996, hereby consents to the terms of the foregoing Amendment
dated as of December 12, 1997 (to which this Consent is annexed) and confirms
that such Subsidiary Guaranty, Security Agreement and Trademark, Patent and
Copyright Security Agreement remain in full force and effect and continue to
secure the Obligations pursuant to the terms thereof.
Dated as of December 12, 1997
AUTHENTIC FITNESS RETAIL INC.
By:
-----------------------------------
Name:
Title:
CCC ACQUISITION CORP.
By:
-----------------------------------
Name:
Title:
CCC ACQUISITION REALTY CORP.
By:
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Name:
Title:
CCC TEN. CORP.
By:
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Name:
Title:
CCC CAL. CORP.
By:
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Name:
Title:
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