SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 30, 1998
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
SALANT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-2433 13-3402444
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) INDENTIFICATION NO.)
INCORPORATION)
1114 Avenue of the Americas, New York, New York 10036
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 221-7500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 5. OTHER EVENTS
Salant Corporation ("Salant") has received and accepted an $85
million financing commitment from The CIT Group/Commercial Services, Inc.
("CIT"), Salant's existing working capital lender, that would be available
to Salant upon completion of Salant's restructuring efforts. This new
financing commitment supercedes the earlier post-restructuring commitment
that Salant had received from CIT in June 1998. In connection with CIT's
issuance of this new financing commitment, CIT agreed to extend financing
to Salant under the existing credit agreement through December 31, 1998.
The foregoing summary does not purport to be complete and is
qualified in its entirety by reference to (i) the press release, dated
December 8, 1998, (ii) the letter agreement, dated as of November 30,
1998, by and between Salant and CIT and (iii) the letter agreement, dated
December 7, 1998, by and between Salant and CIT, filed as Exhibits 99,
10.48 and 10.49, respectively, to this Current Report on Form 8-K, which
items are incorporated by reference herein.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(c) Exhibits.
The following exhibits are filed as part of this report:
Exhibit
Number Description
- ------ -----------
99 Press Release, dated December 8, 1998.
10.48 Letter Agreement, dated as of November 30, 1998, by and between
Salant Corporation and The CIT Group/Commercial Services, Inc.
10.49 Letter Agreement, dated December 7, 1998, by and between Salant
Corporation and The CIT Group/Commercial Services, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SALANT CORPORATION
Dated: December 8, 1998 By: /s/ Todd Kahn
--------------------------
Executive Vice President
and General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
99 Press Release, dated December 8, 1998.
10.48 Letter Agreement, dated as of November 30, 1998, by and between
Salant Corporation and The CIT Group/Commercial Services, Inc.
10.49 Letter Agreement, dated December 7, 1998, by and between Salant
Corporation and The CIT Group/Commercial Services, Inc.
FOR IMMEDIATE RELEASE
---------------------
CONTACT: Kekst and Company
Wendi Kopsick
(212) 521-4867
James Fingeroth
(212) 521-4819
SALANT CORPORATION RECEIVES REVISED FINANCING
COMMITMENT FROM CIT AND EXTENSION OF EXISTING CREDIT FACILITY
New York, NY, December 8, 1998 -- Salant Corporation (NYSE: SLT) today
announced that it has received and accepted an $85 million financing
commitment from The CIT Group/Commercial Services, Inc., Salant's existing
working capital lender, that would be available to Salant upon completion
of Salant's restructuring efforts. This new financing commitment supercedes
the earlier post-restructuring commitment that Salant had received from CIT
in June 1998. The extension of the existing CIT facility allows Salant to
continue to explore its restructuring options with Magten Asset Management
Corp., the beneficial owner of, or the representative of the beneficial
owners of, approximately 70% of the aggregate principal amount of the
Senior Secured Notes, and Apollo Apparel Partners, L.P., the beneficial
owner of approximately 40.1% of Salant's issued and outstanding common
stock. The CIT extension agreement also includes an agreement by CIT to
continue to forbear from exercising any of its rights by virtue of the
non-payment of interest under Salant's Senior Secured Notes.
In connection with CIT's issuance of this new financing commitment,
CIT agreed to extend financing to Salant under the existing credit
agreement through December 31, 1998. Under the terms of the new CIT
financing commitment, the $85 million credit facility will be used to fund
Salant's working capital requirements through the third anniversary of the
consummation of Salant's restructuring and will replace Salant's existing
secured credit facility with CIT upon completion of a restructuring of
Salant's existing capital structure acceptable to CIT. The closing of the
new credit facility with CIT is subject to the satisfaction of a number of
conditions.
As previously announced, Salant and its major note and equity holders
have decided to review their continued pursuit of the restructuring
agreement announced in March 1998. This decision reflects, among other
things, the significant additional time required in order to consummate the
restructuring contemplated by that March 1998 agreement and the occurrence
of certain events (including, but not limited to, a reduction in the value
of certain of Salant's business units) that have caused various assumptions
upon which the March restructuring agreement was premised to no longer be
true.
Salant is a diversified apparel company, which markets a broad line of
men's apparel under well-known brand names, including Perry Ellis,
Manhattan and John Henry. Salant also markets children's sleepwear,
underwear and sportswear. Salant's products are sold in department and
specialty stores, national chains and mass volume retailers throughout the
United States.
THE CIT GROUP/COMMERCIAL SERVICES, INC.
1211 Avenue of the Americas
New York, New York 10036
As of November 30, 1998
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Re: The CIT Group/Commercial Services, Inc.
with Salant Corporation
---------------------------------------
Gentlemen:
Reference is made to the Revolving Credit, Factoring and Security
Agreement between The CIT Group/Commercial Services, Inc. ("Lender") and
Salant Corporation ("Borrower") dated September 20, 1993, as amended (the
"Credit Agreement"). Capitalized terms used and not otherwise defined
herein shall have their respective meanings as set forth in the Credit
Agreement.
Pursuant to the Thirteenth Amendment to the Credit Agreement (a)
Borrower requested Lender (i) to forbear through November 30, 1998 from
exercising any of its rights and remedies arising from certain Events of
Default specified therein and (ii) to extend the term of the Credit
Agreement through November 30, 1998 and (b) Lender agreed to forbear and to
extend the term of the Credit Agreement through November 30, 1998 upon the
terms and conditions set forth therein.
Borrower has requested Lender (a) to continue to forbear through
December 31, 1998 from exercising any of its rights and remedies arising
from the Payment Default and the Additional Payment Default, (b) to extend
the term of the Credit Agreement through December 31, 1998, (c) in the
event Borrower files a case under chapter 11 of the Bankruptcy Code on or
before December 31, 1998, to provide Borrower with debtor-in-possession
financing on substantially the terms and conditions set forth in the
Debtor-in-Possession Revolving Credit Facility Term Sheet dated November
30, 1998 (the "DIP Facility Term Sheet"), a copy of which is attached
hereto and (d) provided that Borrower emerges from chapter 11 not later
than June 30, 1999, to thereafter provide Borrower with financing
substantially on the terms and conditions set forth in the Chapter 11 Exit
Financing - Syndicated Revolving Credit Facility Term Sheet dated November
30, 1998 (the "Chapter 11 Exit Financing Term Sheet"), a copy of which is
attached hereto.
In response to Borrower's requests as set forth above, it is
hereby agreed as follows:
1. Lender shall, subject to the terms and conditions set forth
below, (a) continue to forbear from exercising any of its rights and
remedies arising from the Payment Default and the Additional Payment
Default and (b) continue making loans, advances and other financial
accommodations to Borrower on and subject to the terms and conditions set
forth in the Credit Agreement, as amended below. Such forbearance shall
terminate on December 31, 1998, or earlier upon the happening of:
(i) the occurrence of any Event of Default other than the
Payment Default, Additional Default or any Event of
Default arising solely by reason of the commencement
by Borrower of a case under chapter 11 of the
Bankruptcy Code, provided, that, a Financing Order as
described in the DIP Facility Term Sheet has been
entered and has not been reversed, modified, amended
or stayed and the time to appeal the same has
expired, unless otherwise agreed by Lender; or
(ii) the exercise of any right or remedy with respect to
the Collateral by any holder of any New Public
Secured Note or by the Trustee under the New Public
Secured Notes Indenture; or
(iii) the payment of any interest on the New Public Secured
Notes in respect of which the Payment Default and
Additional Payment Default arose or otherwise; or
(iv) the occurrence of an Agreement Termination Event
under and as defined in the letter agreement dated
March 2, 1998, as amended (the "Magten Letter
Agreement") among Borrower, Apollo Apparel Partners,
L.P. ("Apollo") and Magten Asset Management Corp.
("Magten") attached to the Twelfth Amendment as part
of Exhibit A thereto, other than the occurrence of an
Agreement Termination Event under Section 4(g) of the
Magten Letter Agreement.
2. Section 10.1(a) of the Credit Agreement is amended and
restated in its entirety to read as follows:
"10.1 Term
(a) This Agreement and the other Financing Agreements
shall become effective as of the date hereof and
shall continue in full force and effect for a term
ending on December 31, 1998, unless sooner terminated
pursuant to the terms hereof."
3. Provided that Borrower files a case under chapter 11 of the
Bankruptcy Code on or before December 31, 1998, Lender agrees to provide
Borrower with Debtor-in-Possession financing on substantially the terms and
conditions set forth in the DIP Facility Term Sheet, which terms and
conditions are acceptable to Borrower and which terms and conditions shall
be incorporated in the Credit Agreement upon entry of the Financing Order
described in the DIP Facility Term Sheet.
4. Lender agrees to provide Borrower no later than December 4,
1998 with a commitment letter for financing after Borrower exits from
chapter 11 on substantially the same terms and conditions set forth in the
chapter 11 Exit Financing Term Sheet and Borrower agrees to accept and
return such commitment letter to Lender together with the commitment fee
specified therein in immediately available funds within one business day of
receipt thereof.
5. In consideration of the further forbearance by Lender with
respect to the Payment Default and the Additional Payment Default and the
extension of the term of the Credit Agreement as set forth herein, Borrower
shall pay Lender a forbearance fee in the amount of $200,000, which shall
be fully earned upon execution of this Agreement and shall be paid to
Lender on or before December 1, 1998. Such fee shall not be refundable in
whole or part for any reason and may be charged, at Lender's sole option,
to any account of Borrower maintained by Lender.
6. If Lender is repaid in full, other than as a result of being
acquired or a capital infusion, prior to the commencement of the
Debtor-in-Possession financing arrangements between Lender and Debtor, then
Borrower shall thereupon pay to Lender an early termination fee in the
amount of $250,000 which Lender may, at its sole option, charge to any
account of Borrower maintained with Lender.
7. This Agreement shall become effective as of November 30, 1998
provided that Lender shall have received all of the following no later than
December 2, 1998:
(a) This Agreement duly executed and delivered by the
Borrower and the Guarantors.
(b) The agreement of Borrower, Magten and Apollo the
effect of which is to provide that Magten and Apollo
will forbear through December 31, 1998.
8. This Agreement shall not constitute a waiver or amendment of
any provision of the Credit Agreement not expressly referred to herein and
shall not be construed as a consent to any further or future action on the
part of the Borrower that would require consent of Lender. Except as
expressly amended herein, the provisions of the Credit Agreement are and
shall remain in full force and effect. Nothing herein shall constitute a
waiver of the Payment Default or the Additional Payment Default or limit,
impair or affect any of Lender's rights or remedies with respect thereto,
subject however, to the terms of the forbearance provided for herein, all
of which Borrower acknowledges and agrees have been heretofore and are
hereby further expressly reserved by Lender.
9. This Agreement may be executed in counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
10. This Agreement shall be governed by and construed and
interpreted in accordance with, the laws of the State of New York.
11. By execution of this Agreement where indicated below, each of
the Guarantors acknowledges and agrees to all of the foregoing.
Please indicate your agreement to the foregoing by executing this
letter where indicated below and return it to us.
Very truly yours.
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/ Kenneth Wendler
------------------------------------
Title: Vice President
---------------------------------
AGREED:
SALANT CORPORATION
By: /s/ Todd Kahn
------------------------------
Title: Executive Vice President
& General Counsel
---------------------------
ACKNOWLEDGED AND AGREED:
CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC.
By: /s/ Todd Kahn By: /s/ Todd Kahn
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
<PAGE>
DENTON MILLS, INC. SLT SOURCING, INC.
By: /s/ Todd Kahn By: /s/ Todd Kahn
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
VERA LICENSING, INC. SALANT CANADA INC.
By: /s/ Todd Kahn By: /s/ Todd Kahn
------------------------------ ------------------------------
Title: Executive Vice President Title: Executive Vice President
& General Counsel & General Counsel
-------------------------- ---------------------------
J.J. FARMER CLOTHING, INC.
By: /s/ Todd Kahn
------------------------------
Title: Executive Vice President
& General Counsel
--------------------------
<PAGE>
TERM SHEET
November 30, 1998
SALANT CORPORATION
DEBTOR-IN-POSSESSION REVOLVING CREDIT FACILITY
Borrower: Salant Corporation, as Debtor and Debtor-in-
Possession.
Guarantors: All subsidiaries.
Lender: The CIT Group/Commercial Services, Inc.
Amount of Facility: $85,000,000 Revolving Credit Facility.
Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible
accounts plus (ii) 60% of eligible Perry Ellis
finished goods inventory, plus (iii)(x) for the
first 120 days of the initial 150 day term of the
facility, 55% of eligible finished goods inventory
of non-Perry Ellis business units, and (y)
following such 120 day period, 50% of the eligible
finished goods inventory of non-Perry Ellis
business units, not to exceed $25,000,000 in the
aggregate at any time outstanding in respect of
all inventory; and (b) $85,000,000. Eligibility
with respect to finished goods inventory shall be
mutually agreed upon between Borrower and Lender.
Letter of Credit
Subfacility: $30,000,000
Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender in
its sole discretion may make loans to Borrower in
excess of applicable lending formulae but within
the $85,000,000 Revolving Credit Facility and all
such loans shall be repayable on demand.
Reserve for
Professional
FeeCarve-Out: A minimum of $2,000,000 to be reserved for
carve-out of professional fees.
Factoring: Effective January 1, 1999, only for accounts of
non-Perry Ellis business units on a
non-notification basis for the first 150 days and
on a notification basis thereafter.
Interest Rate: Reference Rate + 1.00% (No LIBOR option).
Letter of Credit Fees: (a) Documentary L/Cs. 1/8 of 1.0% on issuance; 1/8
of 1.0% on negotiation.
(b) Standby L/Cs: 1% per annum plus bank charges.
Factoring Commission: .75%
Collection Days: Two days, calculated at a rate equal to Reference
Rate + 1.00%.
Forbearance Fee: $200,000 payable on December 1, 1998.
Collateral Management
Fee: $4,167 per month.
Field Exam Fee: $750 per day, plus out-of-pocket expenses.
Term: Initial term of 150 days, subject to renewal by
Lender in its discretion for an additional 90 day
period and thereafter for an additional 120 day
period. Lender shall have the right to terminate
the DIP Facility if Borrower fails to exit from
Chapter 11 at the end of any term of the DIP
Facility.
DIP Facility
Continuation Fee: If Borrower does not exit from Chapter 11 by the
end of the initial term and Lender elects to renew
the DIP Facility as described above, then $250,000
shall be payable to continue the DIP Facility for
days 151-240 and the interest rate shall be
increased to Reference Rate + 1.25%.
Additional DIP Facility
Continuation Fee: If Borrower does not exit from Chapter 11 at the
end of the 151-240 day term and Lender elects to
renew the DIP Facility as described above, then
$250,000 shall be payable to continue the DIP
Facility for days 241-360 and the interest rate
shall be increased to Reference Rate + 1.75%.
Early Termination Fee: $250,000 if Lender is paid out in full during the
DIP Facility as a result of Borrower refinancing
with another lender.
Liquidation of
Inventory: In connection with any liquidation of the
inventory at the nonPerry Ellis business units not
being conducted in connection with a sale of any
such business unit as a going concern, the party
who liquidates the inventory of the non-Perry
Ellis business units shall be satisfactory to
Lender.
Remittance of Net
Proceeds from Sale of
Non-Perry Ellis Units: All net proceeds of sale of non-Perry Ellis
business units shall, subject to any existing
prior liens, be remitted to Lender for application
to Borrower's obligations.
Security: All loans and other financial accommodations,
whether made before or during Borrower's Chapter
11 case, shall, subject only to any existing prior
liens, be secured by a first priority lien on and
security interest in all assets of Borrower and
its subsidiaries, whether now owned or hereafter
acquired, with super-priority administrative claim
status over any and all administrative expenses in
Borrower's Chapter 11 case, subject only to a
carve-out for allowed professional fees as set
forth above.
Conditions Precedent: Conditions precedent customary for this type of
financing, including, but not limited to, the
following:
(a) Financing Orders satisfactory to Lender
approving on an interim and final basis the
DIP loan documents and transactions
contemplated thereunder, including the grant
of first priority liens, administrative claim
super-priority and cross-collateralization;
(b) Legal documentation satisfactory to Lender;
(c) The non-occurrence of any Event of Default
under the CIT Credit Agreement (including,
without limitation, any Event of Default
arising from the breach of Section 7.15
Compliance with ERISA of the CIT Credit
Agreement) other than Events of Default in
existence on the date hereof of which Lender
has knowledge and other than any Event of
Default arising solely by reason of the
commencement by Borrower of a case under
chapter 11 of the Bankruptcy Code;
(d) Any other information (financial or
otherwise) reasonably requested by Lender;
and
Expenses: Borrower shall be liable for all costs and
expenses of Lender incurred in connection with the
DIP Facility, including, without limitation,
Lender's attorney's fees and expenses, whether or
not the DIP Facility closes.
<PAGE>
TERM SHEET
November 30, 1998
SALANT CORPORATION
CHAPTER 11 EXIT FINANCING - SYNDICATED REVOLVING CREDIT FACILITY
Borrower: Salant Corporation.
Guarantors: All subsidiaries.
Lender: The CIT Group/Commercial Services, Inc.
Syndication: CIT shall have the right to syndicate the
facility.
Agent: CIT.
Amount of Facility: $85,000,000 Syndicated Revolving Credit Facility.
Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible
accounts, plus (ii) 60% of eligible finished goods
inventory, not to exceed $25,000,000 at any time
outstanding; and (b) $85,000,000. Eligibility with
respect to finished goods inventory shall be
mutually agreed upon between Borrower and Lender.
Letter of Credit
Subfacility: $30,000,000. (Reserve against the facility will be
taken with respect to (i) documentary letters of
credit opened for the purpose of acquiring
eligible inventory, to the extent of (A) 100% of
the undrawn amount of such outstanding letters of
credit opened for the purpose of acquiring
eligible inventory minus (B) the percentage equal
to the then ----- current percentage rate of
advance against eligible inventory and (ii) with
respect to all other letters of credit, to the
extent of 100% of the undrawn amount of such
letters of credit.)
Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender may
in Its sole discretion make loans to Borrower in
excess of the applicable lending formulae but
within the 85,000,000 Syndicated Revolving Credit
Facility and all such loans shall be repayable on
demand.
Interest Rate: Reference Rate + 0.50% (No LIBOR Option);
provided, however, that if Borrower meets certain
mutually agreed upon financial tests, including,
but not limited to, liquidity and debt to equity
tests, based upon Borrower's opening financial
statements, then upon satisfaction of such
financial tests the interest rate shall be
Reference Rate + 0.25% or LIBOR + 2.25%.
Default Rate: 1.50% over Reference Rate plus applicable margin.
Letter of Credit Fees: (a) Documentary L/Cs: 1/8 of 1.0% on issuance; 1/8
of 1.0% on negotiation.
(b) Standby L/Cs: 1.0% per annum plus bank charges.
Collections: Collections shall be credited to Borrower's loan
account upon Lender's receipt of a wire transfer
of federal funds into Lender's payment account
designated for such purpose.
Commitment Fee: $325,000 payable upon Borrower's acceptance of
Lender's commitment to provide the facility.
Unused Line Fee: .25%
Agency Fee: $100,000 for each of years 2 and 3 only.
Collateral Management
Fee: $8,333 per month.
Field Exam Fee: $750 per day plus out of pocket expenses
Term: Three years
No Factoring: Revolving Credit Agreement will not provide for
any factoring of accounts through CIT or
otherwise.
Security: First and only lien on all assets of Borrower and
its subsidiaries, subject to customary permitted
encumbrances.
Conditions Precedent: Conditions precedent for this type of financing,
including, but not limited to, the following:
(a) CIT's satisfaction in all respects with the
structure and terms, and all financial,
accounting and tax aspects of Borrower's
Chapter 11 plan (the "Plan") and the
transactions contemplated thereby.
(b) CIT's satisfaction in all respects with the
capitalization and capital structure of
Borrower and its subsidiaries following
consummation of the Plan.
(c) CIT shall be satisfied with the existing and
projected liquidity of Borrower and its
subsidiaries and their ability to fund their
ongoing working capital and other cash
requirements.
(d) Resolution satisfactory to CIT of any failure
by Borrower or any of its subsidiaries to
comply with any law or regulation to which
any of their respective pension plans are
subject.
(e) Bankruptcy Court shall have entered orders
(the "Orders") satisfactory in substance to
Lenders approving confirmation of the Plan
and the definitive credit agreement for the
Exit Facility and all related documentation
contemplated thereunder, and there shall not
be in effect any appeal or stay of the
Orders.
(f) Borrowers' debt restructuring shall have been
completed and shall be satisfactory to CIT.
(g) CIT shall have completed its due diligence.
(h) Legal documentation satisfactory to CIT which
shall include financial covenants, including,
but not limited to, minimum equity, maximum
loss, interest coverage, debt-to-equity and
capital expenditure limitations.
(i) Approval of Exit Facility by CIT's Executive
Credit Committee.
(j) Closing of Exit Facility no later than June
30, 1999.
Expenses: Borrower shall be liable for all costs and
expenses of Lenders incurred in connection with
the Exit Facility, including, without limitation,
Lenders' attorneys fees and expenses, whether or
not the Exit Facility closes.
THE CIT GROUP/COMMERCIAL SERVICES, INC.
1211 Avenue of the Americas
New York, New York 10036
December 7, 1998
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Gentlemen:
You have requested that in the event Salant Corporation (the
"Company") files a case under Chapter 11 of the United States Bankruptcy
Code (the "Chapter 11 Case") that we provide the Company with
post-confirmation financing.
Based upon the information you have furnished to us, The CIT
Group/Commercial Services, Inc. ("CIT") is pleased to confirm its
commitment to provide the Company with a post-confirmation secured
revolving credit facility of up to $85,000,000 (the "Credit Facility"),
subject to the terms and conditions set forth below.
We contemplate that the Credit Facility will be structured as follows:
1. REVOLVING CREDIT FACILITY
-------------------------
(a) Amount: A revolving line of credit for loans and letters of
credit in a maximum principal amount equal to the lesser of (i)
$85,000,000 (the "Maximum Credit") and (ii) the sum of (A) eighty-five
percent (85%) of the net amount of eligible accounts and (B) the
lesser of (x) sixty percent (60%) of the value (at the lower of cost
or market determined on a first-in-first-out basis) of eligible
finished goods inventory, and (y) $25,000,000. Standards of
eligibility for accounts shall be the same as provided for in the
Revolving Credit, Factoring and Security Agreement between CIT and the
Company dated September 20, 1993, as amended (the "Existing Credit
Agreement"), except as may be modified by agreement between the
Company and CIT. Standards of eligibility for finished goods inventory
shall be mutually agreed upon between the Company and CIT. CIT may
establish reserves against loan availability under the lending
formulas set forth above as shall be mutually agreed upon between the
Company and CIT.
(b) Seasonal Overadvances: Subject to the Company's cash flow
needs, CIT may in its sole discretion make loans to the Company in
excess of the lending formulas set forth above not to exceed the
Maximum Credit and repayable on demand.
(c) Letter of Credit Subfacility:
(i) Amount: Within the Credit Facility, letters of credit
("L/Cs") arranged through CIT up to an aggregate
undrawn amount at any time outstanding of
$30,000,000.
(ii) L/C Reserve Availability: A reserve against the line
of credit under the Credit Facility will be required
to the extent of (A) one hundred percent (100%) of
the undrawn amount of outstanding letters of credit
opened for the purpose of acquiring eligible finished
goods inventory minus (B) the percentage equal to the
then current percentage rate of advance against
eligible finished goods inventory. All other letters
of credit opened by CIT will require a reserve
against the line of credit under the Credit Facility
of one hundred percent (100%) of the undrawn amount
of such letters of credit;
(iii) Handling of Documents Under Letters of Credit: The
Company will not be required to consign to CIT any of
the documents relating to inventory purchased under
letters of credit arranged through CIT under the
Credit Facility ("L/C Documents"), provided, however,
that upon the occurrence and during the continuance
of (i) an event of default under the Credit Facility
or (ii) any act, event or condition which with notice
or passage of time or both would constitute an event
of default, then, and in any such event, without
notice in the case of an event of default and upon
written notice from CIT in any other case, all L/C
Documents shall be consigned to CIT.
(d) No Factoring: The Credit Facility will not provide for any
factoring of accounts through CIT or otherwise.
2. INTEREST RATE
-------------
Reference Rate + 0.50%; provided, however, that if the Company
satisfies certain financial tests to be mutually agreed upon, including,
but not limited to liquidity and debt to equity tests, based upon the
Company's opening financial statements after exiting from the Chapter 11
Case, then, upon satisfying such financial tests the interest rate shall be
Reference Rate + .025% or LIBOR + 2.25%. The rate of interest after the
occurrence of an event of default under the Credit Facility shall be 1.50%
over the Reference Rate plus the then current margin. The Reference Rate is
the rate of interest publicly announced by The Chase Manhattan Bank, New
York, New York from time to time as its prime rate. Such prime rate is not
intended by Chase to be the lowest rate of interest charged by Chase to its
commercial borrowers. LIBOR will be available for 1, 2 or 3 month periods
and will be based upon CIT's customary term and procedures applicable to
interest on loans payable by reference to LIBOR. All interest rates are per
annum. All interest shall be payable monthly in arrears calculated on the
basis of a 360-day year. Collections shall be credited to the loan account
of the Company upon CIT's receipt of a wire transfer of federal funds into
CIT's payment account designated for such purpose.
3. FEES
----
All fees set forth below are in addition to interest and other charges
provided for herein and may, at our option, be charged directly to any loan
account of the Company maintained with us:
(a) Commitment Fee: We shall receive a commitment fee in the
amount of $325,000 for our commitment herein to provide Salant with
the Credit Facility outlined herein, earned and payable in full upon
execution and return by the Company of this letter to us.
(b) Unused Line Fee: We shall receive an unused line fee of .25%
per annum on the average monthly unused portion of the Credit
Facility, payable monthly in arrears.
(c) Agency Fee: We shall receive an agency fee of $100,000
payable on each of the first and second anniversary dates of the
closing date of the Credit Facility for acting as agent and
administering the Credit Facility for the Company and for each of the
lenders who purchase a portion of, or a participation in, the Credit
Facility.
(d) Collateral Management Fee: We shall receive a collateral
management fee of $8,333 for each month or part thereof during the
term of the Credit Facility for monitoring the collateral, payable
monthly in advance with the first such fee payable at closing.
(e) Letter of Credit Fees:
(i) Documentary L/Cs: 1/8 of 1% on issuance; 1/8 of 1% an
negotiation.
(ii) Standby L/Cs: 1,0% per annum plus bank charges.
(iii) All other L/C and related fees shall be in the amount
set forth on Schedule 3.2(c) of the Existing Credit
Agreement.
4. LEDGER DEBT
-----------
The obligations of the Company to CIT under the Credit Agreement shall
include, without limitation, all indebtedness of the Company to CIT on
accounts arising from the sale of goods or services purchased by Salant
from any concern whose accounts are factored or financed by CIT.
5. GUARANTEES
----------
All obligations of the Company to CIT under the Credit Facility shall
be guaranteed by each of the Company's subsidiaries.
6. COLLATERAL
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First and only security interests in and liens upon all present and
future assets of the Company and each of its subsidiaries (subject to
customary permitted encumbrances), including, without limitation, all
accounts, contract rights, general intangibles (including, without
limitation, all trademarks, patents, licenses of trademarks or patents,
other intellectual property, tax refunds and chooses in action), chattel
paper, documents, instruments, stock in subsidiaries, inventory, machinery,
equipment, fixtures and real property, and all products and proceeds of the
foregoing.
7. USE OF PROCEEDS
---------------
All of the loans and other credit accommodations provided to the
Company under the Credit Facility shall be used exclusively for the working
capital of the Company provided, that the proceeds of the initial loans
under the Credit Facility may be used for funding payments under the
Company's Chapter 11 Plan (the "Plan") and the transactions contemplated
thereby and hereby and for the costs, expenses and fees incurred in
connection with the Credit Facility.
8. CONTRACT TERM
-------------
The Credit Facility shall have an initial term commencing on the
closing date and continuing through and including three (3) years
thereafter (the "Renewal Date") and shall be automatically renewed from
year to year thereafter unless terminated by either party upon at least
sixty (60) days written notice prior to the Renewal Date or any anniversary
of the Renewal Date.
9. EXPENSES
--------
(a) The Company agrees to pay all reasonable legal and closing
costs and expenses, including attorneys' fees, appraisers' fees,
filing fees, search charges, recording taxes and field examination
charges and expenses (including a charge of $750 per person per day of
CIT's examiners in the field and in the office, plus travel, hotel and
all other out-of-pocket expenses), in each case whether or not this
transaction closes. All such expenses shall be paid to us on demand
and may be charged to any loan account of the Company with us. We
shall have the right to offset such expenses against any fees or sums
received from or on behalf of the Company.
(b) If this transaction closes, the Company further agrees to pay
all of CIT's out-of-pocket expenses and customary administrative
charges incurred from time to time during the course of our financing
arrangements.
(c) This paragraph 9 shall survive the expiration or termination
of this letter.
10. OTHER INFORMATION AND CONDITIONS
--------------------------------
Compliance with all terms and requirements of this letter are
conditions precedent to the making of loans and providing other credit
accommodations under the Credit Facility. In addition, the extension of the
Credit Facility is subject to the satisfaction, in a manner satisfactory to
CIT, of conditions precedent usual for this type of financing, including,
but not limited to, the following terms and conditions:
(a) The structure and terms of the Plan and all financial,
accounting and tax aspects of the Plan and the transactions
contemplated thereby shall in all respects be satisfactory to CIT,
(b) The Company's debt restructuring shall have been completed
and shall be satisfactory to CIT.
(c) The capitalization and capital structure of the Company shall
in all respects be satisfactory to CIT.
(d) The existing and projected liquidity of the Company and its
subsidiaries and their ability to fund their ongoing working capital
and other cash requirements and to consummate the Plan shall be
satisfactory to CIT.
(e) The Company shall continue to furnish, or cause to be
furnished, to us all financial information, projections, budgets,
business plans, cash flows and such other information as we shall
reasonably request from time to time. We shall have received current
perpetual inventory records and/or roll forwards of inventory through
the date of closing, together with supporting documentation and other
documents and information that will enable us to accurately identify
and verify eligible collateral at or immediately prior to closing in a
manner satisfactory to us and including documentation with respect to
inventory in transit, goods in bonded warehouses or at other third
party locations.
(f) Satisfactory legal review of the terms of the Credit Facility
and its structure by our counsel, execution of loan documents,
delivery of opinions of counsel and other agreements, documents and
instruments as may be necessary or desirable to effectuate the
financing arrangements described herein as may be determined by us and
our counsel.
(i) Such loan documents will include, among other
documents, an Amended and Restated Revolving Credit
and Security Agreement between the Company and CIT,
or, at CIT's option, between the Company and CIT, as
agent, for itself and any other lenders party
thereto, the guarantee of the obligations of the
Company under the Credit Facility by each of the
Company's subsidiaries, security agreements, UCC
financing statements and mortgage modification
agreements. The opinions of counsel will include,
among other things, the opinion that the financing
arrangements described herein do not violate any of
the terms of existing agreements of the Company or
any of its subsidiaries with any other parry, that
the financing agreements create valid and enforceable
security interests in all of the property of the
Company and each of its subsidiaries, that the
financing agreements are valid, enforceable and
binding and that the Company and each of its
subsidiaries have been duly incorporated and are in
good standing under the laws of their respective
states or jurisdictions of incorporation and each
state or jurisdiction where the Company and each of
its subsidiaries transact business, and such other
matters, as we may reasonably request.
(ii) Such loan documents will contain such provisions,
representations, warranties, covenants, conditions
precedent, events of default and remedies, all as
customarily required by CIT for transactions of this
type and as may be deemed appropriate in view of the
nature of the business of the Company, including,
among other things: financial covenants ("Maintenance
Covenants") as to minimum tangible net worth, maximum
net loss, minimum interest coverage ratio and capital
expenditure limitations; prohibitions or limitations
on the payment of management fees or other fees or
payments due to affiliates; prohibitions or
limitations on loans, investments and guarantees in,
to or in favor of affiliates and any third parties;
prohibitions or limitations on the payments of
dividends and redemptions and other upstreaming or
cross-streaming of funds; limitations on indebtedness
and liens, compliance with ERISA; cross-defaults
based on defaults under any material indebtedness to
others or under material leases, material licenses or
other material agreements, or for generally not
paying obligations to others. Except for the
Maintenance Covenants referred to above, the Credit
Facility shall have no other Maintenance Covenants.
(g) Termination of the liens and security interests held by the
holders of the Company's Senior Notes and the delivery to us of UCC-3
termination statements and such other release documents as we may
request, in form and substance reasonably satisfactory to us.
(h) We shall have received, in form and substance reasonably
satisfactory to us, all consents, waivers, acknowledgments and other
agreements from third persons which we may deem necessary in order to
permit, protect and perfect our security interests in and liens upon
the collateral, including, without limitation, (i) waivers by lessors,
owners and/or mortgagees of any security interests, liens or other
claims by such persons in and to assets of the Company and each of its
subsidiaries, and agreements by such persons permitting us access to
the premises to exercise our rights and remedies and otherwise deal
with the assets of the Company and its subsidiaries and (ii)
acknowledgments by processors, consignees and warehousemen at any time
in possession of any of assets of the Company or its subsidiaries of
our security interests and liens, waivers by such persons of any
security interests, liens or other claims by such persons in and to
assets of the Company and its subsidiaries, and agreements by such
persons to follow our directions with respect to the release and
delivery of any assets of the Company and its subsidiaries at any time
in their possession and (iii) agreements from licensors of trademarks
and other intellectual property to the Company or its subsidiaries,
including, but not limited to, Perry Ellis International, Inc.,
permitting us to use, in a manner and for a period satisfactory to us,
the marks, logos or other intellectual property licensed by such
parties to the Company or its subsidiaries to exercise our rights and
remedies and otherwise deal with the assets of the Company and its
subsidiaries.
(i) We shall have received, in form and substance reasonably
satisfactory to us, guarantees, duly authorized, executed and
delivered by each of Clantexport Inc., Denton Mills. Inc., Vera
Licensing, Inc., Frost Bros. Enterprises, Inc., SLT Sourcing, Inc.,
Salant Canada Inc., J.J. Farmer Clothing, Inc. and any other
subsidiaries of the Company in our favor absolutely and
unconditionally guaranteeing all present and future obligations of the
Company to us under the Credit Facility, as well as such security
agreements and UCC financing statements as may be necessary or
desirable to effectuate the grant by such companies in our favor of
first and only security interests in and liens upon all of their
respective present and future assets, subject to customary permitted
encumbrances.
(j) We shall have received, at the expense of the Company,
current environmental audits of its plants and real estate conducted
by an independent environmental engineering firm reasonably acceptable
to us, and in form, scope and methodology satisfactory to us,
confirming that (i) the Company is in compliance with all significant
applicable environmental use laws, regulations, codes and ordinances
in all material respects and (ii) there is no material potential or
actual liability of the Company for any remedial action with respect
to any environmental condition or any other significant environmental
problems.
(k) We shall have received, in form and substance reasonably
satisfactory to us, evidence of insurance coverage, including (i)
mortgagee's and lender's loss payee endorsements in our favor as to
casualty and business interruption insurance and containing all
endorsements, assurances of affirmative coverage requested by us for
protection of our interests and (ii) mortgagee's title insurance by a
company and agent acceptable to us (A) insuring the priority, amount
and sufficiency of the mortgage, deed of trust or deed to secure debt
in our favor on each parcel of real estate included in the collateral,
(B) insuring against matters that would be disclosed by surveys and
(C) containing those endorsements, assurances or affirmative coverage
requested by us for protection of our interests.
(1) CIT may from time to time, in its sole discretion, assign, or
sell participations in, the Credit Facility or any portion thereof to
another lender or lenders;
(m) The Company shall have established a blocked account or
lockbox for its collections and the transfer there of to us, which
shall be in form and substance reasonably acceptable to us.
(n) All Uniform Commercial Code financing statements relating to
the collateral shall have been duly filed and recorded and we shall
have received UCC search results from the various jurisdictions
showing the financing statements in our favor filed of record prior to
the closing.
(o) We may conduct additional or update field examinations, at
the Company's expense, prior to extending the Credit Facility, the
results of which must be satisfactory to us. Without limiting the
generality of the foregoing, (i) except for the Payment Default and
the Additional Payment Default (as defined in the Thirteenth Amendment
to the Existing Credit Agreement), any other payment default in
respect of scheduled interest or principal payments under the New
Public Secured Notes (as defined in the Existing Credit Agreement) and
the filing of the Chapter 11 Case or any Event of Default arising
solely by reason of the commencement of the Chapter 11 Case, no act,
condition or event which would constitute an Event of Default under
the Existing Credit Agreement or the financing agreements to be
executed between us shall exist as of the closing, (ii) no material
investigation, litigation, or other proceedings other than the Chapter
11 Case shall be pending or threatened against the Company or any
affiliate as of the closing, and (iii) the collateral shall not have
materially declined in value from the values set forth in the last
appraisals or field examinations previously done furnished to us prior
to closing.
(p) Any failure by the Company or any of its subsidiaries to
comply with any law or regulation to which any of their respective
pension plans are subject shall have been resolved in a manner
satisfactory to CIT.
(q) No material adverse change in the business, operations,
profits or prospects of the Company shall have occurred since the date
of our last field examination prior to closing.
(r) This transaction and the events contemplated herein must
close by June 30, 1999. After June 30, 1999 our willingness to proceed
shall require credit reapproval by our Executive Credit Committee even
if we continue to work on the transaction. Such reapproval, if
obtained, may result in different terms and conditions, or a
determination not to consummate the transaction.
(s) Loan availability at closing based upon the above lending
formulas shall be in an amount adequate to fund the Plan and the
Company's cash requirements in connection with closing.
(t) The Bankruptcy Court shall have entered one or more final
non-appealable orders satisfactory in substance to CIT approving
confirmation of the Plan and the definitive credit agreement for the
Credit Facility and the related documentation contemplated thereunder.
This letter contains CIT's entire commitment for this transaction and,
upon acceptance by the Company, supersedes all prior proposals, term
sheets, negotiations, discussions and correspondence. This commitment may
not be contradicted by evidence of any alleged oral agreement. All prior
proposals, term sheets, negotiations, discussions and correspondence are
merged in the governing terms of this commitment, which may be amended only
in writing executed by the parties hereto. No condition of this commitment
may be waived, except in writing signed by CIT.
This letter shall be of no force and effect unless accepted by you and
as so accepted, received by us no later than 5:00 P.M. on December 7, 1998,
which receipt, without further act by you, shall constitute your
authorization and direction to us to charge the Commitment Fee required
above to your account with us.
This letter and the substance of the Credit Facility shall not be
disclosed by you to any third party other than attorneys, accountants and
financial advisors who are in a confidential relationship with you and
require knowledge thereof to perform their duties in connection herewith or
unless disclosure is required by law, or is made in a Company Form 8-K or
in a Company press release. This commitment is not intended for the benefit
of, and may not be relied upon by, any third party.
This agreement shall be governed by and construed in accordance with
the laws of the State of New York. Each of the parties hereto waives trial
by jury in connection with any action, or proceeding relating to this
agreement.
We welcome the opportunity to be of continuing service to you again
and we look forward to working with you in closing this transaction.
Very truly yours,
THE CIT GROUP COMMERCIAL SERVICES, INC.
By: /s/ Anthony Lombardi
-----------------------------------------
Title: Senior Vice President
--------------------------------------
ACCEPTED AS OF THIS 7th
DAY OF DECEMBER, 1998:
SALANT CORPORATION
By: /s/ Philip Franzel
--------------------------
Title: Chief Financial Officer
-----------------------
