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
March 2, 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)
ITEM 5. OTHER EVENTS
On March 2, 1998, Salant Corporation ("Salant") entered into an
agreement in principle (the "Restructuring Agreement") with its major note
and equity holders to restructure its existing indebtedness under Salant's
10 1/2% Senior Secured Notes due December 31, 1998. Salant also entered into an
agreement (the "CIT Agreement") with its working capital lender, The CIT
Group/Commercial Services, Inc. ("CIT"), pursuant to which CIT has agreed to
continue to extend financing under the current credit agreement until the
proposed restructuring plan is implemented. On March 3, 1998, Salant issued
a press release regarding the Restructuring Agreement and the CIT Agreement.
Salant is exploring with its advisors the alternatives for implementing the
proposed restructuring and expects to formulate definitive plans in the near
term.
The foregoing summary does not purport to be complete and is
qualified in its entirety by reference to (i) the press release, dated March
2, 1998, (ii) the letter agreement, dated March 2, 1998, by and among Salant,
Magten Asset Management Corp., as agent on behalf of certain of its accounts,
and Apollo Apparel Partners, L.P., and (iii) the Twelfth Amendment and
Forbearance Agreement, dated as of March 2, 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.
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 March 2, 1998.
10.48 Letter Agreement, dated March 2, 1998, by and among Salant
Corporation, Magten Asset Management Corp., as agent on behalf of
certain of its accounts, and Apollo Apparel Partners, L.P.
10.49 Twelfth Amendment and Forbearance Agreement, dated as of March 2,
1998, by and between Salant Corporation and The CIT
Group/Commercial Services, Inc.
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: March 4, 1998 By: /s/ Todd Kahn
-----------------------
Executive Vice President
and General Counsel
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
99 Press Release, dated March 2, 1998.
10.48 Letter Agreement, dated March 2, 1998, by and among Salant
Corporation, Magten Asset Management Corp., as agent on behalf of
certain of its accounts, and Apollo Apparel Partners, L.P.
10.49 Twelfth Amendment and Forbearance Agreement, dated as of March 2,
1998, by and between Salant Corporation and The CIT
Group/Commercial Services, Inc.
[LETTERHEAD OF SALANT CORPORATION]
FOR: SALANT CORPORATION
CONTACT: Todd Kahn
Executive Vice President-
Corporate Affairs
and General Counsel
(212) 221-5379
FOR IMMEDIATE RELEASE
- ---------------------
SALANT CORPORATION REACHES AGREEMENT WITH ITS MAJOR
NOTE AND EQUITY HOLDERS AND EXTENSION AGREEMENT WITH CIT
New York, NY, March 2, 1998 -- Salant Corporation ("Salant")
(NYSE: SLT), today announced that it has reached an agreement in
principle with its major note and equity holders to restructure its
existing indebtedness under Salant's 10 1/2% Senior Secured Notes due
December 31, 1998 (the "Senior Notes"). Under the restructuring,
Salant will convert the entire $104.9 million outstanding aggregate
principal amount of, and all accrued and unpaid interest on, its
Senior Notes into common equity. Salant also announced today that it
has reached an agreement with its working capital lender, The CIT
Group/Commercial Services, Inc. ("CIT"), to support Salant's
restructuring efforts. CIT has agreed to continue to extend financing
under the current credit agreement until the proposed restructuring
plan is implemented.
The restructuring agreement was entered into by Salant and Magten
Asset Management Corp., the beneficial owner of, or the representative
of the beneficial owners of, approximately 67% of the aggregate
principal amount of the Senior Notes ("Magten"). Apollo Apparel
Partners, L.P., the beneficial owner of approximately 40.1% of
Salant's issued and outstanding common stock, is also a party to the
restructuring agreement and has agreed to vote all of its shares of
Salant common stock in favor of the restructuring. The restructuring
agreement provides that (1) the entire principal amount of the Senior
Notes, plus all accrued and unpaid interest thereon, will be converted
into 92.5% of Salant's issued and outstanding common stock, and (2)
Salant's existing stockholders will retain 7.5% of Salant's issued and
outstanding common stock and will receive seven-year warrants to
purchase up to 10% of Salant's common stock on a fully diluted basis.
Stockholder and noteholder approval will be requied in order to
consummate the restructuring agreement. The restructuring agreement
also provides for a reverse stock split which will require the
approval of Salant's stockholders. Because of the treatment of accrued
interest on the Senior Notes under the proposed restructuring
agreement, Salant will not pay the $5.5 million of interest on the
Senior Notes that became payable on March 2, 1998.
In connection with the restructuring agreement, CIT and Salant
have entered into an agreement under which CIT has agreed to forbear
from exercising any of its rights under its working capital loan by
virtue of the non-payment of the March 2, 1998 interest payment on the
Senior Notes, subject to the terms and conditions of such agreement.
CIT has also agreed to continue to extend financing to Salant under
the current credit agreement until the proposed restructuring plan is
implemented. The agreement with CIT also provides for the waiver by
CIT of Salant's failure to meet certain financial covenants under the
CIT credit agreement. Salant currently anticipates that, upon
consummation of the restructuring, Salant will be able to enter into a
more favorable financing package that CIT has proposed in connection
with the restructuring.
Consummation of the proposed restructuring is subject to the
satisfaction of a number of conditions precedent, including the
negotiation and execution of definitive documentation.
Jerald Politzer, Chairman of the Board and CEO of Salant,
commented that, "This restructuring is in the best interest of all of
Salant's stakeholders - vendors, employees, customers and investors.
This restructuring will reduce our annual interest cost by
approximately $11 million. In addition, once the restructuring is
implemented, the more favorable financing package proposed by our
lender, CIT, should result in future interest and cost savings. A
deleveraged Salant without the Senior Notes will be well positioned to
compete successfully and achieve its strategic objectives."
Mr. Politzer added, "We believe that the commitment by our major
noteholders to convert its debt into equity demonstrates strong
confidence in, and commitment to, our management team and our vision
for the growth of the business. In addition, we expect that our
trading partners will be pleased by the strengthening of our balance
sheet that will result from these transactions."
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.
Statements in this press release that are not strictly historical
are "forward-looking" statements within the meaning of the Safe Harbor
provisions of the federal securities laws. Investors are cautioned
that such statements are solely predictions and speak only as of the
date of this release. Actual results may differ materially due to
risks and uncertainties that are described in Salant's Form 10-K for
1996, the 1996 Annual Report to shareholders, and Form 10-Q for the first,
second and third quarters of 1997. These risks include, without
limitation, competition from competitors, the seasonality of Salant's
products and risks associated with Salant's foreign sourcing
operations.
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
(212) 221-7500
March 2, 1998
Magten Asset Management Corp.
35 East 21st Street
New York, New York 10010
Attention: Mr. Talton R. Embry
Apollo Apparel Partners, L.P.
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Attention: Mr. Ed Yorke
Mr. Robert Katz
Re: Salant Corporation ("Salant")
-----------------------------
Gentlemen:
The purpose of this letter agreement (this "Letter Agreement") is
to set forth the agreement among Magten Asset Management Corp. ("Magten"),
in its capacity as holder of those certain 10-1/2% Senior Secured Notes due
December 31, 1998 (the "Senior Notes") of Salant that were issued pursuant
to an Indenture, dated September 20, 1993, as amended (the "Senior Note
Indenture"), Salant and Apollo Apparel Partners, L.P. ("Apollo", and
together with Magten and Salant, the "Parties"), in its capacity as the
holder of approximately 40.1% of Salant's issued and outstanding shares of
common stock, regarding the basic terms and conditions of a restructuring
(the "Restructuring") of Salant pursuant to a comprehensive consensual
plan.
1. Restructuring.
-------------
The basic terms and conditions of the Restructuring as agreed
among the Parties are set forth in the Summary of Terms and Conditions (the
"Term Sheet") attached hereto as Exhibit A (including Annex I attached
hereto), which is incorporated herein and made a part of this Letter
Agreement (it being agreed that neither Magten nor Apollo expresses any
opinion as to the accuracy of any of the information set forth on Annex I
to the Term Sheet, including, without limitation, the enterprise value of
Salant).
2. Magten Agreements.
-----------------
Magten represents to Salant that it is (i) the beneficial owner
of no less than $70 million in aggregate face amount of the Senior Notes
(the "Relevant Notes") and/or the investment adviser or manager for the
beneficial owners of the Relevant Notes having the power to vote and
dispose of Relevant Notes on behalf of such beneficial owners, and (ii)
entitled (for its own account or the account of other persons claiming
through it) to all of the rights and economic benefits of the Relevant
Notes. Magten agrees and represents to Salant that, subject to Sections 4
and 5 hereof and subject to its receipt of solicitation materials in
respect of the Restructuring that are consistent with the terms of this
Letter Agreement (it being recognized that, until such solicitation
materials have been received and Magten has reviewed them, this Letter
Agreement shall not constitute an agreement by Magten to take any step or
action that would violate any provision of applicable federal or state
securities laws, and to the extent any provision hereof shall be construed
as constituting such a violation, such provision shall be deemed stricken
herefrom and of no force and effect without liability to any of the
Parties):
(a) in connection with the component of the Restructuring
consisting of an exchange offer (the "Exchange Offer")
for the Senior Notes, Magten will, as promptly as
practicable, tender (or, with respect to managed
accounts, use its reasonable best efforts to cause to
be tendered) the Relevant Notes in acceptance of the
Exchange Offer, provided that (i) all applicable
federal and state securities laws have been complied
with and (ii) the terms of the Exchange Offer and the
remaining components of the Restructuring are
consistent with the terms of the Exchange Offer and the
Restructuring described on the Term Sheet, unless
revised terms have been previously agreed to in writing
by Magten, it being recognized and agreed by the
Parties that the Term Sheet does not purport to include
all of the material terms with respect to the
Restructuring;
(b) so long as it is the beneficial owner of, and/or
investment adviser or manager with respect to, the
Relevant Notes, Magten will not at any time prior to
the termination of this Letter Agreement support or
encourage, directly or indirectly, any financial
restructuring concerning Salant other than the
Restructuring;
(c) Magten will not sell, transfer or assign any of the
Relevant Notes or any voting interest therein during
the term of this Letter Agreement, except to a
purchaser who agrees prior to such acquisition to be
bound by all the terms of this Letter Agreement as if
such purchaser had originally executed this Letter
Agreement with respect to the Relevant Notes being
acquired by such purchaser, which agreement shall
subsequently be confirmed in writing (which writing may
include a trade confirmation issued by a broker or
dealer, acting as principal or agent for the purchaser,
stating that such agreement to be bound hereby is a
term of such transfer), in which event, Salant shall be
deemed to have acknowledged that each of its
obligations to Magten hereunder shall be deemed to
constitute obligations in favor of such purchaser, and
Salant shall confirm that acknowledgment in writing. At
Salant's request, Magten shall use reasonable efforts
to cause such purchaser to acknowledge in writing its
obligations to Salant and Apollo hereunder; and
(d) Magten shall cause to be provided written instructions
to the trustee (the "Indenture Trustee") under Section
6.05 of the Senior Note Indenture, promptly following
the date of the Letter Agreement, directing the
Indenture Trustee to forbear during the term of this
Letter Agreement from taking any action in connection
with the failure by Salant to make the interest payment
on the Senior Notes that is payable on March 2, 1998,
including, without limitation, the exercise of any of
the Indenture Trustee's rights under the Senior Note
Indenture arising by virtue of such failure; provided,
that, Magten shall not be required to provide any
indemnities to the Indenture Trustee in connection
therewith and shall not be liable for any failure by
the Indenture Trustee to comply with such instructions.
3. Apollo Agreements.
-----------------
Apollo represents to Salant that it is (i) the beneficial owner
of approximately 40.1% of Salant's issued and outstanding shares of common
stock (the "Relevant Common Stock"), and (ii) entitled to all of the rights
and economic benefits of the Relevant Common Stock. Apollo agrees and
represents to Salant that, subject to Sections 4 and 5 hereof and subject
to its receipt of proxy or other solicitation materials in respect of the
Restructuring that are consistent with the terms of this Letter Agreement,
in connection with the component of the Restructuring requiring the vote of
the holders of Salant's issued and outstanding common stock (the "Existing
Common Stock") with respect to certain of the transactions contemplated by
the Restructuring, Apollo will enter into a voting agreement with Salant
which will provide that (i) Apollo will vote all of its shares of Relevant
Common Stock in favor of each of such transactions; (ii) so long as it is
the beneficial owner of the Relevant Common Stock, Apollo will not at any
time prior to the termination of this Letter Agreement, support or
encourage, directly or indirectly, any financial restructuring concerning
Salant other than the Restructuring; and (iii) Apollo will not sell,
transfer or assign any of the Relevant Common Stock or any voting interest
therein during the term of this Letter Agreement except to a purchaser who
agrees in writing prior to such acquisition to be bound by the terms of the
voting agreement with Apollo and by all the terms of this Letter Agreement
with respect to the Relevant Common Stock being acquired by such purchaser.
4. Termination of Agreement.
------------------------
Magten's obligations hereunder shall terminate upon the
occurrence of any Agreement Termination Event, unless the occurrence of
such Agreement Termination Event is waived in writing by Magten. Apollo's
obligations hereunder shall terminate upon the occurrence of any Agreement
Termination Event set forth in subparagraphs (c), (e) and (f) of this
Section 4, unless the occurrence of such Agreement Termination Event is
waived in writing by Apollo.
For the purposes hereof an "Agreement Termination Event" shall
mean any of the following:
(a) Salant shall not have obtained the requisite
shareholder consent at the Special Meeting (as such
term is defined in the Term Sheet) on or before July
31, 1998;
(b) the Exchange Offer shall not have commenced on or
before June 15, 1998;
(c) the Effective Date (as such term is defined in the Term
Sheet) shall not have occurred on or before July 31,
1998;
(d) Salant or Apollo shall have disclaimed publicly in
writing (or in a writing sent to Magten) its intention
to pursue the Restructuring;
(e) there occurs any material change in the terms or the
feasibility of the Restructuring that materially and
adversely affects the holders of the Senior Notes, in
the case of Magten, or the holders of the Existing
Common Stock, in the case of Apollo, not previously
consented to by Magten;
(f) Salant shall be the subject of a voluntary or
involuntary petition under title 11 of the Untied
States Code (the "Bankruptcy Code") prior to the
occurrence of the Effective Date, other than a
voluntary petition filed in connection with a
prepackaged or prenegotiated chapter 11 case to
effectuate the Restructuring; provided, however, that
the filing of an involuntary petition under the
Bankruptcy Code will only be deemed to constitute an
Agreement Termination Event when and if such
involuntary petition for relief has continued
undismissed for 60 days or an order or decree approving
the involuntary petition has continued unstayed and in
effect for 60 days;
(g) to the extent the right of Magten to vote or direct the
disposition of the Relevant Notes results from an
arrangement in existence on the date hereof under which
Magten has been engaged to perform investment
management services on behalf of a beneficial owner of
the Relevant Notes, (i) such engagement shall be
terminated by such beneficial owner or as the result of
any statutory, regulatory or bona fide business
requirement or condition not related to the subject
matter of this Letter Agreement, or (ii) such
beneficial holder on its own (without any direct or
indirect influence from Magten) directs Magten to
dispose of some or all of the Relevant Notes
beneficially owned by such beneficial owner; provided
that, in any case, the Agreement Termination Event
shall only apply to Senior Notes held by the beneficial
owner as to which the engagement has been terminated or
as to which such disposal direction has been issued.
Neither Magten nor Apollo shall have any liability to Salant or
to any other person in respect of any termination of this Letter Agreement
in accordance with the terms hereof.
5. Conditions.
----------
In addition to the provisions of paragraph 4 above with respect
to the Agreement Termination Events, the respective obligations of Magten,
Salant and Apollo to consummate each of the transactions contemplated by
the Restructuring are also subject to the satisfaction of each of the
following conditions:
(a) neither Magten, Salant nor Apollo has failed to comply
with any of its obligations set forth in this Letter
Agreement;
(b) negotiation, preparation and execution of mutually
satisfactory definitive transaction agreements and
other documents incorporating the terms and conditions
of each of the transactions contemplated by the
Restructuring set forth herein and such other terms and
conditions as the parties may reasonably require;
(c) all authorizations, consents and regulatory approvals
required, if any, in connection with the consummation
of the transactions contemplated by the Restructuring
and the continuation of Salant's businesses as
currently constituted shall have been obtained; and
(d) the holders of 100% (or such lesser percentage as
agreed upon by Magten) of the Senior Notes shall have
tendered their Senior Notes in connection with the
Exchange Offer.
6. Further Acquisition of Securities.
---------------------------------
This Letter Agreement shall in no way be construed to preclude
(i) Magten from acquiring additional Senior Notes or (ii) Apollo from
acquiring additional shares of Existing Common Stock. However, any such
additional Senior Notes so acquired by Magten or additional shares of
Existing Common Stock so acquired by Apollo shall automatically be deemed
to be Relevant Notes or shares of Relevant Common Stock, as the case may
be, and to be subject to all of the terms of this Letter Agreement. This
Letter Agreement shall in no way be construed to preclude Magten or Apollo
from acquiring any other securities of Salant. However, Magten agrees that
it will vote or exercise (or cause to be voted or exercised) any such
additional securities in favor of the Restructuring for so long as this
Letter Agreement remains in effect, and Apollo agrees that it will exercise
or vote (or cause to be exercised or voted) any additional securities in
favor of the Restructuring for so long as this Letter Agreement remains in
effect.
7. Amendments.
----------
This Letter Agreement may not be modified, amended or
supplemented except in writing signed by each of the Parties.
8. Indemnification Obligations.
---------------------------
Salant agrees that it shall fully indemnify (i) Magten, (ii) each
and every other person by reason of the fact that such person is or was a
director, officer, employee, agent, shareholder, professional (including,
without limitation, Hebb & Gitlin and Allen & Company) or other authorized
representative of Magten, (iii) Apollo, and (iv) each and every other
person by reason of the fact that such person is or was a director,
officer, employee, agent, partner, professional or other authorized
representative of Apollo (all of the foregoing persons and the entities in
(i) through (iv) above, the "Indemnitees") against any claims, liabilities,
actions, suits, damages, fines, judgments or expenses (including reasonable
attorney's fees), brought or asserted by anyone (other than Salant or any
successor with respect to asserted violations of this Letter Agreement or
any other agreement with Salant entered into by such Indemnitee in
connection with the Restructuring) arising during the course of, or
otherwise in connection with or in any way related to, the negotiation,
preparation, formulation, solicitation, dissemination, implementation,
confirmation and consummation of the Restructuring, including the Exchange
Offer and the transactions contemplated thereby; provided, however, that
this indemnity shall not extend to any claims asserted by Magten or Apollo
against any other Indemnitee, and provided, further, that the foregoing
indemnification shall not apply to any liabilities arising from the gross
negligence or willful misconduct of any Indemnitee. If any claim, action or
proceeding is brought or asserted against an Indemnitee in respect of which
indemnity may be sought from Salant, the Indemnitee shall promptly notify
Salant in writing, and Salant shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnitee, and
the payment of all expenses. The Indemnitee shall have the right to employ
separate counsel in any such claim, action or proceeding and to participate
in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of the Indemnitee unless and until (a) Salant has agreed to
pay the fees and expenses of such counsel, or (b) Salant shall have failed
promptly to assume the defense of such claim, action or proceeding and
employ counsel reasonably satisfactory to the Indemnitee in any such claim,
action or proceeding or (c) the named parties to any such claim, action or
proceeding (including any impleaded parties) include both the Indemnitee
and Salant, and the Indemnitee believes, in the exercise of its business
judgment and in the opinion of its outside legal counsel, reasonably
satisfactory to Salant, that the joint representation of Salant and the
Indemnitee will likely result in a conflict of interest (in which case, if
the Indemnitee notifies Salant in writing that it elects to employ separate
counsel at the expense of Salant, Salant shall not have the right to assume
the defense of such action or proceeding on behalf of the Indemnitee). In
addition, Salant shall not effect any settlement or release from liability
in connection with any matter for which the Indemnitee would have the right
to indemnification from Salant, unless such settlement contains a full and
unconditional release of the Indemnitee, or a release of the Indemnitee
reasonably satisfactory in form and substance to the Indemnitee.
Notwithstanding anything contained herein to the contrary, the provisions
of this Section 8 shall not be deemed to limit any other indemnification
obligation of Salant in effect to any Indemnitee whether by agreement or in
accordance with Salant's bylaws.
9. Publicity.
---------
This Letter Agreement and each of the transactions contemplated
by the Restructuring shall be kept confidential until the Parties agree
upon the language and timing of a press release to be issued by Salant.
10. No Third Party Beneficiaries; Separate Responsibilities.
-------------------------------------------------------
This Letter Agreement is only for the benefit of the undersigned
parties and nothing herein, expressed or implied, is intended or shall be
construed to confer upon any person or entity, other than such persons or
entities, any rights or remedies under or by reason of, and no person or
entity, other than such persons or entities, is entitled to rely in any way
upon, this Letter Agreement. Magten shall not have or acquire any liability
or responsibility for Apollo's performance or non-performance under this
Letter Agreement, and Apollo shall not have or acquire any liability or
responsibility for Magten's performance or non-performance under this
Letter Agreement
11. Governing Law; Jurisdiction.
---------------------------
This Letter Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard
to any conflicts of law provision which would require the application of
the law of any other jurisdiction. By its execution and delivery of this
Letter Agreement, each of the Parties hereby irrevocably and
unconditionally agrees for itself that any legal action, suit or proceeding
against it with respect to any matter under or arising out of or in
connection with this Letter Agreement or for the recognition or enforcement
of any judgment rendered in any such action, suit or proceeding, may be
brought in any Federal or State court in the Borough of Manhattan, the City
of New York, but for that purpose only, and, by execution and delivery of
this Letter Agreement, each of the Parties hereby irrevocably accepts and
submits itself to the nonexclusive jurisdiction of each such court,
generally and unconditionally, with respect to any such action, suit or
proceeding.
12. Specific Performance.
--------------------
It is understood and agreed by the Parties that money damages
would not be a sufficient remedy for any breach of this Letter Agreement by
any of the Parties and the non-breaching Party shall be entitled to
specific performance and injunctive or other equitable relief as a remedy
of any such breach.
13. Survival.
--------
Notwithstanding (i) the sale of the Relevant Notes in accordance
with Section 2(c) hereof, (ii) the sale of the Relevant Common Stock in
accordance with Section 3(c) hereof, or (iii) the termination of Magten's
and Apollo's obligations hereunder in accordance with Section 4 hereof, the
agreements and obligations of Salant in Sections 8 and 11-13 shall survive
such termination and shall continue in full force and effect for the
benefit of Magten and Apollo in accordance with the terms hereof.
14. Headings.
--------
The headings of the Sections, paragraphs and subsections of this
Letter Agreement are inserted for convenience only and shall not affect the
interpretation hereof.
15. Successors and Assigns.
----------------------
This Letter Agreement is intended to bind and inure to the
benefit of the Parties and their respective successors, assigns, heirs,
executors, administrators and representatives.
16. Prior Negotiations.
------------------
This Letter Agreement and the Term Sheet supersede all prior
negotiations with respect to the subject matter hereof; provided however,
that the terms and conditions set forth in (i) the confidentiality
agreement, dated January 15, 1998, between Salant and Magten; (ii) the fee
agreement, dated January 7, 1998, between Salant and Hebb & Gitlin; and
(iii) the fee agreement, dated as of January 1, 1998, between Salant and
Allen & Company, shall remain in full force and effect.
17. Counterparts.
------------
This Letter Agreement (and any modifications, amendments,
supplements or waivers in respect hereof) may be executed in counterparts
by manual or facsimile signature of each undersigned party, and all such
counterparts shall be deemed to constitute one and the same instrument.
If the foregoing accurately reflects the agreement among the
parties regarding the matters referred to herein, Salant requests that you
execute the enclosed copy of this Letter Agreement and return it to the
undersigned.
Very truly yours,
SALANT CORPORATION
By:/s/ Jerald S. Politzer
---------------------------------
Name: Jerald S. Politzer
Title: Chairman
Accepted and Agreed as of the
date first written above.
MAGTEN ASSET MANAGEMENT
CORP., as agent on behalf
of certain of its accounts
By:/s/ Talton R. Embry
---------------------------
Name: Talton R. Embry
Title: Chairman
APOLLO APPAREL PARTNERS, L.P.
By: AIF II, L.P., its General Partner
By:/s/ Robert Katz
---------------------------
Name: Robert Katz
Title: Vice President
<PAGE>
Exhibit A
---------
Summary of Terms and Conditions
Salant Corporation ("Salant")
-----------------------------
This Summary of Terms and Conditions is part of the Letter Agreement, dated
March 2, 1998 (the "Letter Agreement"), addressed to Magten Asset
Management Corp., as agent on behalf of certain of its accounts ("Magten"),
and Apollo Apparel Partners, L.P. ("Apollo") by Salant, and is subject to
the terms and conditions of the Letter Agreement. Capitalized terms used
herein, which are not otherwise defined herein, shall have the respective
meanings assigned to them in the Letter Agreement.
I. Overview of Restructuring Plan -- The 10-1/2% Senior Secured Notes due
December 31, 1998 of Salant (the "Senior Notes") and all outstanding
shares of Common Stock of Salant (the "Existing Common Stock") will be
restructured pursuant to a comprehensive consensual plan (the
"Restructuring Plan"). The material economic terms and assumptions for
the agreed Restructuring Plan are set forth on Annex I hereto:
. Pursuant to the Restructuring Plan, the holders of the
Senior Notes will receive that number of shares of Existing
Common Stock on the date that the restructuring of Salant is
consummated (the "Effective Date") which represents 92.5% of
the issued and outstanding shares of Existing Common Stock
immediately following the Effective Date, subject to
dilution for new employee stock incentive and/or option
plans (as set forth in paragraph III.B. below) and the
Warrants (as defined below). As set forth on Annex I hereto,
assuming that 15.3 million shares of Existing Common Stock
are outstanding as of the Effective Date, the number of
shares of Existing Common Stock that would be issued to the
holders of the Senior Notes would be approximately 188.7
million shares.
. In order to implement the Restructuring Plan, Salant will
hold a meeting of stockholders to obtain the approval of the
holders of Existing Common Stock (the "Existing Equity") as
more fully described below.
. Pursuant to the Restructuring Plan, Existing Equity will (i)
retain 7.5% of the issued and outstanding shares of Existing
Common Stock immediately following the Effective Date
(approximately 15.3 million shares of Existing Common
Stock), subject to dilution for new employee stock incentive
and/or option plans of Salant (as described below) and the
Warrants; and (ii) receive warrants (the "Warrants")
representing the right to purchase up to 10% of the issued
and outstanding shares of Existing Common Stock on a fully
diluted basis (approximately 22.7 million shares of Existing
Common Stock), on the terms described in paragraph III.D.
below.
II. Capitalization of Reorganized Salant
------------------------------------
. Pursuant to the Restructuring Plan, as of the Effective
Date, the capital structure of reorganized Salant
("Reorganized Salant") will consist of: (i) the New Senior
Credit Facility (as discussed in paragraph III.G. below);
(ii) the Existing Common Stock; and (iii) the Warrants.
III. Implementation and Basic Terms of Restructuring Plan
----------------------------------------------------
A. Stockholder Approval
--------------------
. To effectuate the Restructuring Plan, Salant will hold a
special meeting (the "Special Meeting") of shareholders at
which the Existing Equity will vote upon the following
matters (a majority vote of the Existing Equity would be
required):
- (i) the issuance of shares of Existing Common Stock to
effectuate the Restructuring Plan as described below;
and
- (ii) as described below, an amendment to Salant's
Certificate of Incorporation to effectuate the reverse
stock split.
. In order to ensure that stockholder approval of the
Restructuring Plan is obtained, Apollo Apparel Partners,
L.P. ("Apollo"), the holder of 40.1% of the Existing Common
Stock, has agreed to enter into a voting agreement with
Salant pursuant to which Apollo will agree with Salant to
vote their shares of Existing Common Stock at the Special
Meeting in favor of the proposed reverse stock split and
issuance of shares of Existing Common Stock in accordance
with the terms hereof. In addition, Salant and Apollo will
attempt to obtain the agreement of DDJ Capital Management,
LLC, the holder of 12.2% of the Existing Common Stock, to
enter into a similar voting agreement, and Magten will
cooperate with Salant and Apollo in such effort.
B. Existing Common Stock
---------------------
Issuer: Reorganized Salant.
- -------
Holders of the
Senior Notes: Pursuant to the Exchange Offer (as defined below),
- ------------- on the Effective Date, holders of the Senior Notes
will receive 92.5% of the issued and outstanding
shares of Existing Common Stock immediately
following the Effective Date (approximately 188.7
million shares of Existing Common Stock), subject
to dilution for new employee stock incentive
and/or option plans of Salant (as described below)
and the Warrants. The allocation of the
distributions of the Existing Common Stock under
the Restructuring Plan to the holders of the
Senior Notes will be pro rata based on the amount
of their respective claims relating to the Senior
Notes held by them. Under the Restructuring Plan,
the aggregate allowed amount of the claim in
respect of the Senior Notes will be $104.9
million, plus accrued and unpaid interest through
the Effective Date (including the aggregate amount
of $5.5 million of interest payable on March 2,
1998).
Holders of the Pursuant to the Restructuring Plan, on the Effective
Common Stock: Date, holders of the Existing Common Stock will
- -------------- retain 7.5% of the issued and outstanding shares
of Existing Common Stock immediately following the
Effective Date (approximately 15.3 million shares
of Existing Common Stock), subject to dilution for
new employee stock incentive and/or option plans
of Salant (as described below) and the Warrants.
Employee Stock Pursuant to the Restructuring Plan, Reorganized
and Stock Option Salant will reserve 10% of the outstanding Existing
Plans: Common Stock, on a fully diluted basis, as of the
- ---------------- Effective Date, in order to create new employee
stock and stock option plans for the benefit of
the members of management and the other employees
of Reorganized Salant. On the Effective Date, a
management stock option plan will be authorized
pursuant to which options to acquire a certain
percentage of such 10% reserve will be granted to
(1) the directors of Reorganized Salant and (2)
those members of management of the Salant selected
by management and approved by the non-management
members of the board of directors of Reorganized
Salant. The decision to grant any additional stock
options from the balance of the 10% reserve
referred to above and the administration of the
stock option plans will be in the discretion of
the non-management members of the board of
directors of Reorganized Salant. In addition, by
agreement between Salant and its employees, all
existing employee stock options and other equity
based plans will be adjusted so that such options
and equity based plans will be part of the
above-referenced new employee stock and/or stock
option plans (i.e., subsumed within the 10%) as
agreed upon between Apollo and Salant, subject to
consultation with Magten.
Existing Pursuant to the Restructuring Plan, as of the
Shareholders' Effective Date, Salant's existing shareholders'
Rights Plan: rights plan will be amended to permit the
- ------------- transactions contemplated by the Restructuring Plan.
C. The Exchange Offer
------------------
. Pursuant to an exchange offer (the "Exchange Offer") by
Salant, the holders of the Senior Notes will receive 92.5%
of the issued and outstanding shares of Existing Common
Stock immediately following the Effective Date
(approximately 188.7 shares of Existing Common Stock),
subject to dilution for new employee stock incentive and/or
option plans of Salant (as described below) and the
Warrants.
. The shares of Existing Common Stock to be issued pursuant to
the Exchange Offer will be registered pursuant to a Form S-4
registration statement under the Securities Act of 1933 (the
"'33 Act").
. Salant will enter into a registration rights agreement for
the benefit of holders of 10% or more of the Existing Common
Stock as of the Effective Date upon terms and conditions
reasonably acceptable to Magten and Salant.
D. Warrants
--------
Issuer: Reorganized Salant.
- -------
Exercisable For: 10% of the issued and outstanding shares of
- ---------------- Existing Common Stock on a fully diluted basis
(approximately 22.7 million shares of Existing
Common Stock).
Warrants will be entitled to standard
anti-dilution protection.
Exercise Price: $0.6127 per share of Existing Common Stock.
- ---------------
Exercise Period: From and including the Effective Date until the
- ---------------- seventh anniversary of the Effective Date.
Holders of Pursuant to the Restructuring Plan, the Existing
Existing Common Equity will receive all of the Warrants. The
Stock: allocation of the distributions of the Warrants
- --------------- under the Restructuring Plan to the Existing
Equity will be pro rata based on the number of
shares of Existing Common Stock held by them.
Warrant Agreement: On the Effective Date, Salant will enter into
- ------------------ a warrant agreement for the Warrants on terms
and conditions reasonably satisfactory to Magten,
Apollo and Salant.
E. Reverse Stock Split
-------------------
In order to effect the Restructuring Plan, Salant is
required to issue a significant number of shares of Existing
Common Stock. Absent any corporate action, such as a reverse
stock split, the shares of Existing Common Stock would have
a value of less than $1.00 per share. In order to
"normalize" the post-restructuring trading of the Existing
Common Stock by reducing the float and thereby increasing
the per share stock price, under the Restructuring Plan, a
reverse stock split would be effectuated. In order to effect
the reverse stock split, Existing Equity would be asked to
approve the split at the Special Meeting described above.
The numbers used in this Term Sheet are prior to giving
effect to a reverse stock split.
F. Corporate Governance
--------------------
. The certificate of incorporation and the by-laws of
Reorganized Salant will contain those terms and conditions
that are reasonably satisfactory to the holders of the
Senior Notes, the holders of the Existing Common Stock and
Salant. Under the certificate of incorporation for
Reorganized Salant, all shares of Existing Common Stock will
have equal rights on voting and distributions.
. Pursuant to the Restructuring Plan, on the Effective Date,
the board of directors of Reorganized Salant will be
reconstituted and will have between five and seven members.
The composition of the initial reconstituted board will be
as follows: (i) Jerald Politzer (Chairman); (ii) between
three and five members nominated by Magten, subject to
consultation with Salant and with other holders of Senior
Notes who may come forward; and (iii) one member designated
by the current board of directors of Salant.
G. New Senior Credit Facility
--------------------------
. The terms of the new senior secured credit facility in
effect as of the Effective Date (the "New Senior Credit
Facility") will be on terms and conditions that are
reasonably satisfactory to Magten, Apollo and Salant.
H. Additional Assumptions
----------------------
. As of the Effective Date, the minimum availability under the
New Senior Credit Facility will be at a level that is
satisfactory to Magten, Apollo and Salant.
. No payments will be made to the members of management under
existing severance, employment and/or change of control
agreements or arrangements solely by reason of the
transactions contemplated under the Restructuring Plan.
. Salant and Apollo recognize that Magten and its professional
advisors (including Allen & Company and Hebb & Gitlin) are
acting solely in the interest of Magten and that they have
not consulted with, and do not and will not acquire any
duties, responsibilities or liabilities to, any other holder
of Senior Notes.
. If 100% of the holders of the Senior Notes do not consent to
the Restructuring, Salant shall take such actions as are
necessary to bind such holders to the terms of the
Restructuring and the Effective Date shall not occur unless
such action by Salant has been taken.
TWELFTH AMENDMENT AND FORBEARANCE AGREEMENT
--------------------------------------------
TWELFTH AMENDMENT AND FORBEARANCE AGREEMENT, dated as of March 2,
1998 (this "Amendment"), with respect to the Revolving Credit, Factoring
and Security Agreement, dated as of September 20, 1993, as amended by
letter agreement Re: Amendment to Credit Agreement with respect to the
Mississippi Property, dated June 14, 1994 (the "First Amendment") and by
letter agreement Re: Amendment to Credit Agreement with respect to
Additional Guarantors, dated August 24, 1994 (the "Second Amendment"), and
by the Third Amendment to Credit Agreement, dated as of February 28, 1995
(the "Third Amendment"), and by the Fourth Amendment to Credit Agreement,
dated as of March 1, 1995 (the "Fourth Amendment"), and by the Fifth
Amendment to Credit Agreement, dated as of June 28, 1995 (the "Fifth
Amendment"), and by the Sixth Amendment to Credit Agreement, dated as of
August 15, 1995 (the "Sixth Amendment"), and by the Seventh Amendment to
Credit Agreement, dated as of March 27, 1996 (the "Seventh Amendment"), and
by the Eighth Amendment to Credit Agreement, dated as of June 1, 1996 (the
"Eighth Amendment"), and by the Ninth Amendment to Credit Agreement, dated
as of August 16, 1996 (the "Ninth Amendment"), and by the Tenth Amendment
to Credit Agreement, dated as of February 20, 1997 (the "Tenth Amendment"),
and by the Eleventh Amendment to Credit Agreement, dated as of August 8,
1997 (the "Eleventh Amendment") (as so amended, and as further amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), between THE CIT GROUP/COMMERCIAL SERVICES, INC. ("Lender") and
SALANT CORPORATION ("Borrower").
W I T N E S S E T H:
-------------------
WHEREAS, Lender and Borrower are parties to the Credit Agreement;
WHEREAS, certain Events of Default described below have occurred
and are continuing under the Credit Agreement;
WHEREAS, Borrower has requested that Lender (a) waive, as of
January 3, 1998, the Covenant Defaults (as defined below) and, with respect
to the Payment Default (as defined below), forbear for a limited period of
time from exercising any of its rights and remedies with respect to such
existing Event of Default under the Credit Agreement; (b) agree to continue
(i) making loans, advances and other financial accommodations to Borrower
and (ii) factoring the Factored Accounts, all on and subject to the terms
and conditions set forth in the Credit Agreement, as amended by this
Amendment; and (c) amend certain provisions of the Credit Agreement,
including increasing the advance rate for Revolving Loans in respect of
Eligible Inventory; and
WHEREAS, Lender is willing to agree to the foregoing requests of
Borrower upon the terms and subject to the conditions set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree, effective as of the Effective Date, as defined below,
as follows:
1. Defined Terms. Initially capitalized terms used and not otherwise
defined herein shall have their respective meanings as defined in the
Credit Agreement.
2. Events of Default. Borrower acknowledges, confirms and agrees that
(a) as of January 3, 1998, Borrower defaulted under the financial covenants
set forth in Section 7.19 (Stockholders' Equity) and Section 7.22 (Maximum
Loss) of the Credit Agreement (the "Covenant Defaults") and (b) Borrower
elected not to pay the interest due and payable on March 2, 1998 on the New
Public Secured Notes, exclusive of any grace period provided with respect
thereto in the New Public Secured Notes or in the New Public Secured Notes
Indenture (the "Payment Default") in contemplation of the proposed
conversion into equity of the Public Secured Notes on the terms set forth
in the letter agreement and term sheet appended thereto, a copy of which is
attached hereto as Exhibit A (the "Notes Agreement").
3. Waiver and Forbearance. In response to Borrower's request for a
waiver of the Covenant Defaults as recited above, Lender hereby waives the
Covenant Defaults as of January 3, 1998. In addition, in response to
Borrower's request for Lender to forbear with respect to the Payment
Default which is continuing, Lender agrees, subject to the terms and
conditions set forth below, (a) to forebear from exercising any of its
rights and remedies arising from the Payment Default (whether such rights
and remedies arise under the Credit Agreement, any other Financing
Agreement or applicable law) for the purpose of collecting any of the
Obligations, and (b) to continue making loans, advances and other financial
accommodations to Borrower and to factor the Factored Accounts, all on and
subject to the terms and conditions set forth in the Credit Agreement, as
amended by this Amendment. Such forbearance shall terminate on July 1,
1998, or earlier upon the happening of:
(i) the occurrence of any Event of Default other than the
Payment Default; or
(ii) the failure of Borrower on or before June 1, 1998, to
(A) execute and deliver to Lender, a commitment letter executed by
Lender providing for the agreement between Lender (as Agent for itself
and other lenders) and Borrower to enter into a new $135 million
syndicated credit facility (in replacement of the financing and
factoring arrangements provided by Lender pursuant to the Credit
Agreement) on terms and conditions satisfactory to Lender or (B)
deliver to Lender a copy of a commitment letter executed between
another lender and Borrower providing for a credit facility to
Borrower which by its terms provides for closing and funding thereof
on or before July 1, 1998, and enables Borrower upon such closing and
funding to simultaneously terminate the Credit Agreement and all other
Financing Agreements and to satisfy in full all of its then existing
Obligations to Lender (either such credit facility, the "Replacement
Credit Facility"); or
(iii) the exercise of any right or remedy with respect to
any of the Collateral by any holder of any New Public Secured Note or
by the Trustee under the New Public Secured Notes Indenture; or
(iv) the payment of any interest on the New Public Secured
Notes in respect of which the Payment Default arose or otherwise.
4. Continuation of Eurodollar Loans. Notwithstanding the certification
by Borrower contained in each Notice of Borrowing with respect to a
Eurodollar Loan requested by Borrower, provided no Event of Default other
than the Payment Default shall have occurred, Lender agrees to continue
making Eurodollar Loans to Borrower on and subject to all the terms and
conditions applicable to Eurodollar Loans set forth in the Credit
Agreement.
5. Addition of Defined Terms. Section 1 of the Credit Agreement is
hereby amended to add the following defined terms thereto:
(a) "1.21A 'Covenant Trigger Date' shall mean the last day of
any fiscal month of Borrower on which Borrower first fails
to maintain Excess Availability of at least $5,000,000,
except that for Borrower's June fiscal month, such amount
shall be at least $4,500,000."
(b) "1.26A 'EBITDA' shall mean, for any period, the sum (without
duplication) of (i) net income, (ii) provision for taxes
based on income, (iii) Interest Expense, and (iv) to the
extent net income has been reduced thereby, amortization
expense, depreciation expense and other non-cash expenses,
less extraordinary items (including, without limitation, all
costs and expenses of Borrower and its Subsidiaries in
connection with the negotiation, execution and performance
of the Twelfth Amendment and in connection with the
negotiation, execution and consummation of the transactions
contemplated by the Notes Agreement), all as determined on a
consolidated basis for Borrower and its Subsidiaries in
accordance with GAAP."
(c) "1.34A 'Excess Availability' shall mean at any time, the
amount by which Revolving Loans and Letter of Credit
Accommodations available to Borrower under the Advance
Formulas, within applicable sublimits and after deducting
all applicable reserves, exceed the aggregate amount of
Revolving Loans, Letter of Credit Accommodations and all
other Obligations then outstanding."
(d) "1.46A 'Interest Coverage Ratio' shall mean, with respect to
any period, the ratio of (i) EBITDA to (ii) Interest
Expense."
(e) "1.46B 'Interest Expense' shall mean, for any period,
interest expense with respect to all outstanding
Indebtedness of Borrower and its Subsidiaries for such
period, exclusive of interest with respect to the New Public
Secured Notes."
(f) "1.78A 'Twelfth Amendment' shall mean the Twelfth Amendment
and Forbearance Agreement, dated as of March 2, 1998,
executed between Lender and Borrower.
6. Amendment of Section 3.1(a)(iii). Section 3.1(a)(iii) of the Credit
Agreement is amended in its entirety to read as follows:
"(iii) Sixty percent (60%) of the value of Eligible Inventory"
7. Amendment of Section 3.1(e). Section 3.1(e) of the Credit Agreement
is amended in its entirety to read as follows:
"(e) Notwithstanding anything to the contrary contained in this
Agreement or in any of the other Financing Agreements, during the
period from the second day through and including the day
immediately prior to the last day of each of Borrower's March,
April, May, and June, 1998 fiscal months, at the request of
Borrower, Lender may, in its sole discretion, subject to the
Maximum Credit, make Revolving Loans and Letter of Credit
Accommodations to Borrower in excess of the aggregate amount
available under the Advance Formulas of up to $3,000,000 at any
time outstanding (the "Seasonal Overadvance Subfacility");
provided, that, any amount outstanding under the Seasonal
Overadvance Subfacility in excess of the Advance Formulas shall
be repaid in full on the last day of each fiscal month during
said period, provided further, that, no Revolving Loans shall be
made under the Seasonal Overadvance Subfacility in any fiscal
month unless (i) any amount outstanding under the Seasonal
Overadvance Subfacility in the immediately preceding calendar
month has been repaid in full when due, and (ii) there is some
Excess Availability on the last day of the fiscal month in which
such repayment in full is made. If Borrower fails to pay any
amounts outstanding under the Seasonal Overadvance Subfacility
when due, Borrower shall pay to Lender a non-refundable fee of
$12,500 on each occasion on which it fails to make such payment
when due."
8. Amendment of Section 3.3. Section 3.3 of the Credit Agreement is
amended in its entirety to read as follows:
"3.3 Maximum Credit
The aggregate principal amount of the Revolving Loans and Letter
of Credit Accommodations at any time outstanding shall not exceed
$120,000,000 (the "Maximum Credit")."
9. Amendment of Section 7.19.Section 7.19 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"[Intentionally Deleted]"
10. Amendment of Section 7.22. Section 7.22 of the Credit Agreement is
deleted in its entirety and replaced with the following:
"7.22 Monthly Loss Covenant; Interest Coverage Ratio. If Borrower
fails to maintain Excess Availability of at least $5,000,000 on
the last day of any fiscal month of Borrower other than
Borrower's June fiscal month, for which month such amount shall
be at least $4,500,000, then, from and after the Covenant Trigger
Date, Borrower shall at all times be in compliance with the
financial covenants set forth below:
(a) Maximum Net Loss. The aggregate net loss (exclusive of costs
and expenses of Borrower incurred in connection with the
negotiation, execution and performance of the Twelfth Amendment
and the negotiation, execution and consummation of the
transactions contemplated by the Notes Agreement incurred by
Borrower in (i) any fiscal month set forth below plus (ii) the
immediately preceding eleven (11) months shall not exceed the
amount set forth below opposite each such month:
Fiscal Month Maximum Net Loss
------------ ----------------
March, 1998 $19,000,000
April, 1998 $18,100,000
May, 1998 $15,000,000
June, 1998 $ 7,000,000
(b) Minimum Interest Coverage Ratio. Borrower shall at all times
cause to be maintained as of the end of each fiscal period set
forth below an Interest Coverage Ratio of not less than the
Interest Coverage Ratio set forth opposite such fiscal period end
set forth below:
Fiscal Month Minimum Interest Coverage Ratio
------------ -------------------------------
March, 1998 1.60 to 1.00
April, 1998 1.20 to 1.00
May, 1998 1.32 to 1.00
June, 1998 0.60 to 1.00"
11. Additional Events of Default. Section 8.1 of the Credit Agreement
is amended by deleting the period at the end of Section 8.1(r) and
substituting a semicolon followed by the word "or" therefor and by adding
thereto the following Sections 8.1(s) and 8.1(t) as follows:
"(s) Ernst & Young LLP ceases to be business consultant to the
Company and is not replaced within 5 days by a business
consultant satisfactory to Lender; or
(t) Any event or circumstance occurs from and after March 2, 1998
that materially and adversely affects the business, properties,
operations or condition, financial or otherwise, of Borrower."
12. Amendment of Section 8.2(iii). Section 8.2(iii) of the Credit
Agreement is amended by deleting therefrom the defined term "Interest Rate"
and substituting therefor the defined term "Effective Prime Rate."
13. Waiver, Forbearance and Amendment Fee. In consideration of
Lender's waiver of the Covenant Defaults and forbearance with respect to
the Payment Default and other agreements set forth in this Amendment and
for other valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged by Borrower, Borrower shall pay Lender a
forbearance and amendment fee in the amount of $150,000, which shall be
paid and fully earned upon execution of this Amendment. In addition, in
consideration of the Replacement Credit Facility proposed by Lender to
Borrower, Borrower agrees to pay Lender $1,050,000 as a non-refundable and
fully earned fee as of the date hereof, payable in three (3) equal
installments of $350,000 each on April 1, May 1, and June 1, 1998. Such fee
shall not be refundable in whole or in part for any reason whatsoever, and
may be charged, at Lender's sole option, to any account of Borrower
maintained by Lender. Notwithstanding the foregoing, Lender and Borrower
agree that, (a) if and when the Replacement Credit Facility extended by
Lender becomes effective, such $1,050,000 fee shall thereupon be deemed
paid and shall be applied by Lender on account of the closing fee that will
be due and payable by Borrower to Lender upon closing of the Replacement
Credit Facility (such portion of the fee allocated by Lender to the payment
of such closing fee under the Replacement Credit Facility being hereinafter
referred to as the "Allocated Replacement Facility Fee"), and no other
closing fee or facility fee shall be due or payable in connection with any
Replacement Credit Facility extended by Lender or in connection with any
debtor-in-possession financing provided by Lender to Debtor in connection
with a case commenced with respect to Debtor under Chapter 11 of Title 11
of the United States Code, and (b) if (and only if) Lender does not extend
a Replacement Credit Facility because Lender's Executive Credit Committee
fails to give credit approval for such Replacement Credit Facility, then a
portion of the Allocated Replacement Facility Fee in the amount of $600,000
shall be refunded, without interest, to Borrower.
14. Representations and Warranties. Borrower hereby represents and
warrants to Lender that the representations and warranties set forth in
Section 6 of the Credit Agreement are true on and as of the date hereof as
if made on and as of the date hereof after giving effect to this Amendment,
except to the extent any such representation or warranty expressly relates
to a prior date, and breach of any of the representations and warranties
made in this paragraph 14 shall constitute an Event of Default under
Section 8.1(b) or 8.1(c) of the Credit Agreement, as applicable. Borrower
further represents and warrants that, (a) after giving effect to this
Amendment, other than the Payment Default, no Event of Default or event
which, with the lapse of time or the giving of notice or both, would become
an Event of Default has occurred and is continuing, and (b) the terms and
conditions pursuant to which Borrower proposes that the New Public Secured
Notes shall be converted into equity interests in Borrower, as outlined in
the Term Sheet therefor delivered by Borrower to Lender, have been agreed
to in principle by a majority of the holders of the New Public Secured
Notes.
15. Effectiveness. This Amendment shall become effective on the date
(the "Effective Date") Lender shall have received each of the following:
(a) The written consent of all Participants to the execution and
delivery of this Amendment by Lender.
(b) Counterparts of this Amendment, duly executed and delivered
by Borrower and Lender.
(c) A duly executed copy of the Consent of Guarantors
substantially in the form of Exhibit B hereto.
(d) The agreement in principle attached hereto as Exhibit A
shall have been executed by Borrower, Apollo Apparel
Partners, L.P. and Magten Asset Management Corp. and Lender
shall have received a fully executed copy thereof.
16. Effect of this Agreement. This Amendment 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 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 limit, impair or affect
any of Lender's rights and remedies with respect thereto (subject, however,
to the terms of the forbearance provided for in paragraph 3 of this
Agreement), all of which Borrower acknowledges and agrees have been
heretofore and are hereby further expressly reserved by Lender.
17. Counterparts. This Amendment may be executed in counterparts, and
all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
18. Governing Law. This Amendment shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered in New York, New York by their proper and
duly authorized officers as of the day and year first above written.
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By: /s/ Anthony Lombardi
-----------------------------------
Title: /s/ Senior Vice President
--------------------------------
SALANT CORPORATION
By: /s/ Todd Kahn
-----------------------------------
Title: Executive Vice President
& General Counsel
--------------------------------
EXHIBIT A
---------
Filed as Exhibit 10.48
CONSENT OF GUARANTORS
---------------------
Each of the undersigned, CLANTEXPORT, INC., DENTON MILLS, INC., FROST
BROS. ENTERPRISES, INC., SLT SOURCING, INC., each a Guarantor under its
respective Guarantee, each dated as of September 20, 1993, and SALANT
CANADA INC. and J.J. FARMER CLOTHING INC., each a guarantor under its
respective Guaranty (Unlimited Liability), each dated as of September 20,
1994 (individually, in the case of each of the foregoing Guarantors, its
"Guarantee"), made in favor of The CIT Group/Commercial Services, Inc.
("Lender"), pursuant to the Credit Agreement as defined in the Twelfth
Amendment and Forbearance Agreement, dated as of March 2, 1998 between
Lender and Salant Corporation (the "Amendment"), to which this Consent is
attached, hereby consents to the Amendment and the matters contemplated
thereby, and hereby confirms and agrees that its Guarantee is, and shall
continue to be, in full force and effect and is hereby ratified and
confirmed in all respects except that, on and after the effective date of
the Amendment, each reference in its Guarantee to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended
by the Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed and delivered by its authorized officer this
___ day of March, 1998.
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
-------------------------- --------------------------
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
--------------------------
