AMENDMENT NO. 1 TO CREDIT AGREEMENT

EX-10.22 18 d559406dex1022.htm EX-10.22 EX-10.22

Exhibit 10.22

AMENDMENT NO. 1 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”) is entered into as of March 23, 2012, by and among the Lenders identified on the signature pages hereof (such Lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders (in such capacity, “Agent”), KELLWOOD COMPANY, a Delaware corporation (“Borrower Representative”), the Domestic Subsidiaries of Borrower Representative party hereto as Borrowers (together with Borrower Representative, “Borrowers”) and the other Obligors party hereto (together with the Borrowers, the “Loan Parties”).

WHEREAS, the Loan Parties, Agent, and Lenders are parties to that certain Credit Agreement dated as of October 19, 2011 (as amended, modified or supplemented from time to time, the “Credit Agreement”);

WHEREAS, the Loan Parties have requested (i) that Agent and Lenders temporarily modify the Covenant Testing Trigger Date and (ii) that Agent and Lenders waive the application of certain provisions of the Credit Agreement as they may apply to the execution and delivery of a Guaranty by SK Financial Services Corp. (“SK”), dated as of the date hereof (the “SK/Cerberus Guaranty”) in favor of the Second Lien Agent;

WHEREAS, in connection therewith, the Loan Parties, Agent and Lenders have agreed to amend the Credit Agreement in certain respects;

NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement.

2. Amendments to Credit Agreement. In reliance upon the representations and warranties of the Loan Parties set forth in Section 7 below, the Credit Agreement is hereby amended as follows:

(a) The definition of “Covenant Testing Trigger Date” appearing in Section 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

Covenant Testing Trigger Date - means any day that Excess Availability is less than 12.5% of the Maximum Revolver Amount (other than during the Availability Modification Period).

(b). The definition of “Permitted Acquisition” appearing in Section 1.1 of the Credit Agreement is hereby amended to delete the phrase “any Acquisition effected with the consent and approval of the board of directors” appearing therein and replace it with the following: “any Acquisition (other than an Acquisition effected during the Availability Modification Period) effected with the consent and approval of the board of directors”.

(c) Section 1.1 of the Credit Agreement is hereby amended to insert the following definitions in the proper order alphabetically:

Availability Modification Period - the period commencing on March 26, 2012 and ending upon the earliest of (i) the occurrence of any Event of Default, (ii) any date on which Excess Availability is less than $5,000,000, (iii) any termination or cancellation of, or reduction in the amount available to be drawn on (as a result of a draw or otherwise), the Sun Letter of Credit, (iv) any date on which the Sun Guaranty ceases to be in full force and effect or any party thereto challenges the validity thereof and (v) April 28, 2012.

Sun Guaranty - that certain Guaranty dated as of March 23, 2012 made by SK Financial Services Corp. in favor of Agent.

Sun Letter of Credit - a standby letter of credit with an expiration date of no earlier than May 31, 2012 and a face amount of $20,000,000 issued by Bank of Montreal to Agent on behalf of SK Financial Services Corp.

(d) The first sentence Section 2.1.7 of the Credit Agreement is hereby amended to delete the phrase “ Borrowers may, by written notice to Agent” appearing therein and replace it with the following: “Borrowers may, at any time other than during the Availability Modification Period, by written notice to Agent”

(e) The first sentence of Section 8.1 of the Credit Agreement is hereby amended to delete the phrase: “provided that, if at any time Excess Availability is less than 12.5% of the Maximum Revolver Amount and, thereafter, so long as Borrowers do not maintain an average daily Excess Availability (measured as of the close of business of each Business Day) in excess of 12.5% of the Maximum Revolver Amount for a period of two (2) consecutive fiscal months” and replace it with the following:

“provided that, (i) if at any time Excess Availability is less than 12.5% of the Maximum Revolver Amount and, thereafter, so long as Borrowers do not maintain an average daily Excess Availability (measured as of the close of business of each Business Day) in excess of 12.5% of the Maximum Revolver Amount for a period of two (2) consecutive fiscal months and (ii) at all times during the Availability Modification Period,”

(f) Section 10.2.8(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(b) Exercise its option to make cash payments of interest in respect of the Last Out Term Loan at any time during the Availability Modification Period or if an Event of Default exists or would be caused thereby or make any cash payments of interest in respect of the Last Out Term Loan except as provided in the Last Out Term Loan Agreement as in effect on the date hereof.”

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(g) Section 10.2.17 of the Credit Agreement is hereby amended to amend and restate clauses (g) and (h) thereof in their entirety as follows:

“(g) at any time other than during the Availability Modification Period, payment of management fees and customary and reasonable fees for management consulting services to Sun Capital Partners Management V, LLC pursuant to Section 2 of the Management Services Agreement; provided that (i) no Event of Default has occurred and is continuing at the time of any such payment thereof or would result after giving effect thereto and (ii) Availability after giving effect to such payment is greater than $25,000,000 (it being understood that any management fees which may not be paid pursuant to the foregoing conditions set forth in this proviso may accrue and be paid at such time as such conditions would be satisfied after giving effect to such payment), and (h) at any time other than during the Availability Modification Period, payment of indemnities and reimbursements of reasonable out-of-pocket fees and expenses incurred by Sun Capital Partners Management V, LLC in connection with the performance of the services under the Management Services Agreement; provided that this clause (h) shall not limit reimbursement of Sun Capital Partners Management V, LLC or its affiliates for compensation paid by Sun Capital Partners Management V, LLC or its affiliates to the “performance improvement team” assisting the Borrower Representative in an amount not to exceed $500,000 in any Fiscal Year”.

3. Waiver.

(a) Subject to the terms and conditions contained herein, the Agent and the Lenders hereby waive application of Section 10.1.10 of the Credit Agreement, as such section may apply to the execution and delivery of the SK/Cerberus Guaranty in favor of the Second Lien Agent, provided that the conditions to the effectiveness of this Waiver described in Section 6 below are satisfied.

(b) By its signature below, SK agrees that any and all subrogation rights of SK under the SK/Cerberus Guaranty following any payment by SK to the Second Lien Agent thereunder are fully subordinated to the prior payment in full in cash of all Obligations under the Credit Agreement. Accordingly, to the extent SK is entitled to exercise any subrogation rights under the SK/Cerberus Guaranty, SK agrees that it shall not take any action in respect of such subrogation rights until all Obligations (other than contingent indemnity obligations for which a claim has not been asserted) have been paid in full in cash.

4. Continuing Effect. Except as expressly set forth in Section 2 or 3 of this Amendment, nothing in this Amendment shall constitute a modification or alteration of the terms, conditions or covenants of the Credit Agreement or any other Loan Document, or a waiver of any other terms or provisions thereof, and the Credit Agreement and the other Loan Documents shall remain unchanged and shall continue in full force and effect, in each case as amended hereby.

5. Reaffirmation and Confirmation; Covenant. Each Loan Party hereby ratifies, affirms, acknowledges and agrees that the Credit Agreement and the other Loan Documents represent the valid, enforceable (except as enforceability may be limited by

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bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally) and collectible obligations of such Loan Party, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to the Credit Agreement or any other Loan Document. Each Loan Party hereby agrees that this Amendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations. The Liens and rights securing payment of the Obligations are hereby ratified and confirmed by each Loan Party in all respects. The Loan Parties agree that during the Availability Modification Period they shall provide collateral reporting on a weekly basis. Failure to comply with the foregoing agreement shall constitute an immediate Event of Default.

6. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of each of the following conditions precedent, each in form and substance acceptable to Agent:

(a) Agent shall have received a fully executed copy of this Amendment;

(b) Agent shall have received the Sun Letter of Credit, in the form attached hereto as Exhibit A;

(c) Agent shall have received the Sun Guaranty, in the form attached hereto as Exhibit B, together with an opinion of counsel in form and substance satisfactory to Agent and a copy of the corresponding guaranty executed in favor of the Second Lien Agent;

(d) Agent shall have received payment of an amendment fee in the amount of $50,000 in immediately available funds; and

(e) No Default or Event of Default shall have occurred and be continuing on the date hereof or as of the date of the effectiveness of this Amendment.

7. Representations and Warranties. In order to induce Agent and Lenders to enter into this Amendment, each Loan Party hereby represents and warrants to Agent and Lenders that, after giving effect to this Amendment:

(a) All representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of this Amendment, in each case as if then made, other than representations and warranties that expressly relate solely to an earlier date (in which case such representations and warranties were true and correct in all material respects on and as of such earlier date);

(b) No Default or Event of Default has occurred and is continuing; and

(c) This Amendment and the Credit Agreement, as modified hereby, constitute legal, valid and binding obligations of each Loan Party and are enforceable against each Loan Party in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

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8. Other Agreements.

(d) Application of LC Draws. If Agent receives any payment in respect of the Sun Guaranty, including any proceeds from a draw on the Sun Letter of Credit, such payment shall be applied as set forth in Section 5.6 of the Credit Agreement.

(e) Cash Dominion. The Loan Parties acknowledge and agree that, as a result of Excess Availability being less than 12.5% of the Maximum Revolver Amount, as of the date hereof there exists a Cash Dominion Period pursuant to Section 8.5 of the Credit Agreement, which shall remain in effect until the time that such Cash Dominion Period ends pursuant to the terms of Section 8.5 of the Credit Agreement.

(f) Limit on Cash-Pay Interest. Each Loan Party and each Last-Out Term Lender agree and acknowledge that the Loan Parties shall not exercise their option to make cash payments of interest in respect of the Last Out Term Loan at any time during the Availability Modification Period.

9. Miscellaneous.

(a) Expenses. The Loan Parties jointly and severally agree to pay on demand all expenses of Agent (including, without limitation, the fees and expenses of outside counsel for Agent) in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith, all in accordance with Section 3.4 of the Credit Agreement. The Loan Parties further agree to reimburse Agent for expenses incurred by Agent in connection with a collateral audit of the Loan Parties to be conducted in April, 2012, notwithstanding any limitations on such reimbursement set forth in Section 10.1.l(b) of the Credit Agreement. All obligations provided herein shall survive any termination of this Amendment and the Credit Agreement as modified hereby.

(b) Governing Law. This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois.

(c) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart of this Amendment.

10. Release.

(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Loan Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the “Releasees” and individually as a “Releasee”), of

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and from all demands, actions, causes of action, suits, controversies, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any Loan Party or any of their respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever in relation to, or in any way in connection with any of the Credit Agreement, or any of the other Loan Documents or transactions thereunder or related thereto which arises at any time on or prior to the day and date of this Amendment.

(b) Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

(c) Each Loan Party agrees that no feet, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.

[signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized and delivered as of the date first above written.


BORROWERS: KELLWOOD COMPANY KELLWOOD FINANCIAL RESOURCES, INC. (formerly known as Newkell, Inc.) KWD HOLDINGS, INC. PHAT FASHIONS LLC PHAT LICENSING LLC ZOBHA, LLC MEOW INC. BETH’S BOUTIQUE, LLC AMERICAN RECREATION PRODUCTS, INC. SIERRA DESIGNS ACQUISITION CORPORATION ROYAL ROBBINS, INC.
























By:
Name:		Adrian Kowalewski
Title:		Senior Vice President