CONGRESS ▇▇▇▇▇▇▇ CORPORATION
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10036
▇▇▇ ▇▇▇ ▇▇▇▇
December 31, 1996
Candie's, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Amendments to Factoring Contract
and Other Factoring Agreements
Gentlemen:
Reference is made to (a) the Discount Factoring Agreement between ▇▇▇▇▇▇'s,
Inc. ("Client") and Congress ▇▇▇▇▇▇▇ Corporation ("Congress"), dated April 2,
1993 (as now or hereafter amended, the "Factoring Agreement"), (b) the Letter
re: Inventory Loans between Congress and Client, dated April 2, 1993 (as now
amended, the "Inventory Loan Supplement"), (c) the Trade Financing Agreement
Supplement to Factoring Agreement between Congress and Client, dated April 2,
1993 (as now or hereafter amended, the "Trade Financing Supplement"), and (d)
all other existing and future agreements, documents, supplements and guaranties,
each as now or hereafter amended or supplemented, between Congress and Client or
executed by Client in favor of Congress (individually and collectively, together
with the Factoring Contract, the Inventory Loan Supplement and the Trade
Financing Supplement, the "Factoring Agreements").
Reference is also made to (a) the Discount Factoring Agreement between
Bright Star Footwear, Inc. ("Bright Star") and Congress, dated April 2, 1993 (as
now or hereafter amended, the "Candie's Factoring Contract"), (b) the Letter re:
Inventory Loans between Congress and Bright Star dated April 2, 1993 (as now or
hereafter amended, the "Bright Star Inventory Loan Supplement"), (c) the Trade
Financing Agreement Supplement to Factoring Agreement between Congress and
Bright Star, dated April 2, 1993 (as now or hereafter amended, the "Bright Star
Trade Financing Supplement") and (d) all other existing and future agreements,
documents, supplements and guaranties, each as now or hereafter amended or
supplemented, between Congress and Bright Star or executed by Bright Star in
favor of Congress (individually and collectively, together with the Bright Star
Factoring Contract, the Bright Star Inventory Loan Supplement and
the Bright Star Trade Financing Supplement, the "Bright Star
Factoring Agreements").
This will confirm the agreement between Client and Congress that the
Factoring Agreements shall be and are hereby amended as follows:
1. The definitions of the capitalized terms set forth in the first two
paragraphs of this Amendment are incorporated into the Factoring Agreements in
each place in the amendments below, where a reference is made to such
capitalized terms.
2. The maximum aggregate outstanding amount of advances made by Congress to
Client against the purchase price of "accounts" (as defined in the Factoring
Contract) pursuant to the Factoring Contract, loans made by Congress to client
pursuant to the Inventory Loan Supplement and "Credits" (as defined in the Trade
Financing Supplement), plus the aggregate outstanding amount of advances made by
Congress to Bright Star against the purchase price of "accounts" (as defined in
the Bright Star Factoring Contract) pursuant to the Bright Star Factoring
Contract, loans made by Congress to Bright Star pursuant to Bright Star
Inventory Loan Supplement and "Credits" (as defined in the Bright Star Trade
Financing Supplement), except in Congress' sole discretion, shall not exceed
$20,000,000 at any time (the "Maximum Credit").
3. During each of the periods indicated in the written projections annexed
hereto as Exhibit A (the "Projection") and up to the amounts indicated as an
"overdraft" in the Projections for each such period (subject to the Maximum
Credit, applicable sublimits and applicable reserves as provided in the
Factoring Agreements and the Bright Star Factoring Agreements), Congress will
make advances and extend loans and Credits to or for the account of Client above
the amounts calculated pursuant to the formulas, as amended hereunder, set forth
in Section 6(b) of the Factoring Contract, Section 2 of the Inventory Loan
Supplement and Section 1.5 of the Trade Financing Supplement (collectively,
"Overformula Advances"), provided that, (i) no event of default set forth in
Section 14 of the Factoring Contract then exists, (ii) the aggregate outstanding
amount of the Overformula Advances and the Overformula Advances (as defined in
the Bright Star Factoring Agreements) to Bright Star shall not exceed $1,500,000
(on a combined basis for both Client and Bright Star) at any time, and (iii) the
existing Guarantee and Waiver in favor of Congress executed by Mr. ▇▇▇▇ ▇▇▇▇, as
amended concurrently herewith, with respect to Client and Bright Star is in full
force and effect.
4. Section 2 of the Inventory Loan Supplement shall be and is hereby
amended by (a) deleting the words "Fifty Percent (50%) of finished goods which
would include shoes and/or garments" and
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(b) inserting in its stead "(i) fifty (50%) percent of the Value of Eligible
Inventory consisting of finished shoes and garments purchased by Client not
earlier than six (6) months before the date of such calculation and (b)
twenty-five (25%) percent of the Value of Eligible Inventory consisting of
finished shoes and garments purchased by Client earlier than six (6) months but
not earlier than twelve (12) months from the date of such calculation.
5. Section 3(b) of the Inventory Loan Supplement shall be and is hereby
amended by deleting "$2,500,000 (combined with Bright Star Footwear, Inc.)" and
inserting in its stead "$4,500,000 (minus the amount of the then outstanding
loans made by Congress to Bright Star pursuant to the Bright Star Inventory Loan
Supplement)".
6. The Factoring Contract shall be and is hereby amended as follows:
(a) Section 6(a) is amended, effective as of December 1, 1996 by deleting
"1-1/2% in excess of the prime commercial interest rate from time to
time announced by Philadelphia National Bank" and inserting in its
stead "three quarters of one (.75%) percent above the rate from time
to time announced by CoreStates Bank, N.A. or its successors, at its
office in Philadelphia, Pennsylvania, as its prime rate";
(b) Section 6(b) is amended, effective as of December 1, 1996, by adding,
at the end of the first sentence and immediately before the period,";
provided, however, if the 'dilution' (as calculated in accordance with
Congress'customary practices), on a combined basis for both Client and
Bright Star, is above eight (8%) percent in any consecutive three (3)
month period beginning on the first day of December, March, June or
September of any year (a "Prior Period"), then such percentage shall
be reduced in the immediately following consecutive three (3) month
period, after the end of the Prior Period, by two percent (2%) for
each one (1%) percent or part thereof of such 'dilution' in the
immediately preceding three (3) month period which is above eight (8%)
percent";
(c) Section 6(b) is also amended, effective as of December 1, 1996, by
deleting "five (5) business days" in the sixth line thereof and
inserting in its stead "four (4) business days";
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(d) Section 7 is amended, effective as of December 1, 1996, by (i)
deleting ".75% of One (.75%) Percent" in the first line thereof and
inserting in its stead "six tenths of one (.6%) percent" and (ii)
deleting "$4.50" in the seventh line thereof and inserting in its
stead "$2.50";
(e) Section 13 is amended by (i) deleting "for one year from the date
hereof" in the first line thereof and inserting in its stead "until
November 30, 1998", and (ii) deleting "commencing sixty (60) days
prior to the end of such one (1) year period" and inserting in its
stead "before November 30, 1998 or any subsequent termination date",
and (iii) by adding the following at the end thereof, "provided that
(A) Client may elect to terminate this agreement before November 30,
1998 by paying to Congress an early termination fee of $540,000 minus
the amount of all factoring commissions previously paid to Congress
pursuant to this agreement and the Bright Star Factoring Contract and
(B) concurrently with any termination of this agreement, all
"Obligations" (as such term is defined in this agreement and the
Bright Star Factoring Contract) are fully and finally paid and/or
indemnified to Congress satisfaction and all of the other Factoring
Agreements and the Bright Star Factoring Agreements are terminated;
(f) Section 14 is amended to include as an event of default (i) any event
of default under the Bright Star Factoring Contract or any of the
other Factoring Agreements or (ii) if actual consolidated net profit
of Client and Bright Star at the end of the first, second, third or
fourth fiscal quarters of any fiscal year, on a cumulative basis,
(each a "fiscal period") is less than eighty percent (80%) of the
amount of the "Consolidated Net Income" projected for such fiscal
period in the Projection unless the actual consolidated net worth of
Client and Bright Star at the end of such fiscal period is in excess
of eighty (80%) percent of the amount of the consolidated total
stockholders' equity" projected in the Projection for the end of such
fiscal period.
Except as hereinabove specifically provided, the Factoring Agreements are
ratified, confirmed and extended.
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Please indicate your consent and agreement to the above by executing and
returning the enclosed copy of this letter to us.
CONGRESS ▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: S.V.P.
CONSENTED AND AGREED TO:
CANDIE'S, INC.
By: ▇▇▇▇ ▇▇▇▇
---------------------------
Title: CEO
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CONGRESS ▇▇▇▇▇▇▇ CORPORATION
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10036
▇▇▇ ▇▇▇ ▇▇▇▇
December 31, 1996
Bright Star Footwear, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Amendments to Factoring Contract
and Other Factoring Agreements
Gentlemen:
Reference is made to (a) the Discount Factoring Agreement between Bright
Star Footwear, Inc. ("Client") and Congress ▇▇▇▇▇▇▇ Corporation ("Congress"),
dated April 2, 1993 (as now or hereafter amended, the "Factoring Agreement"),
(b) the Letter re: Inventory Loans between Congress and Client, dated April 2,
1993 (as now amended, the "Inventory Loan Supplement"), (c) the Trade Financing
Agreement Supplement to Factoring Agreement between Congress and Client, dated
April 2, 1993 (as now or hereafter amended, the "Trade Financing Supplement"),
and (d) all other existing and future agreements, documents, supplements and
guaranties, each as now or hereafter amended or supplemented, between Congress
and Client or executed by Client in favor of Congress (individually and
collectively, together with the Factoring Contract, the Inventory Loan
Supplement and the Trade Financing Supplement, the "Factoring Agreements").
Reference is also made to (a) the Discount Factoring Agreement between
▇▇▇▇▇▇'s, Inc. ("Candie's") and Congress, dated April 2, 1993 (as now or
hereafter amended, the "Candie's Factoring Contract"), (b) the Letter re:
Inventory Loans between Congress and ▇▇▇▇▇▇'s, dated April 2, 1993 (as now or
hereafter amended, the "Candie's Inventory Loan Supplement"), (c) the Trade
Financing Agreement Supplement to Factoring Agreement between Congress and
Candie's, dated April 2, 1993 (as now or hereafter amended, the "Candie's Trade
Financing Supplement") and (d) all other existing and future agreements,
documents, supplements and guaranties, each as now or hereafter amended or
supplemented, between Congress and ▇▇▇▇▇▇'s or executed by ▇▇▇▇▇▇'s in favor of
Congress (individually and collectively, together with the Candie's Factoring
Contract, the Candie's Inventory Loan
Supplement and the Candie's Trade Financing Supplement, the "Candie's Factoring
Agreements").
This will confirm the agreement between Client and Congress that the
Factoring Agreements shall be and are hereby amended as follows:
1. The definitions of the capitalized terms set forth in the first two
paragraphs of this Amendment are incorporated into the Factoring Agreements in
each place in the amendments below, where a reference is made to such
capitalized terms.
2. The maximum aggregate outstanding amount of advances made by Congress to
Client against the purchase price of "accounts" (as defined in the Factoring
Contract) pursuant to the Factoring Contract, loans made by Congress to client
pursuant to the Inventory Loan Supplement and "Credits" (as defined in the Trade
Financing Supplement), plus the aggregate outstanding amount of advances made by
Congress to ▇▇▇▇▇▇'s against the purchase price of "accounts" (as defined in the
Candie's Factoring Contract) pursuant to the Candie's Factoring Contract, loans
made by Congress to ▇▇▇▇▇▇'s pursuant to ▇▇▇▇▇▇'s Inventory Loan Supplement and
"Credits" (as defined in the Candie's Trade Financing Supplement), except in
Congress' sole discretion, shall not exceed $20,000,000 at any time (the
"Maximum Credit").
3. During each of the periods indicated in the written projections annexed
hereto as Exhibit A (the "Projection") and up to the amounts indicated as an
"overdraft" in the Projections for each such period (subject to the Maximum
Credit, applicable sublimits and applicable reserves as provided in the
Factoring Agreements and the Candie's Factoring Agreements), Congress will make
advances and extend loans and Credits to or for the account of Client above the
amounts calculated pursuant to the formulas, as amended hereunder, set forth in
Section 6(b) of the Factoring Contract, Section 2 of the Inventory Loan
Supplement and Section 1.5 of the Trade Financing Supplement (collectively,
"Overformula Advances"), provided that, (i) no event of default set forth in
Section 14 of the Factoring Contract then exists, (ii) the aggregate outstanding
amount of the Overformula Advances and the Overformula Advances (as defined in
the Candie's Factoring Agreements) to Candie's shall not exceed $1,500,000 (on a
combined basis for both Client and ▇▇▇▇▇▇'s) at any time, and (iii) the existing
Guarantee and Waiver in favor of Congress executed by Mr. ▇▇▇▇ ▇▇▇▇, as amended
concurrently herewith, with respect to Client and ▇▇▇▇▇▇'s is in full force and
effect.
4. Section 2 of the Inventory Loan Supplement shall be and is hereby
amended by (a) deleting the words "Fifty Percent (50%) of finished goods which
would include shoes and/or garments" and (b) inserting in its stead "(i) fifty
(50%) percent of the Value of Eligible Inventory consisting of finished shoes
and garments purchased by Client not earlier than six (6) months before the
-2-
date of such calculation and (b) twenty-five (25%) percent of the Value of
Eligible Inventory consisting of finished shoes and garments purchased by Client
earlier than six (6) months but not earlier than twelve (12) months from the
date of such calculation.
5. Section 3(b) of the Inventory Loan Supplement shall be and is hereby
amended by deleting "$2,500,000 (combined with Candie's, Inc.)" and inserting in
its stead "$4,500,000 (minus the amount of the then outstanding loans made by
Congress to ▇▇▇▇▇▇'s pursuant to the Candie's Inventory Loan Supplement)".
6. The Factoring Contract shall be and is hereby amended as follows:
(a) Section 6(a) is amended, effective as of December 1, 1996 by deleting
"1-1/2% in excess of the prime commercial interest rate from time to
time announced by Philadelphia National Bank" and inserting in its
stead "three quarters of one (.75%) percent above the rate from time
to time announced by CoreStates Bank, N.A. or its successors, at its
office in Philadelphia, Pennsylvania, as its prime rate";
(b) Section 6(b) is amended, effective as of December 1, 1996, by adding,
at the end of the first sentence and immediately before the period, ";
provided, however, if the 'dilution' (as calculated in accordance with
Congress'customary practices), on a combined basis for both Client and
Candie's, is above eight (8%) percent in any consecutive three (3)
month period beginning on the first day of December, March, June or
September of any year (a "Prior Period"), then such percentage shall
be reduced in the immediately following consecutive three (3) month
period, after the end of the Prior Period, by two (2%) percent for
each one (1%) or part thereof of such 'dilution' in the immediately
preceding three (3) month period which is above eight (8%) percent";
(c) Section 6(b) is also amended, effective as of December 1, 1996, by
deleting "five (5) business days" in the sixth line thereof and
inserting in its stead "four (4) business days";
(d) Section 7 is amended, effective as of December 1, 1996, by (i)
deleting ".75% of One Percent (.75%)" in the first line thereof and
inserting in its stead "six tenths of one (.6%) percent" and (ii)
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deleting "$4.50" in the seventh line thereof and inserting in its
stead "$2.50";
(e) Section 13 is amended by (i) deleting "for one year from the date
hereof" in the first line thereof and inserting in its stead "until
November 30, 1998", and (ii) deleting "commencing sixty (60) days
prior to the end of such one (1) year period" and inserting in its
stead "before November 30, 1998 or any subsequent termination date",
and (iii) by adding the following at the end thereof, "provided that
(A) Client may elect to terminate this agreement before November 30,
1998 by paying to Congress an early termination fee of $540,000 minus
the amount of all factoring commissions previously paid to Congress
pursuant to this agreement and the Candie's Factoring Contract and (B)
concurrently with any termination of this agreement, all "Obligations"
(as such term is defined in this agreement and the Candie's Factoring
Contract) are fully and finally paid and/or indemnified to Congress
satisfaction and all of the other Factoring Agreements and the
Candie's Factoring Agreements are terminated;
(f) Section 14 is amended to include as an event of default (i) any event
of default under the Candie's Factoring Contract or any of the other
Factoring Agreements or (ii) if actual consolidated net profit of
Client and Candie's at the end of the first, second, third or fourth
fiscal quarters of any fiscal year, on a cumulative basis, (each a
"fiscal period") is less than eighty (80%) percent of the amount of
the "Consolidated Net Income" projected for such fiscal period in the
Projection unless the actual consolidated net worth of Client and
Candie's at the end of such fiscal period is in excess of eighty (80%)
percent of the amount of the consolidated total stockholders' equity"
projected in the Projection for the end of such fiscal period.
Except as hereinabove specifically provided, the Factoring Agreements are
ratified, confirmed and extended.
-4-
Please indicate your consent and agreement to the above by executing and
returning the enclosed copy of this letter to us.
CONGRESS ▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: S.V.P.
CONSENTED AND AGREED TO:
BRIGHT STAR FOOTWEAR, INC.
By: ▇▇▇▇ ▇▇▇▇
-------------------------------
Title: CEO
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