Contract
Exhibit 10.1
ELEVENTH AMENDMENT (this “Eleventh Amendment”), dated as of February 1, 2008, to the
REVOLVING CREDIT AGREEMENT dated as of January 25, 1994 (as amended and modified prior to the date
hereof, the “Credit Agreement”) between THE TALBOTS, INC. (the “Borrower”) and SUMITOMO MITSUI
BANKING CORPORATION (as successor to The Sakura Bank, Limited, New York Branch) (the “Bank”).
WITNESSETH:
WHEREAS, pursuant to Section 14(j)(i) of the Credit Agreement, the Borrower has requested that
the Bank extend the Revolving Credit Period for one additional year, so that such period would
expire on January 28, 2010; and
WHEREAS, the Borrower has requested that the Bank amend the Agreement by adding certain
financial covenants; and
WHEREAS, the Bank is willing to grant such extension and add such financial covenants,
conditioned on the Borrower’s agreement to amend the Credit Agreement provided herein;
NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
Unless otherwise indicated, capitalized terms used herein and defined in the Credit Agreement
shall have the respective meanings ascribed thereto in the Credit Agreement.
ARTICLE II
EXTENSION OF REVOLVING CREDIT PERIOD
EXTENSION OF REVOLVING CREDIT PERIOD
The Bank hereby notifies the Borrower of its acceptance of the Borrower’s request to extend
the expiration date of the Revolving Credit Period to January 28, 2010. In accordance with Section
14(j)(iii) of the Credit Agreement, the Revolving Credit Period is extended to such date.
ARTICLE III
AMENDMENTS
AMENDMENTS
3.01. | Definitions. Section 1(a) of the Agreement shall be amended by adding the following defined terms in their appropriate alphabetical positions: |
“Capital Stock” shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership, membership
or other equity interests of such Person, in each case including any warrants,
options or other rights entitling the holder thereof to purchase or acquire any of
the foregoing.
“Capitalized Lease Obligations” shall mean obligations for the payment of rent
for any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the lessee
and, for purposes hereof, the amount of any such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
“Consolidated EBITDA” shall mean, with respect to any Person for any period,
(i) the Consolidated Net Income of such Person and its Subsidiaries for such period,
plus without duplication, (ii) the sum of the following amounts of such Person and
its Subsidiaries for such period and to the extent deducted in determining
Consolidated Net Income of such Person for such period: (A) Consolidated Net
Interest Expense, (B) income tax expense, (C) depreciation expense, (D) amortization
expense, (E) any extraordinary, unusual or non-recurring non-cash expenses or losses
(including, whether or not otherwise includable as a separate item in the statement
of such Consolidated Net-Income for such period, non-cash losses on sales of assets
not in the ordinary course of business), excluding any such non-cash charges to the
extent that it represents an accrual or reserve for potential cash charges in any
future period and (F) any other non-cash charges in excess of $500,000.00, reducing
Consolidated Net Income (excluding any such non-cash charges to the extent that it
represents an accrual or reserve for potential cash charges in any future period).
“Consolidated EBITDAR” shall mean, with respect to any Person for any period,
the Consolidated EBITDA of such Person and its Subsidiaries for such period; plus
all amounts paid or payable by such Person and its Subsidiaries on Operating Lease
Obligations for such period as reflected in such Person’s financial statements.
“Consolidated Net Income” means, with respect to any Person for any period, the
net income (loss) of such Person and its Subsidiaries for such period, determined on
a consolidated basis and in accordance with GAAP, but excluding from the
determination of Consolidated Net Income (without duplication) (a) any extraordinary
gains or losses or gains or losses from Dispositions, (b) restructuring charges and
(c) effects of discontinued operations.
“Consolidated Net Interest Expense” shall mean, with respect to any Person for
any period, gross interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person), less (i)
the sum of interest income for such period, plus (ii) the upfront costs or fees for
such period associated with Hedging Agreements (to the extent not included in gross
interest expense), in each case, determined on a consolidated basis and in
accordance with GAAP.
“Consolidated Net Worth” shall mean, with respect to any Person at any time,
the sum of the following accounts (or their equivalents) set forth on a consolidated
balance sheet of such Person and its Subsidiaries prepared in
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accordance with GAAP: the par or stated value of all outstanding Capital Stock,
capital surplus and retained earnings (or less accumulated deficits).
“Disposition” shall mean any transaction, or series of related transactions,
pursuant to which any Person or any of its Subsidiaries sells, assigns, transfers or
otherwise disposes of any property or assets (whether now owned or hereafter
acquired) to any other Person, in each case, whether or not the consideration
therefor consists of cash, securities or other assets owned by the acquiring Person,
excluding any sales of Inventory in the ordinary course of business on ordinary
business terms.
“Fixed Charge Coverage Ratio” shall mean, with respect to any Person for any
period, the ratio of (i) Consolidated EBITDAR of such Person and its Subsidiaries
for such period to (ii) the sum of (A) Consolidated Net Interest Expense of such
Person and its Subsidiaries for such period, plus (B) all amounts paid or payable by
such Person and its Subsidiaries on Operating Lease Obligations having a scheduled
due date during such period as reflected in such Person’s financial statements.
“GAAP” shall mean generally accepted accounting principles in effect from time
to time in the United States, applied on a consistent basis, provided that (1) for
the purpose of the financial covenants in Section 10 and the definitions used
therein, “GAAP” shall mean generally accepted accounting principles in effect on the
date hereof and consistent with those used in the preparation of the financial
statements and (ii) to the extent “GAAP” is not applied on a consistent basis the
Borrower shall deliver to the Bank a certificate setting forth the items not
consistently applied and the reasons therefor and certifying that such
inconsistencies nonetheless conform with GAAP, provided, further, that if any change
in GAAP that affects in any respect the calculation of any financial covenant
contained in Section 10 occurs after the date of this Agreement, the Bank and the
Borrower shall negotiate in good faith amendments to the provisions of this
Agreement that relate to the calculation of such covenant with the intent of having
the respective positions of the Bank and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date of this
Agreement and, until any such amendments have been agreed upon, the financial
covenants in Section 10 shall be calculated as if no such change in GAAP has
occurred.
“Guaranty” shall mean the guaranty made by The Talbots Group, Limited
Partnership, a Massachusetts limited partnership, and each other entity that becomes
a party thereto, in favor of the Bank in support of the Borrower’s indebtedness
under the Agreement, including any amendments thereto and replacements thereof.
“Hedging Agreements” shall mean any interest rate, commodity or equity swap,
cap, floor or forward rate agreement or collar arrangements, interest rate future or
option contracts, currency swap agreements, currency future or option
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contracts and other similar agreements or arrangements designed to protect
against fluctuations in interest rates or currency, commodity or equity values, and
any confirmation executed in connection with any such agreement or arrangement.
“Indebtedness” shall mean with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) all obligations of such
Person for the deferred purchase price of assets or services acquired by such Person
which, in accordance with GAAP, would be shown on the liability side of the balance
sheet of such Person, (iii) all obligations of such Person under or evidenced by
bonds, debentures, notes or other similar instruments or upon which interest
payments are customarily made, (iv) all obligations and liabilities, contingent or
otherwise, of such Person in respect of letters of credit, acceptances and similar
facilities, including, without duplication, all drafts drawn thereunder, (v) all
obligations of the kind referred to in clauses (i) through (iv) and (vi) through
(viii) of this definition secured by any lien on any property owned by such Person
whether or not owing by such Person and even though such Person has not assumed or
become liable for payment thereof, (vi) all Capitalized Lease Obligations of such
Person, (vii) all obligations and liabilities of such Person created or arising
under any conditional sales or other title retention agreement with respect to
property used and/or acquired by such Person, even though the rights and remedies of
the lessor, seller and/or lender thereunder are limited to repossession or sale of
such property, or agreements to pay a specified purchase price for goods or services
whether or not delivered or accepted, i.e., take-or-pay and similar obligations,
(viii) solely for purposes of Section 11(a)(iii), contingent obligations of such
Person under ‘any Hedging Agreements, as calculated in accordance with. accepted
practice, (ix) all obligations referred to in clauses (i) through (viii) of this
definition of another Person (a) guaranteed directly or indirectly in any manner by
such Person or (b) secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any lien upon or in any
property owned by such Person; provided, however, that the term Indebtedness shall
not include (y) trade payables (including trade letters of credit issued for the
account of such Person in the ordinary course of its business, but excluding drafts
drawn thereunder or any reimbursement obligations in respect thereof) or accrued
expenses, in each case arising in the ordinary course of business and not more than
60 days delinquent or (z) gift cards and other customer liabilities arising in the
ordinary course of business of such Person. The Indebtedness of any Person shall
include the Indebtedness of any partnership of or joint venture in which such Person
is a general partner or joint venturer.
“Leverage Ratio” shall mean, on any date of determination, the ratio of (a)
Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters of the Borrower most recently ended on or prior to such
date.
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“Operating Lease Obligations” shall mean all obligations for the payment of
rent for any real or personal property under leases or agreements to lease, other
than Capitalized Lease Obligations.
“Subsidiary” shall mean, as to any Person, any corporation or other entity of
which Capital Stock or other ownership interests having (in the absence of
contingencies) ordinary voting power to elect at least a majority of the board of
directors (or persons performing similar functions) of such corporation or other
entity which is, at the time of determination, owned directly, or indirectly through
one or more intermediaries, by such Person.
“Total Indebtedness” shall mean, as of any date, the aggregate principal amount
of Indebtedness of the Borrower and its Subsidiaries outstanding as of such date,
computed on a consolidated basis in accordance with GAAP. For avoidance of doubt
“Total Indebtedness” shall exclude contingent obligations of the Borrower and its
Subsidiaries, so long as under GAAP such obligations should be excluded.
3.02. | Covenants. Section 10 of the Agreement shall be amended by adding the following subsections in their appropriate alphabetical positions: |
(f) Leverage Ratio. The Borrower will not permit the Leverage Ratio of
the Borrower and its Subsidiaries as of the last day of any period from the third
fiscal quarter 2007 through fourth fiscal quarter 2008 to exceed 4.00 to 1; or from
the first fiscal quarter 2009 through fourth fiscal quarter 2009 to exceed 3.50 to
1.
(g) Net Worth. The Borrower will not permit Consolidated Net Worth of
the Borrower and its Subsidiaries at any time to be less than $500,000,000.
(h) Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio of the Borrower and its Subsidiaries as of the last day
of any period from the third fiscal quarter 2007 through fourth fiscal quarter 2008
to be less than 1.25 to 1; or from the first fiscal quarter 2009 through the fourth
fiscal quarter 2009 to be less than 1.40 to 1.
3.03. Events of Default. Section 11 of the Agreement shall be amended by:
(i) | adding “; or” to the end of subsection (viii); and | ||
(ii) | adding the following subsection in its appropriate numerical position: |
(ix) any guarantee, letter of awareness or any other document issued in support
of the obligations of the Borrower to the Bank, including the Guarantee, shall
expire without renewal, be disclaimed or disavowed or, in the case of a guarantee,
shall cease to be the valid, binding and enforceable obligation of the guarantor
thereunder;
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ARTICLE IV
MISCELLANEOUS
MISCELLANEOUS
4.01. Effectiveness. Conditioned on the truth and accuracy of the representations made in
Section 4.02 hereof, this Eleventh Amendment shall become effective as of the date hereof when the
Bank shall have received:
(i) | a copy of this Eleventh Amendment executed by the parties hereto; and | ||
(ii) | the Guarantee, as defined in the Agreement, as amended by this Eleventh Amendment, together with evidence satisfactory to the Bank of the due authorization, execution and delivery of the Guarantee. |
4.02. Representations. The Borrower reaffirms the representations and warranties in the
Agreement as made as of the date hereof and confirms that both before and after giving effect to
this Eleventh Amendment there is and will be no Event of Default under the Agreement. The Borrower
makes the representations and warranties in the Agreement with respect to its execution and
delivery as to the execution and delivery of this Eleventh Amendment.
4.03. Expenses. The Borrower agrees to pay on demand all out-of-pocket costs and expenses
incurred by the Bank in connection with the administration, modification and amendment of the
Agreement, as amended by this Eleventh Amendment, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel to the Bank with respect thereto and with respect to
advising the Bank as to its rights and responsibilities thereunder, and all costs and expenses, if
any (including, without limitation, reasonable counsel fees and expenses), in connection with the
enforcement thereof (whether through negotiations, legal proceedings or otherwise).
4.04. Ratification. The Credit Agreement shall remain in full force and effect in its
original form when this Eleventh Amendment shall become effective except as the Credit Agreement is
specifically amended by the terms of this Eleventh Amendment.
4.05. Cross-references. Any reference to the Credit Agreement made in the Credit Agreement
or any related document by either party hereto shall henceforth be to the Credit Agreement as
amended by this Eleventh Amendment.
4.06. Execution in Counterparts. This Eleventh Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement.
4.07. Titles and Headings. The titles and headings of sections of this Eleventh Amendment
are intended for convenience only and shall not in any way affect the meaning or construction of
any provisions of this Eleventh Amendment.
4.08. Governing Law. This Eleventh Amendment shall be considered an agreement under the
laws in effect in the State of New York and for all purposes shall be construed in accordance with
such laws without giving effect to the conflict of laws provisions contained therein.
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IN WITNESS WHEREOF, the parties hereto have caused this Eleventh Amendment to be executed by
their respective officers thereunto duly authorized, as of the date first above written.
THE TALBOTS, INC. |
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By: | /s/ Xxxxxx X. Xxxxxx | |||
Name: | Xxxxxx X. Xxxxxx | |||
Title: | Senior Vice President, Finance, Chief Financial Officer and Treasurer |
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SUMITOMO MITSUI BANKING CORPORATION |
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By: | /s/ Xxxxxxxx Xxxxx | |||
Xxxxxxxx Xxxxx | ||||
Joint General Manager | ||||
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