-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KWSN2c9jvPyR0UWVyIcxhsoOHiOrBmkBFDZ3eMOGKjLlrfyCbb+U5qJDNoA0oHNP jTDzSVLvYGqQqkojsI034Q== 0000895345-98-000735.txt : 19981209 0000895345-98-000735.hdr.sgml : 19981209 ACCESSION NUMBER: 0000895345-98-000735 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981130 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALANT CORP CENTRAL INDEX KEY: 0000086346 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 133402444 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-06666 FILM NUMBER: 98765854 BUSINESS ADDRESS: STREET 1: 1114 AVE OF THE AMERICAS STREET 2: 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2122217500 MAIL ADDRESS: STREET 1: 1058 CLAUSSEN RDSTE 101 CITY: AUGUSTA STATE: GA ZIP: 30907 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 NOVEMBER 30, 1998 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SALANT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 0-2433 13-3402444 (STATE OR OTHER (COMMISSION (IRS EMPLOYER JURISDICTION OF FILE NUMBER) INDENTIFICATION NO.) INCORPORATION) 1114 Avenue of the Americas, New York, New York 10036 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (212) 221-7500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ITEM 5. OTHER EVENTS Salant Corporation ("Salant") has received and accepted an $85 million financing commitment from The CIT Group/Commercial Services, Inc. ("CIT"), Salant's existing working capital lender, that would be available to Salant upon completion of Salant's restructuring efforts. This new financing commitment supercedes the earlier post-restructuring commitment that Salant had received from CIT in June 1998. In connection with CIT's issuance of this new financing commitment, CIT agreed to extend financing to Salant under the existing credit agreement through December 31, 1998. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to (i) the press release, dated December 8, 1998, (ii) the letter agreement, dated as of November 30, 1998, by and between Salant and CIT and (iii) the letter agreement, dated December 7, 1998, by and between Salant and CIT, filed as Exhibits 99, 10.48 and 10.49, respectively, to this Current Report on Form 8-K, which items are incorporated by reference herein. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits. The following exhibits are filed as part of this report: Exhibit Number Description - ------ ----------- 99 Press Release, dated December 8, 1998. 10.48 Letter Agreement, dated as of November 30, 1998, by and between Salant Corporation and The CIT Group/Commercial Services, Inc. 10.49 Letter Agreement, dated December 7, 1998, by and between Salant Corporation and The CIT Group/Commercial Services, Inc. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SALANT CORPORATION Dated: December 8, 1998 By: /s/ Todd Kahn -------------------------- Executive Vice President and General Counsel EXHIBIT INDEX Exhibit Number Description - ------ ----------- 99 Press Release, dated December 8, 1998. 10.48 Letter Agreement, dated as of November 30, 1998, by and between Salant Corporation and The CIT Group/Commercial Services, Inc. 10.49 Letter Agreement, dated December 7, 1998, by and between Salant Corporation and The CIT Group/Commercial Services, Inc. EX-99 2 FOR IMMEDIATE RELEASE --------------------- CONTACT: Kekst and Company Wendi Kopsick (212) 521-4867 James Fingeroth (212) 521-4819 SALANT CORPORATION RECEIVES REVISED FINANCING COMMITMENT FROM CIT AND EXTENSION OF EXISTING CREDIT FACILITY New York, NY, December 8, 1998 -- Salant Corporation (NYSE: SLT) today announced that it has received and accepted an $85 million financing commitment from The CIT Group/Commercial Services, Inc., Salant's existing working capital lender, that would be available to Salant upon completion of Salant's restructuring efforts. This new financing commitment supercedes the earlier post-restructuring commitment that Salant had received from CIT in June 1998. The extension of the existing CIT facility allows Salant to continue to explore its restructuring options with Magten Asset Management Corp., the beneficial owner of, or the representative of the beneficial owners of, approximately 70% of the aggregate principal amount of the Senior Secured Notes, and Apollo Apparel Partners, L.P., the beneficial owner of approximately 40.1% of Salant's issued and outstanding common stock. The CIT extension agreement also includes an agreement by CIT to continue to forbear from exercising any of its rights by virtue of the non-payment of interest under Salant's Senior Secured Notes. In connection with CIT's issuance of this new financing commitment, CIT agreed to extend financing to Salant under the existing credit agreement through December 31, 1998. Under the terms of the new CIT financing commitment, the $85 million credit facility will be used to fund Salant's working capital requirements through the third anniversary of the consummation of Salant's restructuring and will replace Salant's existing secured credit facility with CIT upon completion of a restructuring of Salant's existing capital structure acceptable to CIT. The closing of the new credit facility with CIT is subject to the satisfaction of a number of conditions. As previously announced, Salant and its major note and equity holders have decided to review their continued pursuit of the restructuring agreement announced in March 1998. This decision reflects, among other things, the significant additional time required in order to consummate the restructuring contemplated by that March 1998 agreement and the occurrence of certain events (including, but not limited to, a reduction in the value of certain of Salant's business units) that have caused various assumptions upon which the March restructuring agreement was premised to no longer be true. Salant is a diversified apparel company, which markets a broad line of men's apparel under well-known brand names, including Perry Ellis, Manhattan and John Henry. Salant also markets children's sleepwear, underwear and sportswear. Salant's products are sold in department and specialty stores, national chains and mass volume retailers throughout the United States. EX-10.48 3 THE CIT GROUP/COMMERCIAL SERVICES, INC. 1211 Avenue of the Americas New York, New York 10036 As of November 30, 1998 Salant Corporation 1114 Avenue of the Americas New York, New York 10036 Re: The CIT Group/Commercial Services, Inc. with Salant Corporation --------------------------------------- Gentlemen: Reference is made to the Revolving Credit, Factoring and Security Agreement between The CIT Group/Commercial Services, Inc. ("Lender") and Salant Corporation ("Borrower") dated September 20, 1993, as amended (the "Credit Agreement"). Capitalized terms used and not otherwise defined herein shall have their respective meanings as set forth in the Credit Agreement. Pursuant to the Thirteenth Amendment to the Credit Agreement (a) Borrower requested Lender (i) to forbear through November 30, 1998 from exercising any of its rights and remedies arising from certain Events of Default specified therein and (ii) to extend the term of the Credit Agreement through November 30, 1998 and (b) Lender agreed to forbear and to extend the term of the Credit Agreement through November 30, 1998 upon the terms and conditions set forth therein. Borrower has requested Lender (a) to continue to forbear through December 31, 1998 from exercising any of its rights and remedies arising from the Payment Default and the Additional Payment Default, (b) to extend the term of the Credit Agreement through December 31, 1998, (c) in the event Borrower files a case under chapter 11 of the Bankruptcy Code on or before December 31, 1998, to provide Borrower with debtor-in-possession financing on substantially the terms and conditions set forth in the Debtor-in-Possession Revolving Credit Facility Term Sheet dated November 30, 1998 (the "DIP Facility Term Sheet"), a copy of which is attached hereto and (d) provided that Borrower emerges from chapter 11 not later than June 30, 1999, to thereafter provide Borrower with financing substantially on the terms and conditions set forth in the Chapter 11 Exit Financing - Syndicated Revolving Credit Facility Term Sheet dated November 30, 1998 (the "Chapter 11 Exit Financing Term Sheet"), a copy of which is attached hereto. In response to Borrower's requests as set forth above, it is hereby agreed as follows: 1. Lender shall, subject to the terms and conditions set forth below, (a) continue to forbear from exercising any of its rights and remedies arising from the Payment Default and the Additional Payment Default and (b) continue making loans, advances and other financial accommodations to Borrower on and subject to the terms and conditions set forth in the Credit Agreement, as amended below. Such forbearance shall terminate on December 31, 1998, or earlier upon the happening of: (i) the occurrence of any Event of Default other than the Payment Default, Additional Default or any Event of Default arising solely by reason of the commencement by Borrower of a case under chapter 11 of the Bankruptcy Code, provided, that, a Financing Order as described in the DIP Facility Term Sheet has been entered and has not been reversed, modified, amended or stayed and the time to appeal the same has expired, unless otherwise agreed by Lender; or (ii) the exercise of any right or remedy with respect to the Collateral by any holder of any New Public Secured Note or by the Trustee under the New Public Secured Notes Indenture; or (iii) the payment of any interest on the New Public Secured Notes in respect of which the Payment Default and Additional Payment Default arose or otherwise; or (iv) the occurrence of an Agreement Termination Event under and as defined in the letter agreement dated March 2, 1998, as amended (the "Magten Letter Agreement") among Borrower, Apollo Apparel Partners, L.P. ("Apollo") and Magten Asset Management Corp. ("Magten") attached to the Twelfth Amendment as part of Exhibit A thereto, other than the occurrence of an Agreement Termination Event under Section 4(g) of the Magten Letter Agreement. 2. Section 10.1(a) of the Credit Agreement is amended and restated in its entirety to read as follows: "10.1 Term (a) This Agreement and the other Financing Agreements shall become effective as of the date hereof and shall continue in full force and effect for a term ending on December 31, 1998, unless sooner terminated pursuant to the terms hereof." 3. Provided that Borrower files a case under chapter 11 of the Bankruptcy Code on or before December 31, 1998, Lender agrees to provide Borrower with Debtor-in-Possession financing on substantially the terms and conditions set forth in the DIP Facility Term Sheet, which terms and conditions are acceptable to Borrower and which terms and conditions shall be incorporated in the Credit Agreement upon entry of the Financing Order described in the DIP Facility Term Sheet. 4. Lender agrees to provide Borrower no later than December 4, 1998 with a commitment letter for financing after Borrower exits from chapter 11 on substantially the same terms and conditions set forth in the chapter 11 Exit Financing Term Sheet and Borrower agrees to accept and return such commitment letter to Lender together with the commitment fee specified therein in immediately available funds within one business day of receipt thereof. 5. In consideration of the further forbearance by Lender with respect to the Payment Default and the Additional Payment Default and the extension of the term of the Credit Agreement as set forth herein, Borrower shall pay Lender a forbearance fee in the amount of $200,000, which shall be fully earned upon execution of this Agreement and shall be paid to Lender on or before December 1, 1998. Such fee shall not be refundable in whole or part for any reason and may be charged, at Lender's sole option, to any account of Borrower maintained by Lender. 6. If Lender is repaid in full, other than as a result of being acquired or a capital infusion, prior to the commencement of the Debtor-in-Possession financing arrangements between Lender and Debtor, then Borrower shall thereupon pay to Lender an early termination fee in the amount of $250,000 which Lender may, at its sole option, charge to any account of Borrower maintained with Lender. 7. This Agreement shall become effective as of November 30, 1998 provided that Lender shall have received all of the following no later than December 2, 1998: (a) This Agreement duly executed and delivered by the Borrower and the Guarantors. (b) The agreement of Borrower, Magten and Apollo the effect of which is to provide that Magten and Apollo will forbear through December 31, 1998. 8. This Agreement shall not constitute a waiver or amendment of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as a consent to any further or future action on the part of the Borrower that would require consent of Lender. Except as expressly amended herein, the provisions of the Credit Agreement are and shall remain in full force and effect. Nothing herein shall constitute a waiver of the Payment Default or the Additional Payment Default or limit, impair or affect any of Lender's rights or remedies with respect thereto, subject however, to the terms of the forbearance provided for herein, all of which Borrower acknowledges and agrees have been heretofore and are hereby further expressly reserved by Lender. 9. This Agreement may be executed in counterparts and all such counterparts taken together shall be deemed to constitute one and the same instrument. 10. This Agreement shall be governed by and construed and interpreted in accordance with, the laws of the State of New York. 11. By execution of this Agreement where indicated below, each of the Guarantors acknowledges and agrees to all of the foregoing. Please indicate your agreement to the foregoing by executing this letter where indicated below and return it to us. Very truly yours. THE CIT GROUP/COMMERCIAL SERVICES, INC. By: /s/ Kenneth Wendler ------------------------------------ Title: Vice President --------------------------------- AGREED: SALANT CORPORATION By: /s/ Todd Kahn ------------------------------ Title: Executive Vice President & General Counsel --------------------------- ACKNOWLEDGED AND AGREED: CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC. By: /s/ Todd Kahn By: /s/ Todd Kahn ------------------------------ ------------------------------ Title: Executive Vice President Title: Executive Vice President & General Counsel & General Counsel -------------------------- --------------------------- 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 -------------------------- TERM SHEET November 30, 1998 SALANT CORPORATION DEBTOR-IN-POSSESSION REVOLVING CREDIT FACILITY Borrower: Salant Corporation, as Debtor and Debtor-in- Possession. Guarantors: All subsidiaries. Lender: The CIT Group/Commercial Services, Inc. Amount of Facility: $85,000,000 Revolving Credit Facility. Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible accounts plus (ii) 60% of eligible Perry Ellis finished goods inventory, plus (iii)(x) for the first 120 days of the initial 150 day term of the facility, 55% of eligible finished goods inventory of non-Perry Ellis business units, and (y) following such 120 day period, 50% of the eligible finished goods inventory of non-Perry Ellis business units, not to exceed $25,000,000 in the aggregate at any time outstanding in respect of all inventory; and (b) $85,000,000. Eligibility with respect to finished goods inventory shall be mutually agreed upon between Borrower and Lender. Letter of Credit Subfacility: $30,000,000 Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender in its sole discretion may make loans to Borrower in excess of applicable lending formulae but within the $85,000,000 Revolving Credit Facility and all such loans shall be repayable on demand. Reserve for Professional FeeCarve-Out: A minimum of $2,000,000 to be reserved for carve-out of professional fees. Factoring: Effective January 1, 1999, only for accounts of non-Perry Ellis business units on a non-notification basis for the first 150 days and on a notification basis thereafter. Interest Rate: Reference Rate + 1.00% (No LIBOR option). Letter of Credit Fees: (a) Documentary L/Cs. 1/8 of 1.0% on issuance; 1/8 of 1.0% on negotiation. (b) Standby L/Cs: 1% per annum plus bank charges. Factoring Commission: .75% Collection Days: Two days, calculated at a rate equal to Reference Rate + 1.00%. Forbearance Fee: $200,000 payable on December 1, 1998. Collateral Management Fee: $4,167 per month. Field Exam Fee: $750 per day, plus out-of-pocket expenses. Term: Initial term of 150 days, subject to renewal by Lender in its discretion for an additional 90 day period and thereafter for an additional 120 day period. Lender shall have the right to terminate the DIP Facility if Borrower fails to exit from Chapter 11 at the end of any term of the DIP Facility. DIP Facility Continuation Fee: If Borrower does not exit from Chapter 11 by the end of the initial term and Lender elects to renew the DIP Facility as described above, then $250,000 shall be payable to continue the DIP Facility for days 151-240 and the interest rate shall be increased to Reference Rate + 1.25%. Additional DIP Facility Continuation Fee: If Borrower does not exit from Chapter 11 at the end of the 151-240 day term and Lender elects to renew the DIP Facility as described above, then $250,000 shall be payable to continue the DIP Facility for days 241-360 and the interest rate shall be increased to Reference Rate + 1.75%. Early Termination Fee: $250,000 if Lender is paid out in full during the DIP Facility as a result of Borrower refinancing with another lender. Liquidation of Inventory: In connection with any liquidation of the inventory at the nonPerry Ellis business units not being conducted in connection with a sale of any such business unit as a going concern, the party who liquidates the inventory of the non-Perry Ellis business units shall be satisfactory to Lender. Remittance of Net Proceeds from Sale of Non-Perry Ellis Units: All net proceeds of sale of non-Perry Ellis business units shall, subject to any existing prior liens, be remitted to Lender for application to Borrower's obligations. Security: All loans and other financial accommodations, whether made before or during Borrower's Chapter 11 case, shall, subject only to any existing prior liens, be secured by a first priority lien on and security interest in all assets of Borrower and its subsidiaries, whether now owned or hereafter acquired, with super-priority administrative claim status over any and all administrative expenses in Borrower's Chapter 11 case, subject only to a carve-out for allowed professional fees as set forth above. Conditions Precedent: Conditions precedent customary for this type of financing, including, but not limited to, the following: (a) Financing Orders satisfactory to Lender approving on an interim and final basis the DIP loan documents and transactions contemplated thereunder, including the grant of first priority liens, administrative claim super-priority and cross-collateralization; (b) Legal documentation satisfactory to Lender; (c) The non-occurrence of any Event of Default under the CIT Credit Agreement (including, without limitation, any Event of Default arising from the breach of Section 7.15 Compliance with ERISA of the CIT Credit Agreement) other than Events of Default in existence on the date hereof of which Lender has knowledge and other than any Event of Default arising solely by reason of the commencement by Borrower of a case under chapter 11 of the Bankruptcy Code; (d) Any other information (financial or otherwise) reasonably requested by Lender; and Expenses: Borrower shall be liable for all costs and expenses of Lender incurred in connection with the DIP Facility, including, without limitation, Lender's attorney's fees and expenses, whether or not the DIP Facility closes. TERM SHEET November 30, 1998 SALANT CORPORATION CHAPTER 11 EXIT FINANCING - SYNDICATED REVOLVING CREDIT FACILITY Borrower: Salant Corporation. Guarantors: All subsidiaries. Lender: The CIT Group/Commercial Services, Inc. Syndication: CIT shall have the right to syndicate the facility. Agent: CIT. Amount of Facility: $85,000,000 Syndicated Revolving Credit Facility. Borrowing Base: The lesser of (a) the sum of (i) 85% of eligible accounts, plus (ii) 60% of eligible finished goods inventory, not to exceed $25,000,000 at any time outstanding; and (b) $85,000,000. Eligibility with respect to finished goods inventory shall be mutually agreed upon between Borrower and Lender. Letter of Credit Subfacility: $30,000,000. (Reserve against the facility will be taken with respect to (i) documentary letters of credit opened for the purpose of acquiring eligible inventory, to the extent of (A) 100% of the undrawn amount of such outstanding letters of credit opened for the purpose of acquiring eligible inventory minus (B) the percentage equal to the then ----- current percentage rate of advance against eligible inventory and (ii) with respect to all other letters of credit, to the extent of 100% of the undrawn amount of such letters of credit.) Seasonal Overadvances: Subject to Borrower's cash flow needs, Lender may in Its sole discretion make loans to Borrower in excess of the applicable lending formulae but within the 85,000,000 Syndicated Revolving Credit Facility and all such loans shall be repayable on demand. Interest Rate: Reference Rate + 0.50% (No LIBOR Option); provided, however, that if Borrower meets certain mutually agreed upon financial tests, including, but not limited to, liquidity and debt to equity tests, based upon Borrower's opening financial statements, then upon satisfaction of such financial tests the interest rate shall be Reference Rate + 0.25% or LIBOR + 2.25%. Default Rate: 1.50% over Reference Rate plus applicable margin. Letter of Credit Fees: (a) Documentary L/Cs: 1/8 of 1.0% on issuance; 1/8 of 1.0% on negotiation. (b) Standby L/Cs: 1.0% per annum plus bank charges. Collections: Collections shall be credited to Borrower's loan account upon Lender's receipt of a wire transfer of federal funds into Lender's payment account designated for such purpose. Commitment Fee: $325,000 payable upon Borrower's acceptance of Lender's commitment to provide the facility. Unused Line Fee: .25% Agency Fee: $100,000 for each of years 2 and 3 only. Collateral Management Fee: $8,333 per month. Field Exam Fee: $750 per day plus out of pocket expenses Term: Three years No Factoring: Revolving Credit Agreement will not provide for any factoring of accounts through CIT or otherwise. Security: First and only lien on all assets of Borrower and its subsidiaries, subject to customary permitted encumbrances. Conditions Precedent: Conditions precedent for this type of financing, including, but not limited to, the following: (a) CIT's satisfaction in all respects with the structure and terms, and all financial, accounting and tax aspects of Borrower's Chapter 11 plan (the "Plan") and the transactions contemplated thereby. (b) CIT's satisfaction in all respects with the capitalization and capital structure of Borrower and its subsidiaries following consummation of the Plan. (c) CIT shall be satisfied with the existing and projected liquidity of Borrower and its subsidiaries and their ability to fund their ongoing working capital and other cash requirements. (d) Resolution satisfactory to CIT of any failure by Borrower or any of its subsidiaries to comply with any law or regulation to which any of their respective pension plans are subject. (e) Bankruptcy Court shall have entered orders (the "Orders") satisfactory in substance to Lenders approving confirmation of the Plan and the definitive credit agreement for the Exit Facility and all related documentation contemplated thereunder, and there shall not be in effect any appeal or stay of the Orders. (f) Borrowers' debt restructuring shall have been completed and shall be satisfactory to CIT. (g) CIT shall have completed its due diligence. (h) Legal documentation satisfactory to CIT which shall include financial covenants, including, but not limited to, minimum equity, maximum loss, interest coverage, debt-to-equity and capital expenditure limitations. (i) Approval of Exit Facility by CIT's Executive Credit Committee. (j) Closing of Exit Facility no later than June 30, 1999. Expenses: Borrower shall be liable for all costs and expenses of Lenders incurred in connection with the Exit Facility, including, without limitation, Lenders' attorneys fees and expenses, whether or not the Exit Facility closes. EX-10.49 4 THE CIT GROUP/COMMERCIAL SERVICES, INC. 1211 Avenue of the Americas New York, New York 10036 December 7, 1998 Salant Corporation 1114 Avenue of the Americas New York, New York 10036 Gentlemen: You have requested that in the event Salant Corporation (the "Company") files a case under Chapter 11 of the United States Bankruptcy Code (the "Chapter 11 Case") that we provide the Company with post-confirmation financing. Based upon the information you have furnished to us, The CIT Group/Commercial Services, Inc. ("CIT") is pleased to confirm its commitment to provide the Company with a post-confirmation secured revolving credit facility of up to $85,000,000 (the "Credit Facility"), subject to the terms and conditions set forth below. We contemplate that the Credit Facility will be structured as follows: 1. REVOLVING CREDIT FACILITY ------------------------- (a) Amount: A revolving line of credit for loans and letters of credit in a maximum principal amount equal to the lesser of (i) $85,000,000 (the "Maximum Credit") and (ii) the sum of (A) eighty-five percent (85%) of the net amount of eligible accounts and (B) the lesser of (x) sixty percent (60%) of the value (at the lower of cost or market determined on a first-in-first-out basis) of eligible finished goods inventory, and (y) $25,000,000. Standards of eligibility for accounts shall be the same as provided for in the Revolving Credit, Factoring and Security Agreement between CIT and the Company dated September 20, 1993, as amended (the "Existing Credit Agreement"), except as may be modified by agreement between the Company and CIT. Standards of eligibility for finished goods inventory shall be mutually agreed upon between the Company and CIT. CIT may establish reserves against loan availability under the lending formulas set forth above as shall be mutually agreed upon between the Company and CIT. (b) Seasonal Overadvances: Subject to the Company's cash flow needs, CIT may in its sole discretion make loans to the Company in excess of the lending formulas set forth above not to exceed the Maximum Credit and repayable on demand. (c) Letter of Credit Subfacility: (i) Amount: Within the Credit Facility, letters of credit ("L/Cs") arranged through CIT up to an aggregate undrawn amount at any time outstanding of $30,000,000. (ii) L/C Reserve Availability: A reserve against the line of credit under the Credit Facility will be required to the extent of (A) one hundred percent (100%) of the undrawn amount of outstanding letters of credit opened for the purpose of acquiring eligible finished goods inventory minus (B) the percentage equal to the then current percentage rate of advance against eligible finished goods inventory. All other letters of credit opened by CIT will require a reserve against the line of credit under the Credit Facility of one hundred percent (100%) of the undrawn amount of such letters of credit; (iii) Handling of Documents Under Letters of Credit: The Company will not be required to consign to CIT any of the documents relating to inventory purchased under letters of credit arranged through CIT under the Credit Facility ("L/C Documents"), provided, however, that upon the occurrence and during the continuance of (i) an event of default under the Credit Facility or (ii) any act, event or condition which with notice or passage of time or both would constitute an event of default, then, and in any such event, without notice in the case of an event of default and upon written notice from CIT in any other case, all L/C Documents shall be consigned to CIT. (d) No Factoring: The Credit Facility will not provide for any factoring of accounts through CIT or otherwise. 2. INTEREST RATE ------------- Reference Rate + 0.50%; provided, however, that if the Company satisfies certain financial tests to be mutually agreed upon, including, but not limited to liquidity and debt to equity tests, based upon the Company's opening financial statements after exiting from the Chapter 11 Case, then, upon satisfying such financial tests the interest rate shall be Reference Rate + .025% or LIBOR + 2.25%. The rate of interest after the occurrence of an event of default under the Credit Facility shall be 1.50% over the Reference Rate plus the then current margin. The Reference Rate is the rate of interest publicly announced by The Chase Manhattan Bank, New York, New York from time to time as its prime rate. Such prime rate is not intended by Chase to be the lowest rate of interest charged by Chase to its commercial borrowers. LIBOR will be available for 1, 2 or 3 month periods and will be based upon CIT's customary term and procedures applicable to interest on loans payable by reference to LIBOR. All interest rates are per annum. All interest shall be payable monthly in arrears calculated on the basis of a 360-day year. Collections shall be credited to the loan account of the Company upon CIT's receipt of a wire transfer of federal funds into CIT's payment account designated for such purpose. 3. FEES ---- All fees set forth below are in addition to interest and other charges provided for herein and may, at our option, be charged directly to any loan account of the Company maintained with us: (a) Commitment Fee: We shall receive a commitment fee in the amount of $325,000 for our commitment herein to provide Salant with the Credit Facility outlined herein, earned and payable in full upon execution and return by the Company of this letter to us. (b) Unused Line Fee: We shall receive an unused line fee of .25% per annum on the average monthly unused portion of the Credit Facility, payable monthly in arrears. (c) Agency Fee: We shall receive an agency fee of $100,000 payable on each of the first and second anniversary dates of the closing date of the Credit Facility for acting as agent and administering the Credit Facility for the Company and for each of the lenders who purchase a portion of, or a participation in, the Credit Facility. (d) Collateral Management Fee: We shall receive a collateral management fee of $8,333 for each month or part thereof during the term of the Credit Facility for monitoring the collateral, payable monthly in advance with the first such fee payable at closing. (e) Letter of Credit Fees: (i) Documentary L/Cs: 1/8 of 1% on issuance; 1/8 of 1% an negotiation. (ii) Standby L/Cs: 1,0% per annum plus bank charges. (iii) All other L/C and related fees shall be in the amount set forth on Schedule 3.2(c) of the Existing Credit Agreement. 4. LEDGER DEBT ----------- The obligations of the Company to CIT under the Credit Agreement shall include, without limitation, all indebtedness of the Company to CIT on accounts arising from the sale of goods or services purchased by Salant from any concern whose accounts are factored or financed by CIT. 5. GUARANTEES ---------- All obligations of the Company to CIT under the Credit Facility shall be guaranteed by each of the Company's subsidiaries. 6. COLLATERAL ---------- First and only security interests in and liens upon all present and future assets of the Company and each of its subsidiaries (subject to customary permitted encumbrances), including, without limitation, all accounts, contract rights, general intangibles (including, without limitation, all trademarks, patents, licenses of trademarks or patents, other intellectual property, tax refunds and chooses in action), chattel paper, documents, instruments, stock in subsidiaries, inventory, machinery, equipment, fixtures and real property, and all products and proceeds of the foregoing. 7. USE OF PROCEEDS --------------- All of the loans and other credit accommodations provided to the Company under the Credit Facility shall be used exclusively for the working capital of the Company provided, that the proceeds of the initial loans under the Credit Facility may be used for funding payments under the Company's Chapter 11 Plan (the "Plan") and the transactions contemplated thereby and hereby and for the costs, expenses and fees incurred in connection with the Credit Facility. 8. CONTRACT TERM ------------- The Credit Facility shall have an initial term commencing on the closing date and continuing through and including three (3) years thereafter (the "Renewal Date") and shall be automatically renewed from year to year thereafter unless terminated by either party upon at least sixty (60) days written notice prior to the Renewal Date or any anniversary of the Renewal Date. 9. EXPENSES -------- (a) The Company agrees to pay all reasonable legal and closing costs and expenses, including attorneys' fees, appraisers' fees, filing fees, search charges, recording taxes and field examination charges and expenses (including a charge of $750 per person per day of CIT's examiners in the field and in the office, plus travel, hotel and all other out-of-pocket expenses), in each case whether or not this transaction closes. All such expenses shall be paid to us on demand and may be charged to any loan account of the Company with us. We shall have the right to offset such expenses against any fees or sums received from or on behalf of the Company. (b) If this transaction closes, the Company further agrees to pay all of CIT's out-of-pocket expenses and customary administrative charges incurred from time to time during the course of our financing arrangements. (c) This paragraph 9 shall survive the expiration or termination of this letter. 10. OTHER INFORMATION AND CONDITIONS -------------------------------- Compliance with all terms and requirements of this letter are conditions precedent to the making of loans and providing other credit accommodations under the Credit Facility. In addition, the extension of the Credit Facility is subject to the satisfaction, in a manner satisfactory to CIT, of conditions precedent usual for this type of financing, including, but not limited to, the following terms and conditions: (a) The structure and terms of the Plan and all financial, accounting and tax aspects of the Plan and the transactions contemplated thereby shall in all respects be satisfactory to CIT, (b) The Company's debt restructuring shall have been completed and shall be satisfactory to CIT. (c) The capitalization and capital structure of the Company shall in all respects be satisfactory to CIT. (d) The existing and projected liquidity of the Company and its subsidiaries and their ability to fund their ongoing working capital and other cash requirements and to consummate the Plan shall be satisfactory to CIT. (e) The Company shall continue to furnish, or cause to be furnished, to us all financial information, projections, budgets, business plans, cash flows and such other information as we shall reasonably request from time to time. We shall have received current perpetual inventory records and/or roll forwards of inventory through the date of closing, together with supporting documentation and other documents and information that will enable us to accurately identify and verify eligible collateral at or immediately prior to closing in a manner satisfactory to us and including documentation with respect to inventory in transit, goods in bonded warehouses or at other third party locations. (f) Satisfactory legal review of the terms of the Credit Facility and its structure by our counsel, execution of loan documents, delivery of opinions of counsel and other agreements, documents and instruments as may be necessary or desirable to effectuate the financing arrangements described herein as may be determined by us and our counsel. (i) Such loan documents will include, among other documents, an Amended and Restated Revolving Credit and Security Agreement between the Company and CIT, or, at CIT's option, between the Company and CIT, as agent, for itself and any other lenders party thereto, the guarantee of the obligations of the Company under the Credit Facility by each of the Company's subsidiaries, security agreements, UCC financing statements and mortgage modification agreements. The opinions of counsel will include, among other things, the opinion that the financing arrangements described herein do not violate any of the terms of existing agreements of the Company or any of its subsidiaries with any other parry, that the financing agreements create valid and enforceable security interests in all of the property of the Company and each of its subsidiaries, that the financing agreements are valid, enforceable and binding and that the Company and each of its subsidiaries have been duly incorporated and are in good standing under the laws of their respective states or jurisdictions of incorporation and each state or jurisdiction where the Company and each of its subsidiaries transact business, and such other matters, as we may reasonably request. (ii) Such loan documents will contain such provisions, representations, warranties, covenants, conditions precedent, events of default and remedies, all as customarily required by CIT for transactions of this type and as may be deemed appropriate in view of the nature of the business of the Company, including, among other things: financial covenants ("Maintenance Covenants") as to minimum tangible net worth, maximum net loss, minimum interest coverage ratio and capital expenditure limitations; prohibitions or limitations on the payment of management fees or other fees or payments due to affiliates; prohibitions or limitations on loans, investments and guarantees in, to or in favor of affiliates and any third parties; prohibitions or limitations on the payments of dividends and redemptions and other upstreaming or cross-streaming of funds; limitations on indebtedness and liens, compliance with ERISA; cross-defaults based on defaults under any material indebtedness to others or under material leases, material licenses or other material agreements, or for generally not paying obligations to others. Except for the Maintenance Covenants referred to above, the Credit Facility shall have no other Maintenance Covenants. (g) Termination of the liens and security interests held by the holders of the Company's Senior Notes and the delivery to us of UCC-3 termination statements and such other release documents as we may request, in form and substance reasonably satisfactory to us. (h) We shall have received, in form and substance reasonably satisfactory to us, all consents, waivers, acknowledgments and other agreements from third persons which we may deem necessary in order to permit, protect and perfect our security interests in and liens upon the collateral, including, without limitation, (i) waivers by lessors, owners and/or mortgagees of any security interests, liens or other claims by such persons in and to assets of the Company and each of its subsidiaries, and agreements by such persons permitting us access to the premises to exercise our rights and remedies and otherwise deal with the assets of the Company and its subsidiaries and (ii) acknowledgments by processors, consignees and warehousemen at any time in possession of any of assets of the Company or its subsidiaries of our security interests and liens, waivers by such persons of any security interests, liens or other claims by such persons in and to assets of the Company and its subsidiaries, and agreements by such persons to follow our directions with respect to the release and delivery of any assets of the Company and its subsidiaries at any time in their possession and (iii) agreements from licensors of trademarks and other intellectual property to the Company or its subsidiaries, including, but not limited to, Perry Ellis International, Inc., permitting us to use, in a manner and for a period satisfactory to us, the marks, logos or other intellectual property licensed by such parties to the Company or its subsidiaries to exercise our rights and remedies and otherwise deal with the assets of the Company and its subsidiaries. (i) We shall have received, in form and substance reasonably satisfactory to us, guarantees, duly authorized, executed and delivered by each of Clantexport Inc., Denton Mills. Inc., Vera Licensing, Inc., Frost Bros. Enterprises, Inc., SLT Sourcing, Inc., Salant Canada Inc., J.J. Farmer Clothing, Inc. and any other subsidiaries of the Company in our favor absolutely and unconditionally guaranteeing all present and future obligations of the Company to us under the Credit Facility, as well as such security agreements and UCC financing statements as may be necessary or desirable to effectuate the grant by such companies in our favor of first and only security interests in and liens upon all of their respective present and future assets, subject to customary permitted encumbrances. (j) We shall have received, at the expense of the Company, current environmental audits of its plants and real estate conducted by an independent environmental engineering firm reasonably acceptable to us, and in form, scope and methodology satisfactory to us, confirming that (i) the Company is in compliance with all significant applicable environmental use laws, regulations, codes and ordinances in all material respects and (ii) there is no material potential or actual liability of the Company for any remedial action with respect to any environmental condition or any other significant environmental problems. (k) We shall have received, in form and substance reasonably satisfactory to us, evidence of insurance coverage, including (i) mortgagee's and lender's loss payee endorsements in our favor as to casualty and business interruption insurance and containing all endorsements, assurances of affirmative coverage requested by us for protection of our interests and (ii) mortgagee's title insurance by a company and agent acceptable to us (A) insuring the priority, amount and sufficiency of the mortgage, deed of trust or deed to secure debt in our favor on each parcel of real estate included in the collateral, (B) insuring against matters that would be disclosed by surveys and (C) containing those endorsements, assurances or affirmative coverage requested by us for protection of our interests. (1) CIT may from time to time, in its sole discretion, assign, or sell participations in, the Credit Facility or any portion thereof to another lender or lenders; (m) The Company shall have established a blocked account or lockbox for its collections and the transfer there of to us, which shall be in form and substance reasonably acceptable to us. (n) All Uniform Commercial Code financing statements relating to the collateral shall have been duly filed and recorded and we shall have received UCC search results from the various jurisdictions showing the financing statements in our favor filed of record prior to the closing. (o) We may conduct additional or update field examinations, at the Company's expense, prior to extending the Credit Facility, the results of which must be satisfactory to us. Without limiting the generality of the foregoing, (i) except for the Payment Default and the Additional Payment Default (as defined in the Thirteenth Amendment to the Existing Credit Agreement), any other payment default in respect of scheduled interest or principal payments under the New Public Secured Notes (as defined in the Existing Credit Agreement) and the filing of the Chapter 11 Case or any Event of Default arising solely by reason of the commencement of the Chapter 11 Case, no act, condition or event which would constitute an Event of Default under the Existing Credit Agreement or the financing agreements to be executed between us shall exist as of the closing, (ii) no material investigation, litigation, or other proceedings other than the Chapter 11 Case shall be pending or threatened against the Company or any affiliate as of the closing, and (iii) the collateral shall not have materially declined in value from the values set forth in the last appraisals or field examinations previously done furnished to us prior to closing. (p) Any failure by the Company or any of its subsidiaries to comply with any law or regulation to which any of their respective pension plans are subject shall have been resolved in a manner satisfactory to CIT. (q) No material adverse change in the business, operations, profits or prospects of the Company shall have occurred since the date of our last field examination prior to closing. (r) This transaction and the events contemplated herein must close by June 30, 1999. After June 30, 1999 our willingness to proceed shall require credit reapproval by our Executive Credit Committee even if we continue to work on the transaction. Such reapproval, if obtained, may result in different terms and conditions, or a determination not to consummate the transaction. (s) Loan availability at closing based upon the above lending formulas shall be in an amount adequate to fund the Plan and the Company's cash requirements in connection with closing. (t) The Bankruptcy Court shall have entered one or more final non-appealable orders satisfactory in substance to CIT approving confirmation of the Plan and the definitive credit agreement for the Credit Facility and the related documentation contemplated thereunder. This letter contains CIT's entire commitment for this transaction and, upon acceptance by the Company, supersedes all prior proposals, term sheets, negotiations, discussions and correspondence. This commitment may not be contradicted by evidence of any alleged oral agreement. All prior proposals, term sheets, negotiations, discussions and correspondence are merged in the governing terms of this commitment, which may be amended only in writing executed by the parties hereto. No condition of this commitment may be waived, except in writing signed by CIT. This letter shall be of no force and effect unless accepted by you and as so accepted, received by us no later than 5:00 P.M. on December 7, 1998, which receipt, without further act by you, shall constitute your authorization and direction to us to charge the Commitment Fee required above to your account with us. This letter and the substance of the Credit Facility shall not be disclosed by you to any third party other than attorneys, accountants and financial advisors who are in a confidential relationship with you and require knowledge thereof to perform their duties in connection herewith or unless disclosure is required by law, or is made in a Company Form 8-K or in a Company press release. This commitment is not intended for the benefit of, and may not be relied upon by, any third party. This agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties hereto waives trial by jury in connection with any action, or proceeding relating to this agreement. We welcome the opportunity to be of continuing service to you again and we look forward to working with you in closing this transaction. Very truly yours, THE CIT GROUP COMMERCIAL SERVICES, INC. By: /s/ Anthony Lombardi ----------------------------------------- Title: Senior Vice President -------------------------------------- ACCEPTED AS OF THIS 7th DAY OF DECEMBER, 1998: SALANT CORPORATION By: /s/ Philip Franzel -------------------------- Title: Chief Financial Officer ----------------------- -----END PRIVACY-ENHANCED MESSAGE-----