HMX » Topics » Entry into a Material Definitive Agreement

This excerpt taken from the HMX 8-K filed Jan 30, 2009.
Entry into a Material Definitive Agreement.
 
As previously reported, on January 23, 2009, Hartmarx Corporation (the “Company”) and fifty of its wholly-owned United States subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Northern District of Illinois Eastern Division (the “Bankruptcy Court”).

In connection with the filing of the bankruptcy petitions, on January 26, 2009, the Bankruptcy Court granted interim approval of the Ratification and Amendment Agreement, effective as of January 23, 2009 (the “Ratification Agreement”), among the Company and Coppley Apparel Group Limited, the Company’s wholly-owned Canadian operating company (“Coppley Apparel Group”), as borrowers, certain of the Company’s subsidiaries, as guarantors (the “Subsidiary Guarantors”), Wachovia Capital Finance Corporation (Central), in its capacity as agent (the “Agent”), and the lenders party thereto, to ratify and amend the Company’s existing Loan and Security Agreement, dated as of August 30, 2002, as amended (the “Credit Facility”), to provide debtor-in-possession financing to the Company and its subsidiaries.

The Ratification Agreement remains subject to final approval by the Bankruptcy Court, which has scheduled a hearing for February 12, 2009 to consider final approval.

Under the Company’s Credit Facility as amended by the Ratification Agreement, the maximum commitment to lend has been reduced from $200 million to $160 million, of which a maximum of $150 million may be U.S. dollar loans (“U.S. Loans”) and $10 million may be Canadian dollar loans (“Canadian Loans”), subject to a borrowing base formula based on the Company’s level of eligible accounts receivable, eligible inventory, reserves, and, only with respect to U.S. Loans, certain intellectual property. To secure its obligations to the lenders under the Credit Facility as amended by the Ratification Agreement, the Company affirmed and granted to the lenders a security interest in and liens on substantially all of its pre-petition and post-petition assets, including both real and personal property. Borrowings under the Credit Facility as amended by the Ratification Agreement will accrue interest at the following rates: (i) as to all U.S. Loans, a rate of five and three-quarters (5.75%) percent in excess of the U.S. prime rate; and (ii) as to all Canadian Loans, a rate of five and three-quarters (5.75%) percent in excess of the Canadian prime rate.

The Ratification Agreement subjects the Company, Coppley Apparel Group and the Subsidiary Guarantors to certain additional obligations, including the delivery of all financial reports, schedules and other materials furnished by the Debtors to the Bankruptcy Court, as well as weekly delivery to the Agent of a rolling 13 week budget of the Company. In addition, certain covenants in the Credit Facility have been amended by the Ratification Agreement so as to be more restrictive, including limitations on the incurrence of indebtedness, sale of assets, making of investments and the payment of dividends. In addition, payment under the Credit Facility as amended by the Ratification Agreement may be accelerated following certain additional events of default including, but not limited to, (i) the conversion of any of the bankruptcy cases to a case under chapter 7 of the Bankruptcy Code or the appointment of a trustee pursuant to chapter 11 of the Bankruptcy Code; (ii) any event occurring after the commencement of the bankruptcy cases

 
 

 

that would have a material adverse effect on the Company, Coppley Apparel Group or any Subsidiary Guarantor; (iii) the filing or confirmation of a plan of reorganization by the Company, Coppley Apparel Group or any Subsidiary Guarantor that does not provide for payment in full of the Company’s obligations under the Credit Facility as amended by the Ratification Agreement; (iv) the failure to adhere to an agreed-upon timetable with respect to the potential sale of all or substantially all of the assets of the Debtors; and (v) any deviation in aggregate collections, certain categories of disbursements and aggregate disbursements beyond ten (10%) percent of the amount set forth in the then applicable budget. Also, the Ratification Agreement replaces the adjusted net worth covenant in the Credit Facility with a minimum excess availability covenant, which requires the Company to maintain excess availability in an amount not less than the greater of (i) eighty-five (85%) percent of the amount of excess availability projected in the then applicable budget and (ii) $10 million.

The maturity date of the Credit Facility as amended by the Ratification Agreement is the earlier of: (i) July 1, 2009; (ii) confirmation of a plan of reorganization for any Debtor; (iii) the closing of any sale or sales of collateral that result in the payment in full of the Company’s obligations under the Credit Facility as amended by the Ratification Agreement; or (iv) the last termination date set forth in the interim or permanent financing order of the Bankruptcy Court.

A copy of the Ratification Agreement is hereby incorporated by reference herein and attached hereto as Exhibit 10.1.

Item 2.03
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