Third Amendment to Revolving Credit and Guaranty Agreement



 Exhibit 10.85 
  
 THIRD AMENDMENT TO REVOLVING CREDIT AND 
 GUARANTY AGREEMENT 
  
 THIRD AMENDMENT, dated as of July 29, 2003 (the “Amendment”), to the REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of February 20, 2002, among GALEY & LORD, INC., a Delaware corporation (the
“Borrower”), a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, the Guarantors named therein (the “Guarantors”), WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as First Union
National Bank), a national banking corporation (“Wachovia”), each of the other financial institutions from time to time party thereto (together with Wachovia, the “Banks”) and WACHOVIA BANK, NATIONAL
ASSOCIATION, as Agent for the Banks (in such capacity, the “Agent”): 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Borrower, the Guarantors, the Banks and the Agent are parties to that certain Revolving Credit and Guaranty Agreement, dated as of February 20, 2002 (as the same may be amended, modified or supplemented from time to
time, the “Credit Agreement”); 
  
 WHEREAS, pursuant to letters dated September 20, 2002 and July 25, 2003 from the Borrower to the Agent, the Borrower has voluntarily permanently reduced the Total Commitment from $100,000,000 to $50,000,000 as permitted by Section
2.10 of the Credit Agreement; and 
  
 WHEREAS, the Borrower
and the Guarantors have requested that from and after the Effective Date (as hereinafter defined) of this Amendment, the Banks agree to amend the Credit Agreement as set forth herein subject to and upon the terms and conditions set forth in this
Amendment. 
  
 NOW, THEREFORE, the parties hereto hereby
agree as follows: 
  
 1. As used herein, all terms that are
defined in the Credit Agreement shall have the same meanings herein. 
  
 2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement is hereby amended by inserting (a) the following new definitions in appropriate alphabetical order: 
  
 “Third Amendment Effective Date” shall mean
the Effective Date as defined in that certain Third Amendment to Revolving Credit and Guaranty Agreement, dated as of July 29, 2003. 
  
 ; (b) deleting the definition for “Maturity Date” and inserting in lieu thereof the following new definition: 







 “Maturity Date” shall mean October 3, 2003. 
  
 ; and (c) amending the definition for “Letter of Credit Account” by deleting the
word “the” appearing in the first line thereof and inserting in lieu thereof the words “an interest bearing”. 
  
 3. Amendment to Section 2.01. Section 2.01(a) of the Credit Agreement is hereby amended by (a) deleting the amount “$100,000,000”
appearing in clause (i) of the last sentence thereof and inserting in lieu thereof the amount “$50,000,000” and (b) inserting the following proviso at the end thereof: 
  
 provided, however, that without limiting the foregoing, from and after the Third Amendment Effective Date, at
no time shall the principal amount of the Loans and Letter of Credit Outstandings exceed $25,000,000. 
  
 4. Amendment to Section 2.03. Section 2.03(a) of the Credit Agreement is hereby amended by deleting in clause (i) thereof the amount
“$15,000,000” and inserting in lieu thereof the amount “$10,000,000”. 
  
 5. Amendment to Section 2.13. Section 2.13 of the Credit Agreement is hereby amended by (i) deleting subsection (b) thereof in its entirety and inserting in lieu thereof the following new subsection (b):

  
 (b) Upon the repatriation of funds from the Borrower’s
foreign subsidiaries, the Borrower shall apply 100% of such proceeds thereof to the prepayment of the Loans (plus any accrued and unpaid interest and fees thereon) and, after the Loans have been prepaid in full, the Borrower shall deposit into the
Letter of Credit Account cash in an aggregate amount equal to 105% of the Letter of Credit Outstandings (less the amount, if any, then on deposit in the Letter of Credit Account) as collateral security for the Borrower’s reimbursement
obligations in connection therewith; provided, however, that any prepayment pursuant to this subsection shall not reduce the Total Commitment. 
  
 ; and (ii) by amending Section 2.13(d) thereof by deleting the phrase “to the Cash Collateralization of Letter of Credit Outstanding” and inserting in lieu
thereof: 
  
 the Borrower shall deposit into the Letter of Credit
Account cash in an amount equal to 105% of the then undrawn stated amount of all Letter of Credit Outstandings (less the amount, if any, then on deposit in the Letter of Credit Account) as collateral security for the Borrower’s reimbursement
obligations in connection therewith; 
  

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 6. Amendment to Section 6.05. Section 6.05 of the Credit Agreement is hereby amended by
deleting the amount “$24,500,000” opposite the date “July, 2003” and inserting in lieu thereof the amount “$22,500,000”. 
  
 7. Amendment to Section 7.01. Section 7.01(m) of the Credit Agreement is hereby amended by (i) deleting the word “and” appearing
at the end of clause (y), (ii) re-lettering clauses (w), (x), (y) and (z) as clauses (v), (w), (x) and (y), respectively, and (iii) inserting the following new clause (z) at the end thereof: 
  
 and (z) as additional adequate protection payments made to the Existing
Lenders in accordance with the Order Approving the Third Amendment to the Revolving Credit and Guaranty Agreement. 
  
 8. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended in its entirety and replaced with a revised Annex A attached
hereto as Exhibit 1. 
  
 9. Covenants. In order to
induce the Banks to enter into this Amendment, the Borrower and the Guarantors hereby agree to the following covenants, the failure to perform any of which will be an Event of Default under the Credit Agreement: 
  
 (a) The Agent shall have received by no later than August 8,
2003 an updated appraisal of Eligible Accounts Receivable which appraisal shall be reasonably satisfactory to the Agent. 
  
 (b) The Agent shall have received by no later than August 8, 2003 the Borrower’s revised business plans, consolidated and by
division, for the period ending fiscal year 2004 and such business plans shall be reasonably satisfactory in form and substance to the Agent. 
  
 (c) Upon the sale of the capital stock of Klopman International S.r.l. (Italy), Klopman A.G. (Switzerland), Klopman GmbH (Germany),
International Textile S.A. (Tunisia), and Klopman España S.A. (Spain) (collectively, the “Klopman Entities”) and certain intellectual property rights thereof (referred to herein as the “Klopman Sale”), no
less than $24,400,000 will be repatriated to the Borrower and the Borrower shall apply such repatriated funds in accordance with Section 2.13(b) of the Credit Agreement, as hereby amended. 
  
 (d) The Agent and the Banks shall have received by no later
than September 15, 2003 a substantially complete draft of the Borrower’s and the Guarantors’ plan of reorganization and disclosure statement. 
  
 10. Conditions to Effectiveness. 
  
 (a) Subject to clause (b) below, this Amendment shall not become effective until the date (the “Effective Date”) on which (i) this
Amendment shall have been executed by the Borrower, the Guarantors and the Banks, and the Agent shall have received evidence satisfactory to it of such execution, (ii) the Bankruptcy Court shall 
  

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 have entered an interim order, in form and substance satisfactory to the Agent, approving the terms of the Amendment and
authorizing the payment of an amendment fee by the Borrower to the Agent for the respective account of each Bank in an amount equal to  1/4 of 1% of such Bank’s Commitment and (iii) the Borrower shall have paid in cash to the Agent the amendment fee referred to in clause (ii) above. 
  
 (b) Notwithstanding the occurrence of the Effective Date, in the event that a final order, in form and substance
satisfactory to the Agent, approving the terms of this Amendment shall not have been entered by the Bankruptcy Court by September 19, 2003, (i) other than as provided in clause (ii) below, this Amendment shall terminate and be of no further force
and effect; and (ii) the Maturity Date of the Credit Agreement shall be deemed extended to September 19, 2003. 
  
 11. Ratification. Except to the extent hereby amended, the Credit Agreement and each of the Loan Documents remain in full force and effect
and are hereby ratified and affirmed. 
  
 12. Costs and
Expenses. The Borrower agrees that its obligations set forth in Section 10.05 of the Credit Agreement shall extend to the preparation, execution and delivery of this Amendment, including the reasonable fees and disbursements of special
counsel to the Agent. 
  
 13. References. This
Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Credit Agreement or any of the instruments or agreements referred to
therein or (b) to prejudice any right or rights which the Agent or the Banks may now have or have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein. Whenever the Credit
Agreement is referred to in the Credit Agreement or any of the instruments, agreements or other documents or papers executed or delivered in connection therewith, such reference shall be deemed to mean the Credit Agreement as modified by this
Amendment. 
  
 14. Counterparts. This Amendment may
be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the
same instrument. A fax copy of a counterpart signature page shall serve as the functional equivalent of a manually executed copy for all purposes. 
  
 15. Applicable Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. 
  
 [SIGNATURES TO FOLLOW] 
  

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 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
day and the year first written. 
  

	 BORROWER:
 GALEY &
LORD, INC.

		
	 By:
	 	  


	 Name:
 Title:
	 	 Leonard F. Ferro
 Vice President, Secretary and Treasurer



  

	 GUARANTORS:
 GALEY
& LORD INDUSTRIES, INC.
  
 G&L SERVICE COMPANY,
     NORTH AMERICA, INC.
  
 SWIFT TEXTILES, INC.
  
 SWIFT DENIM SERVICES, INC.



  

		
	 By:
	 	  


	 Name:
 Title:
	 	 Leonard F. Ferro
 Vice President, Secretary and Treasurer



  

	 GREENSBORO TEXTILE
     ADMINISTRATION LLC
  
 BRIGHTON WEAVING
LLC
  
 FLINT SPINNING LLC
  
 SOCIETY HILL FINISHING LLC
  
 MCDOWELL WEAVING LLC

		
	 By:
	 	  


	 Name:
 Title:
	 	 Leonard F. Ferro
 Manager



  

	 GALEY & LORD PROPERTIES, INC.
  
 SWIFT DENIM PROPERTIES, INC.

		
	 By:
	 	  


	 Name:
 Title:
	 	 Anthony J. Forman
 Vice President and Treasurer



  

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	 WACHOVIA BANK, NATIONAL ASSOCIATION
 Individually and as Agent

		
	 By:
	 	  


	 Name:
 Title:
	 	 


  

 6 









	THE CIT/GROUP COMMERCIAL SERVICES, INC.
		
	 By:
	 	  


	 Name:
 Title:
	 	 


  

 7 









	GENERAL ELECTRIC CAPITAL CORPORATION
		
	 By:
	 	  


	 Name:
 Title:
	 	 


  

 8 









	FOOTHILL CAPITAL CORPORATION
		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 


  

 9 









	LASALLE BUSINESS CREDIT, INC.
		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 


  

 10 









	 MORGAN STANLEY SENIOR FUNDING,
 INC.

		
	 By:
	 	  


	 Name:
	 	 
	 Title:
	 	 


  

 11 









	ARK CLO 2000-1 LIMITED
		
	 By:
	 	 Patriarch Partners, LLC, its Collateral
 Manager

			
	 	 	 By:
	 	  


	 	 	 	 	         Name:

	 	 	 	 	         Title:



  

 12 









	ARK II CLO 2001-1 LIMITED
		
	 By:
	 	 Patriarch Partners, LLC, its Collateral
 Manager

			
	 	 	 By:
	 	  


	 	 	 	 	         Name:

	 	 	 	 	         Title:



  

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 Exhibit 1 to 
 Third Amendment to Revolving 
 Credit and Guaranty Agreement 
  
 ANNEX A 
 dated as of July 29, 2003 to the 
 Revolving Credit and Guaranty Agreement,

 dated as of February 20, 2002 (as amended) 
  

	 Bank

	  	Commitment
Amount

	  	Commitment
Percentage

	 
	 Wachovia Bank, National Association
 One First Union Center
 301 South College Street
 Charlotte, North Carolina 28288
  
 Attn: Kathy Harkness
	  	$	9,200,000	  	18.4	%
			
	 The CIT/Group Commercial Services
 301 South Tryon Street
 25th Floor
 Charlotte, North Carolina 28202
  
 Attn: Jeff Lew
	  	$	9,200,000	  	18.4	%
			
	 GE Corporate Financial Services
 Distressed Debt Group
 6 High Ridge Park 6C
 Stamford, Connecticut
 06297-5100
  
 Attn: Andrew Santacroce
	  	$	9,200,000	  	18.4	%
			
	 Foothill Capital Corporation
 2450 Colorado Avenue
 Suite 3000 West
 Santa Monica, California 90404
  
 Attn: Eunnie Kim
	  	$	9,200,000	  	18.4	%
			
	 LaSalle Business Credit, Inc.
 135 South LaSalle Street
 Suite 425
 Chicago, Illinois 60603
  
 Attn: Raphael Shin
	  	$	9,200,000	  	18.4	%









	 Morgan Stanley Senior Funding, Inc.
 1633 Broadway, 25th Floor
 New York, New York 10019
  
 Attn: James Morgan
	  	$	2,500,000	  	5	%
			
	 Ark CLO 2000-1 Limited
 112 South Tryon Suite 700
 Charlotte, NC 28284
  
 Attn: Lon Brown
	  	$	750,000	  	1.5	%
			
	 ARK II CLO 2001-1 Limited
 12 South Tryon Suite 700
 Charlotte, NC 28284
  
 Attn: Lon Brown
	  	$	750,000	  	1.5	%
			
	 Total
	  	$	50,000,000.00	  	100	%
	 	  	
	
	  	
	


  

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