Document:

Exhibit 10.6

Exhibit 10.6

EXECUTION COPY

AMENDMENT NO. 1

TO CREDIT AGREEMENT

AMENDMENT NO. 1 TO CREDIT AGREEMENT (this “Amendment”), dated as of June 17, 2011, among
Warnaco Inc., a Delaware corporation (the “Borrower”), the affiliates of the Borrower party hereto,
the Lenders (as defined in the Credit Agreement described below) party hereto and Bank of America,
N.A., as Administrative Agent and Collateral Agent (each as defined in the Credit Agreement
described below).

WHEREAS, the Borrower, The Warnaco Group, Inc., a Delaware corporation (“Group”), as a
guarantor, the Lenders, the Issuers, the Administrative Agent, the Collateral Agent, Merrill Lynch,
Pierce, Fenner & Smith Incorporated (as successor by merger to Banc of America Securities LLC)
(“Merrill Lynch”) and Deutsche Bank Securities Inc. (“DBSI”), as joint lead arrangers, Merrill
Lynch, DBSI and J.P. Morgan Securities Inc., as joint bookrunners, DBSI, as sole syndication agent
for the Lenders and the Issuers, and HSBC Business Credit (USA) Inc., JPMorgan Chase Bank, N.A. and
RBS Business Capital, a division of RBS Asset Finance Inc., each as a co-documentation agent for
the Lenders and Issuers, entered into a certain Credit Agreement, dated as of August 26, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”),
pursuant to which the Lenders and the Issuers have agreed, subject to certain terms and conditions,
to make revolving credit borrowings to the Borrower and to issue or to cause the issuance of
letters of credit for the account of the Borrower;

WHEREAS, the Borrower has informed the Administrative Agent that the Borrower, Calvin Klein
Jeanswear Company (the “CK Borrower”) and Warnaco Swimwear Products Inc. (the “Swimwear Borrower”,
and together with the Borrower and the CK Borrower, collectively, the “Term Borrowers”), as
borrowers, intend to enter into a $200,000,000 term loan facility with various financial
institutions and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for such
financial institutions, which term loan facility will be guaranteed by Group and the direct and
indirect domestic subsidiaries of Group (other than the Term Borrowers), including the Subsidiary
Guarantors (other than the CK Borrower and the Swimwear Borrower);

WHEREAS, the Borrower, the Requisite Lenders, the Administrative Agent and the Collateral
Agent desire to amend certain provisions of the Credit Agreement to, among other things, permit
Group, the Term Borrowers and the other Loan Parties to enter into the term loan facility described
above;

NOW, THEREFORE, subject to the conditions precedent set forth in Section 6 hereof, the
Borrower, the Guarantors, the Requisite Lenders, the Administrative Agent and the Collateral Agent
hereby agree as follows:

SECTION 1. CAPITALIZED TERMS. Capitalized terms used but not defined herein shall have the respective meanings set forth in
the Credit Agreement.

 

 

 

SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.

2.1 Section 1.1 of the Credit Agreement is hereby amended by amending and restating the
following definitions (if already included in Section 1.1) and adding the following definitions in
the appropriate alphabetical location (if not already included in Section 1.1):

“ABL Priority Collateral” has the meaning specified in the Intercreditor
Agreement.

“Capital Expenditures” means, with respect to any Person for any period, the
aggregate of amounts that would be reflected as additions to property, plant or
equipment on a consolidated balance sheet of such Person and its Subsidiaries on a
consolidated basis prepared in conformity with Agreement Accounting Principles,
excluding (i) interest capitalized during construction, (ii) amounts expended on
leasehold improvements for which such Person has received a commitment of
reimbursement from the landlord; provided, that if any such amount is not reimbursed
within six months after the expenditure (the “Reimbursement Expiration Date”), such
amount will be counted towards Capital Expenditures as if such amount had been
expended on the Reimbursement Expiration Date, (iii) amounts credited to, or
received by, any Warnaco Entity in connection with a substantially contemporaneous
trade in, (iv) any expenditures in connection with the replacement, substitution, or
restoration of fixed assets to the extent made with the proceeds of an Asset Sale of
fixed assets or a Property Loss Event with respect to fixed assets, in each case,
within 180 days of the date of receipt of proceeds from such Asset Sale or Property
Loss Event and (v) any portion of expenditures attributable to the acquisition of
property, plant and equipment which are part of a Permitted Acquisition.

“Capital Lease” means, with respect to any Person, any lease of property by
such Person as lessee which would be accounted for as a capital lease on a balance
sheet of such Person prepared in conformity with Agreement Accounting Principles as
in effect on the Closing Date.

“Cash on Hand” means an amount equal to the amount of cash and Cash Equivalents
on deposit in the Cash Collateral Accounts less the aggregate amount of accounts
payable and other unpaid expenses of the Warnaco Entities which, in Group’s
reasonable judgment, are in excess of ordinary course accounts payable and unpaid
expenses as certified in a certificate of a Responsible Officer of Group delivered
to the Administrative Agent prior to the prepayment of any Term Loans.

 

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“Change of Control” means any of the following: (a) Group shall at any time
cease to have legal and beneficial ownership of 100% of the capital stock of the
Borrower, or, directly or indirectly, any other Loan Party (except if such other
Loan Party shall be disposed of pursuant to an Asset Sale permitted by Section 8.4
or if such parties shall merge, liquidate or dissolve in accordance with Section
8.7); or (b) any Person, or two or more Persons acting in concert, shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of, or the power to exercise, directly or indirectly, effective control
for any purpose over, Voting Stock of Group (or other securities convertible into
such Voting Stock) representing 35% or more of the combined voting power of all
Voting Stock of Group; or (c) so long as the Term Loan Credit Agreement is in effect
or any Term Loans are outstanding and the Term Agent has a Lien on any of the
Collateral, any “Change of Control” as defined in the Term Loan Credit Agreement.

“Disqualified Stock” means any Stock which, by its terms (or by the terms of
any security or other Stock into which it is convertible or for which it is
exchangeable), or upon the happening of any event or condition (a) matures or is
mandatorily redeemable (other than solely for Stock which is not otherwise
Disqualified Stock), pursuant to a sinking fund obligation or otherwise, (b) is
redeemable at the option of the holder thereof (other than solely for Stock which is
not otherwise Disqualified Stock), in whole or in part or (c) is or becomes
convertible into or exchangeable for Indebtedness or any other Stock that would
constitute Disqualified Stock, in each case, with respect to clauses (a) through
(c), prior to the date that is 91 days after the Revolving Loan Maturity Date.

“Intercreditor Agreement” means the Intercreditor Agreement, dated as of June
17, 2011, between the Administrative Agent, the Collateral Agent and the Term Agent
and acknowledged by Group, the Borrower and the other Loan Parties party thereto
from time to time, as amended, restated, supplemented, replaced or otherwise
modified from time to time.

“Leverage Ratio” means, with respect to any Person as of any date, the ratio of
(a) consolidated Financial Covenant Debt of such Person and its Subsidiaries
outstanding as of such date minus the aggregate amount of cash and Cash Equivalents
held by such Person and its Subsidiaries to the extent that such cash and Cash
Equivalents are held in a Deposit Account or a Securities Account over which the
Collateral Agent has a perfected first priority Lien for the benefit of the Secured
Parties to (b) EBITDA for such Person for the last four Fiscal Quarter period ending
on or before such date.

“Loan Documents” means, collectively, this Agreement, the Fee Letters, the
Guaranty, each Letter of Credit Reimbursement Agreement, the Collateral Documents,
the Intercreditor Agreement and each certificate, agreement or document executed by
a Loan Party and delivered to any Facility Agent or any Lender in connection with or
pursuant to any of the foregoing.

“Term Agent” means JPMorgan Chase Bank, N.A., in its capacities as
administrative agent and collateral agent for the Term Lenders, and its successors
and assigns in either such capacity from time to time.

“Term Lenders” means the lenders party from time to time to the Term Loan
Credit Agreement.

 

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“Term Loan Credit Agreement” means that certain Term Loan Agreement, dated as
of the Term Loan Effective Date, among Group, the Borrower, Calvin Klein Jeanswear
Company, Warnaco Swimwear Products Inc., the lenders party thereto from time to time
and the Term Agent, as the same may be amended, modified, supplemented, extended,
refinanced or replaced from time to time in accordance with the terms hereof,
thereof and of the Intercreditor Agreement.

“Term Loan Documents” means, collectively, the Term Loan Credit Agreement and
all other documents, instruments and agreements executed and delivered with respect
to or in connection with the Term Loan Credit Agreement, as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof,
thereof and of the Intercreditor Agreement.

“Term Loan Effective Date” means the date, on or about June 17, 2011, of the
execution and delivery of the initial Term Loan Credit Agreement by the initial
parties thereto.

“Term Loans” means loans made pursuant to the Term Loan Credit Agreement.

“Term Priority Collateral” has the meaning specified in the Intercreditor
Agreement.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (a) the sum of the total of the
products obtained by multiplying (i) the amount of each scheduled installment,
sinking fund, serial maturity or other required payment of principal including
payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and the
making of such payment by (b) the then outstanding principal amount of such
Indebtedness.

2.2 Section 1.1 of the Credit Agreement is hereby further amended by deleting the following
defined terms: “Senior Note Indenture”, “Senior Note Indenture Trustee”, “Senior Noteholders”,
“Senior Note Documents” and “Senior Notes”.

2.3 Section 1.1 of the Credit Agreement is hereby further amended by amending and restating
clauses (f), (i) and (j) of the definition of “Eligible Receivable” appearing in such section to
read as follows:

(f) that is not the subject of any dispute, offset, holdback, defense, Lien
(other than a Customary Permitted Lien, a Lien created by the Loan Documents or a
Lien permitted under Section 8.2(l)) or other claim other than such adjustments in
the ordinary course of the applicable Loan Party’s business as
such Loan Party’s business is conducted on the date hereof (such Receivable to be
ineligible to the extent of such dispute, offset, holdback, defense, Lien or claim),

 

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(i) in which a Loan Party owns good and marketable title, free and clear of any
Lien (other than a Customary Permitted Lien, Liens created by the Loan Documents and
Liens permitted under Section 8.2(l)), and that is freely assignable by the Loan
Party (including without any consent of the related Account Debtor),

(j) for which the Collateral Agent, for the benefit of the Secured Parties, has
a valid and enforceable perfected security interest therein and in the Related
Security and Collections with respect thereto, in each case free and clear of any
Lien (other than a Customary Permitted Lien, Liens created by the Loan Documents and
Liens permitted under Section 8.2(l)),

2.4 Section 1.1 of the Credit Agreement is further amended by amending and restating clause
(a)(i)(C) of the definition of “Mortgage Supporting Documents” to read as follows:

(C) insure that the Lien granted pursuant to the Mortgage insured thereby creates a
valid perfected Lien on such parcel of Real Property having at least the priorities
described in Section 4.20 of this Agreement and the Collateral Documents, free and
clear of all defects and encumbrances, except for (A) Liens permitted under Section
8.2 and (B) such other Liens as the Administrative Agent may reasonably approve,

2.5 Section 1.1 of the Credit Agreement is further amended by adding the parenthetical “(and
including interest and fees that accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under the Bankruptcy Code or any other federal, foreign or
state debtor relief or insolvency proceeding naming such Person as the debtor in such proceeding,
regardless of whether such interest and fees are allowed claims in such proceeding)” to the
definition of “Obligations” immediately following the phrase “now existing or hereafter arising and
however acquired” appearing in such definition.

2.6 Section 1.1 of the Credit Agreement is further amended by amending and restating clause
(v) of the definition of “Permitted Acquisition” to read as follows:

(v) the Warnaco Entity making such Proposed Acquisition and the Proposed
Acquisition Target shall have executed such documents and taken such actions as may
be required under (x) Section 7.11 within 30 days (or with respect to any Material
Owned Real Property, as provided in Section 7.13) of the closing of such Proposed
Acquisition (or such longer time as may be agreed by the Administrative Agent in its
sole discretion), and (y) Section 7.13 within the time frames set forth in such
section.

2.7 Section 4.2(d) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(d) For so long as the Term Loan Credit Agreement is in effect, each borrowing,
issuance of a letter of credit and other financial accommodation made hereunder or
under the Canadian Facility (each a “Credit Event”) constitutes a representation and
warranty by each of Group and the Borrower that as of the date of such Credit Event,
such Credit Event does not result in a violation of the indebtedness negative
covenant in the Term Loan Credit Agreement.

 

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2.8 Section 4.3(a) of the Credit Agreement is hereby amended by adding the phrase “and the
Liens permitted under Section 8.2(l)” immediately preceding the period at the end of the second
sentence thereof.

2.9 Section 4.3(b) of the Credit Agreement is hereby amended by (i) adding the phrase “and
those permitted under Section 8.2(l)” immediately preceding the period at the end of the second
sentence thereof, (ii) adding the parenthetical “(other than Group) immediately following “Warnaco
Entity” in the third sentence thereof and (iii) adding the phrase “and the Term Loan Documents”
immediately preceding the period at the end of the fourth sentence thereof.

2.10 Section 4.8(b) of the Credit Agreement is hereby amended by deleting the phrase “filing
of any Tax Return or the assessment or” appearing in clause (i) thereof.

2.11 Section 4.20 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

Section 4.20 Perfection of Security Interests in the Collateral. The
Collateral Documents create valid Liens on the Collateral purported to be covered
thereby, which Liens are perfected Liens and prior to all other Liens (other than
Customary Permitted Liens and Liens securing Indebtedness in respect of purchase
money obligations and Capital Lease obligations permitted under Section 8.2, in each
case, having priority over such Liens), except as set forth in the Intercreditor
Agreement.

2.12 Section 6.1(b) of the Credit Agreement is hereby amended by deleting “and consolidating”
in each instance where it appears.

2.13 Section 6.5 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

Section 6.5 Notices under Term Loan Documents. Promptly after the sending or filing
thereof (and to the extent the substance of which has not previously been or is not
concurrently being provided in writing to the Administrative Agent), the Borrower
shall send the Administrative Agent copies of all material notices, certificates or
reports delivered pursuant to, or in connection with, any Term Loan Document.

2.14 Section 7.11 of the Credit Agreement is hereby amended by adding the following sentence
at the end thereof:

It is understood and agreed that, with respect to any treasury shares of Group, the
Collateral Agent does not intend to take a security interest in any such treasury
 shares of Group, and any and all treasury shares of Group shall not be subject to
the restrictions set forth in Section 8.2 and Section 8.4 hereunder. The parties
agree that all treasury shares of Group shall constitute Excluded Property as
defined in the Pledge and Security Agreement.

 

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2.15 Section 7.13(c)(ii) of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

(ii) otherwise, documents similar to Mortgage Supporting Documents deemed by the
Administrative Agent to be appropriate in the applicable jurisdiction to obtain the
equivalent in such jurisdiction of a mortgage on such Material Owned Real Property
having at least the priorities described in Section 4.20 of this Agreement;

2.16 Section 7.14 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

Section 7.14 [Intentionally Omitted].

2.17 Section 8.1(b) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(b) the Term Loans in an aggregate outstanding principal amount not to exceed
$200,000,000 plus all additional amounts permitted to be borrowed pursuant to
Section 2.5 of the Term Loan Credit Agreement as such section and defined terms
relevant to Section 2.5(a)(E) are in effect on the Term Loan Effective Date;
provided that the Term Loans may not be guaranteed by any Warnaco Entity that is not
guaranteeing the Obligations;

2.18 Section 8.1(f) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(f) Renewals, extensions, refinancings, exchanges and refundings of
Indebtedness permitted by clauses (b), (c) and (e) of this Section 8.1 and of
Indebtedness under the Canadian Facility; provided, however, that (A) any such
renewal, extension, refinancing, exchange or refunding is in an aggregate principal
amount not greater than the principal amount of, and, other than a renewal,
extension, refinancing, exchange or refunding of Indebtedness permitted by clause
(b) above, is on terms not materially less favorable to the Warnaco Entity obligated
thereunder (as reasonably determined by a Responsible Officer of such Warnaco Entity
or, in the case of the Canadian Facility, the governing body of the Canadian
Borrower) (other than with respect to interest rates and other pricing, all of which
shall be market rates as reasonably determined by a Responsible Officer of such
Warnaco Entity or, in the case of the Canadian Facility, the governing body of the
Canadian Borrower), including as to weighted average maturity and final maturity,
than, the Indebtedness being

 

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renewed, extended, refinanced, exchanged or refunded,
(B) additionally with respect to any renewal, extension, refinancing, exchange or refunding of Indebtedness under the
Term Loan Documents, such renewal, extension, refinancing, exchange or refunding (i)
is not guaranteed by any Warnaco Entity that is not guaranteeing the Obligations,
(ii) has a Weighted Average Life to Maturity, calculated as of the date of such
renewal, extension, refinancing, exchange or refunding, that exceeds the sum of (1)
the remaining scheduled term of this Agreement as of such date plus (2) six months,
(iii) matures at least six months after the Revolving Loan Maturity Date, and (iv)
is subject to the Intercreditor Agreement and (C) additionally with respect to any
renewal, extension, refinancing, exchange or refunding of Indebtedness under the
Canadian Facility, such renewal, extension, refinancing, exchange or refunding is
not directly or indirectly guaranteed by, or secured by any assets of, any Loan
Party;

2.19 Section 8.1(g) of the Credit Agreement is hereby amended by adding the following proviso
at the end thereof:

provided further that no such Indebtedness shall be incurred in connection with the
Term Loans;

2.20 Section 8.1(n) of the Credit Agreement is hereby amended by replacing “$50,000,000”
appearing therein with “$75,000,000”.

2.21 Section 8.2(b) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(b) Liens granted by a Foreign Subsidiary of Group securing the Indebtedness
permitted under Section 8.1(g), which Liens for the avoidance of doubt shall not
secure any Indebtedness under this Agreement or under the Term Loan Credit
Agreement;

2.22 Section 8.2 of the Credit Agreement is hereby further amended by (i) deleting the word
“and” immediately following clause (j) thereof, (ii) deleting the period at the end of clause (k)
thereof and substituting therefor “; and” and (iii) adding the following clause (l) thereto:

(l) Liens granted by the Loan Parties pursuant to the Term Loan Documents,
subject in each case to the terms of the Intercreditor Agreement.

2.23 Section 8.4(b) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(b) the sale of any asset or assets (including, without limitation, a
Subsidiary’s Stock) by a Warnaco Entity as long as (i) the purchase price paid to
such Warnaco Entity for such asset shall be no less than the Fair Market Value of
such asset at the time of such sale, (ii) if any such asset constitutes ABL Priority
Collateral (or, in the case of a sale of any or all of the Stock of a Subsidiary, if
any asset of such Subsidiary constitutes ABL Priority Collateral) no less than 100%
of the purchase price for such asset (or, in the case of a sale of any or all of the
Stock
of a Subsidiary that owns any ABL Priority Collateral at the time of such sale, of
the portion of the purchase price for such Stock reasonably allocated to such ABL

 

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Priority Collateral) shall be paid in cash, and in all other cases, no less than 75%
of the purchase price for such asset shall be paid in cash and the remaining amount
paid in notes receivable (provided that in the case of any Asset Sale consummated
when no Loan or Loans or unreimbursed amounts in respect of drawn Letters of Credit
are outstanding (Loan, Loans and Letters of Credit being used in this proviso as
defined in each of this Agreement and the Canadian Facility), 50% of the purchase
price for such asset (or, in the case of a sale of any or all of the Stock of a
Subsidiary that owns any ABL Priority Collateral at the time of such sale, of the
portion of the purchase price for such Stock reasonably allocated to such ABL
Priority Collateral) may be paid in cash and the remaining amount paid in notes
receivable) (which notes receivable, if relating to the sale of any ABL Priority
Collateral or of any or all of the Stock of a Subsidiary that owns any ABL Priority
Collateral at the time of such sale, shall be in form and substance reasonably
satisfactory to the Administrative Agent), (iii) neither the seller of such assets
nor any of its Affiliates shall have any subsequent payment obligations in respect
of such sale, other than customary indemnity obligations, (iv) no Default or Event
of Default has occurred and is continuing at the time of such sale or would result
from such sale, (v) if the total purchase price consideration for all assets sold by
the Loan Parties during any calendar year pursuant to this clause (b) shall exceed
$10,000,000 in the aggregate, then with respect to the sale that resulted in such
excess occurring and each subsequent sale of any assets by any Loan Party pursuant
to this clause (b) during such calendar year, (x) on the date of such sale on a pro
forma basis after giving effect to such sale and any application of the proceeds
thereof on such date, Available Credit is at least 15% of the Aggregate Borrowing
Limit on such date and (y) for the 30 consecutive day period prior to such date (pro
forma as if such sale occurred on the first day of such 30 consecutive day period),
average Available Credit is at least 15% of the Aggregate Borrowing Limit on such
date (such pro forma calculations under clauses (x) and (y) to include, without
limitation, giving effect to any reductions in the Borrowing Base as a result of any
Inventory no longer complying with the definition of “Eligible Inventory” due to
such sale and the application of the proceeds thereof) and (vi) with respect to the
sale that resulted in the excess referred to in clause (v) above and each subsequent
sale of any assets by any Loan Party pursuant to this clause (b) during such
calendar year that has purchase price consideration in excess of $1,500,000, the
Borrower shall deliver to the Administrative Agent, no later than the date of such
sale, Borrowing Base Certificates (as defined herein and in the Canadian Facility)
as of the Business Day immediately preceding the date of such sale executed by a
Responsible Officer of Group giving pro forma effect to such sale and the
application of the proceeds thereof as required by clause (v) above, which Borrowing
Base Certificates (as defined herein and in the Canadian Facility) shall show
compliance with the requirements of clause (v) above;

 

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2.24 Section 8.5 of the Credit Agreement is hereby amended by (i) deleting the word “and”
immediately following clause (c) thereof, (ii) inserting the word “and” immediately
following the semicolon at the end of clause (d) thereof and (iii) adding the following clause
(e) thereto:

(e) other dividends and distributions on the Stock of Group and other
redemptions, repurchases or other acquisitions of the Stock of Group in an aggregate
amount not to exceed the principal amount of Indebtedness incurred pursuant to
Section 8.1(b) and the corresponding dividends to Group not earlier than ten days
prior to the related dividend, distribution, redemption, repurchase or other
acquisition not exceeding in the aggregate such principal amount; provided that no
Event of Default exists at the time of any such dividend, distribution, redemption,
repurchase or other acquisition or the corresponding dividend or would result
therefrom;

2.25 Section 8.6(b) of the Credit Agreement is hereby amended by amending and restating
clauses (v), (vi) and (vii) thereof in their entirety and by adding a new clause (viii) to the end
thereof, all of which to read as follows:

(v) repay Term Loans using then available Cash on Hand in an aggregate amount not to
exceed $10,000,000, (vi) renew, extend, refinance, exchange and refund Indebtedness,
as long as such renewal, extension, refinancing, exchange or refunding is permitted
under Section 8.1(f) (in the case of Indebtedness under any of clauses (b), (c) or
(e) of Section 8.1) or permitted under other clauses of Section 8.1 (in the case of
any other Indebtedness permitted under Section 8.1), (vii) prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof any
Indebtedness of any Warnaco Entity so long as (A) no Default or Event of Default
shall have occurred and be continuing at the time of any such prepayment,
redemption, purchase, defeasance or satisfaction or after giving effect thereto, (B)
the Fixed Charge Coverage Ratio for Group shall be at least 1.1 to 1.0 for the most
recent four Fiscal Quarter period for which Financial Statements have been delivered
pursuant to Section 6.1 on a pro forma basis after giving effect to such prepayment,
redemption, purchase, defeasance or satisfaction (as if such prepayment, redemption,
purchase, defeasance or satisfaction had been made on the first day of such period),
(C) on the date of such prepayment, redemption, purchase, defeasance or satisfaction
on a pro forma basis after giving effect to such prepayment, redemption, purchase,
defeasance or satisfaction, Available Credit is at least 25% of the Aggregate
Borrowing Limit on such date and for the 30 consecutive day period prior to such
date (pro forma as if such prepayment, redemption, purchase, defeasance or
satisfaction occurred on the first day of such 30 consecutive day period), average
Available Credit is at least 25% of the Aggregate Borrowing Limit on such date and
(D) prior to such prepayment, redemption, purchase, defeasance or satisfaction,
Group has delivered to the Administrative Agent a certificate executed by a
Responsible Officer of Group certifying the satisfaction of the requirements under
this clause (vii) with respect to such prepayment, redemption, purchase, defeasance
or satisfaction and setting forth in reasonable detail the calculation of such Fixed
Charge Coverage Ratio and Available Credit and (viii) convert or exchange
Indebtedness into Stock of Group other than Disqualified Stock of Group.

 

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2.26 Section 8.10 of the Credit Agreement is hereby amended by amending and restating the
introductory paragraph thereof in its entirety to read as follows:

Section 8.10 Restrictions on Subsidiary Distributions; No New Negative Pledge.
Other than (x) pursuant to the Loan Documents, the Term Loan Documents, the Canadian
Facility, the documents governing any Indebtedness permitted under Section 8.1(g),
any agreements governing any purchase money Indebtedness or Capital Lease
Obligations permitted by Section 8.1(e) or any renewal, extension, refinancing,
exchange or refunding of any such Indebtedness or Capital Lease Obligations
permitted under Section 8.1(f) (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby) or any agreement governing
any renewal, extension, refinancing, exchange or refunding of the Term Loans or the
Canadian Facility permitted under Section 8.1(f), (y) any restrictions consisting of
customary non-assignment provisions that are entered into in the ordinary course of
business consistent with prior practice to the extent that such provisions restrict
the transfer or assignment of such contract or (z) with respect to any asset that is
subject to a contract of sale permitted by Section 8.4 or which contract
acknowledges that a waiver under Section 8.4 is necessary, each of Group and the
Borrower will not, and will not permit any of its respective Subsidiaries to:

2.27 Section 8.13 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

Section 8.13 Modification of Debt Agreements. Neither Group nor the Borrower
shall, nor shall they permit any of their respective Subsidiaries to, change or
amend the terms of any of the Term Loan Documents (or any indenture, agreement or
other material document entered into in connection therewith) if the effect of such
change or amendment is to (w) increase (or permit the increase in) the aggregate
principal amount of the Term Loans beyond the amount permitted under Section 8.1(b)
or (x) change the final maturity date of any of the Term Loans to a date that is
less than six months after the Revolving Loan Maturity Date or (y) cause the
Weighted Average Life to Maturity of the Term Loans (or any class thereof),
calculated as of the effective date of such change or amendment, to be less than the
sum of (1) the remaining scheduled term of this Agreement as of such date plus (2)
six months or (z) contravene any of the terms of the Intercreditor Agreement.

2.28 Section 9.1(d) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

(d) (i) any Warnaco Entity shall fail to make any payment on (x) so long as the
Term Agent has a Lien on any of the Collateral, any Indebtedness under any of the
Term Loan Documents or (y) any Indebtedness (other than the Obligations, but
including any Indebtedness under any of the Term Loan Documents) of any Warnaco
Entity (or any Guaranty Obligation in respect of Indebtedness of any other Person)
having a principal amount of $25,000,000 or
more, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise)

 

11

 

beyond
any applicable grace periods; or (ii) any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Indebtedness referenced in clause (i),
if the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness referenced in clause (i) (or, in
the case of the Canadian Facility under this clause (ii), if the effect of such
event or condition is (x) to accelerate the maturity of the Indebtedness owing
thereunder or (y) the declaration of an “Event of Default” under and as defined
therein); or (iii) any such Indebtedness referenced in clause (i) shall become or be
declared to be due and payable, or required to be prepaid or repurchased (other than
by a regularly scheduled required prepayment or, in connection with the Term Loans,
a provision requiring a prepayment in the event of the receipt by a Warnaco Entity
of proceeds of an Asset Sale or casualty loss of property (other than ABL Priority
Collateral), an equity issuance by Group or a debt issuance not permitted hereunder
or from excess cash flow), prior to the stated maturity thereof; or

2.29 Section 9.1(g) of the Credit Agreement is hereby amended by inserting the following
language immediately preceding the semicolon and the end thereof:

, or the Intercreditor Agreement shall, in whole or in part, terminate, cease to be
effective or cease to be legally valid, binding and enforceable against the Term
Agent, any Term Lender or any other holder of Indebtedness under the Term Loan
Documents

2.30 Sections 11.8(a)(iv) and (v) of the Credit Agreement are hereby amended and restated in
their entirety to read as follows:

	 	(iv)	 	if to the Administrative Agent:

Bank of America, N.A.

335 Madison Avenue

New York, New York 10017

Attention: Business Capital -

                 Account Executive

Email: seth.tyminski@baml.com

Telecopy No.: (646) 556-0260

with a copy to:

Bank of America, N.A.

CityPlace I, 35th Floor

CT2-500-35-02

185 Asylum Street

Hartford, CT 06103

Attention: Legal Department

Email: timothy.clarke@bankofamerica.com

 

12

 

and

	 	(v)	 	if to the Collateral Agent:

Bank of America, N.A.

335 Madison Avenue

New York, New York 10017

Attention: Business Capital -

                 Account Executive

Email: seth.tyminski@baml.com

Telecopy No.: (646) 556-0260

with a copy to:

Bank of America, N.A.

CityPlace I, 35th Floor

CT2-500-35-02

185 Asylum Street

Hartford, CT 06103

Attention: Legal Department

Email: timothy.clarke@bankofamerica.com

2.31 Section 11.16 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:

Section 11.16 Intercreditor Agreement. Each Secured Party hereby grants to
each of the Facility Agents all requisite authority to enter into or otherwise
become bound by the Intercreditor Agreement (including any Intercreditor Agreement
entered into in connection with any renewal, extension, refinancing, exchange or
refunding of the Term Loans permitted hereunder) and to bind the Secured Parties
thereto by the Facility Agents’ entering into or otherwise becoming bound thereby,
and no further consent or approval on the part of any of the Secured Parties is or
will be required in connection with the performance of the Intercreditor Agreement
(including any Intercreditor Agreement entered into in connection with any renewal,
extension, refinancing, exchange or refunding of the Term Loans permitted
hereunder), including, if required by the Intercreditor Agreement, amending any
Collateral Documents to include a legend referencing the Intercreditor Agreement,
and all actions taken by each Facility Agent under or pursuant to the Intercreditor
Agreement (including any Intercreditor Agreement entered into in connection with any
renewal, extension, refinancing, exchange or refunding of the Term Loans permitted
hereunder) shall be binding upon each Secured Party as if it were a direct signatory
to the Intercreditor Agreement (including any Intercreditor Agreement entered into
in connection with any renewal, extension, refinancing, exchange or refunding of the
Term Loans permitted hereunder). Each Secured Party hereby acknowledges that,
pursuant to the Intercreditor Agreement, the Collateral Agent’s Lien, for the
benefit of the Secured Parties, in certain of the Collateral
securing the Secured Obligations, referred to in the Intercreditor Agreement as the
Term Priority Collateral, will be subordinated to the Lien of the Term Agent in such
Term Priority Collateral.

 

13

 

Notwithstanding anything to the contrary in this Agreement or in any other Loan
Document:

(a) the priority of the Liens and security interests granted to the Collateral
Agent for the benefit of the Secured Parties pursuant to this Agreement and the
other Loan Documents, including any Mortgage, and the exercise of any right or
remedy related to any Collateral shall be subject, in each case, to the terms of the
Intercreditor Agreement; and

(b) in the event of a conflict between the express terms of this Agreement or
any other Loan Document, on the one hand, and of the Intercreditor Agreement, on the
other hand, the terms and provisions of the Intercreditor Agreement shall control.

No Loan Party shall have or be entitled to assert any rights or benefits under
the Intercreditor Agreement or this Section 11.16.

SECTION 3. WAIVER. The Lenders hereby waive all existing defaults solely with respect to any
failure to deliver prior to the date hereof (i) consolidating balance sheets or consolidating
statements of income as required by Section 6.1(b) of the Credit Agreement, (ii) summaries of
outstanding balances of intercompany Indebtedness as required by Section 6.1(f) of the Credit
Agreement and (iii) reports with respect to insurance coverage and the insurance broker’s statement
as required by Section 6.9 of the Credit Agreement, including, in each case, any cross-defaults
arising under Section 9.1(d) of the Credit Agreement with respect to the existence of the same
default under the Canadian Facility.

SECTION 4. AMENDMENT TO PLEDGE AND SECURITY AGREEMENT.
Each Lender party hereto hereby grants to the Collateral Agent all requisite authority to
enter into or otherwise become bound by an amendment to the Pledge and Security Agreement to
reflect the transactions contemplated by the Intercreditor Agreement and this Amendment and to bind
the Secured Parties thereto by the Collateral Agent’s entering into or otherwise becoming bound
thereby, and no further consent or approval on the part of any of the Secured Parties is or will be
required in connection with the performance of the Pledge and Security Agreement as amended by such
amendment. Each Lender party hereto further authorizes the Collateral Agent to deliver to the Term
Agent any and all Term Priority Collateral in its possession, including without limitation,
instruments, stock certificates, and transfer powers that are required to be delivered to the Term
Agent pursuant to the Term Loan Documents with respect to Term Priority Collateral.

 

14

 

SECTION 5. REPRESENTATIONS AND WARRANTIES. Each of the Borrower and the Guarantors represents
and warrants, as of the Effective Date (as defined below) after giving effect to this Amendment, as
follows (which representations and warranties shall survive the execution and delivery of this
Amendment):

5.1 all representations and warranties contained in the Credit Agreement and each of the other
Loan Documents are true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the Effective Date (except to the extent
that such representations or warranties expressly related to a specified prior date, in which case
such representations and warranties shall be true and correct in all material respects as of such
specified prior date);

5.2 the execution, delivery and performance by each Loan Party of this Amendment (i) are
within such Loan Party’s corporate, limited liability, partnership or other powers, (ii) have been
duly authorized by all necessary corporate, limited liability or partnership, as the case may be,
action, including the consent of shareholders, partners and members where required, (iii) do not
and will not (A) contravene such Loan Party’s or any of its Subsidiaries’ respective Constituent
Documents, (B) violate any other Requirement of Law applicable to such Loan Party (including
Regulations T, U and X of the Federal Reserve Board), or any order or decree of any Governmental
Authority or arbitrator applicable to such Loan Party, (C) conflict with or result in a breach of,
or constitute a default under, or result in or permit the termination or acceleration of, any
Contractual Obligation of such Loan Party or any of its Subsidiaries or (D) result in the creation
or imposition of any Lien upon any property of such Loan Party or any of its Subsidiaries and (iv)
do not require the consent of, authorization by, approval of, notice to or filing or registration
with, any Governmental Authority or any other Person, other than those obtained or made;

5.3 this Amendment has been duly executed and delivered by each Loan Party and is the legal,
valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party
in accordance with its terms; and

5.4 there exists no Default or Event of Default.

SECTION 6. EFFECTIVENESS. This Amendment shall become effective upon the date (such date, the “Effective Date”) that the
following conditions precedent have been satisfied, as determined in the Administrative Agent’s
sole discretion:

6.1 The Administrative Agent shall have received each of the following, each dated the
Effective Date unless otherwise indicated or agreed to by the Administrative Agent, in form and
substance satisfactory to the Administrative Agent:

6.1.1 counterparts hereof duly executed and delivered by the Borrower, the Guarantors,
Lenders constituting Requisite Lenders, the Collateral Agent and the Administrative Agent;

6.1.2 a fee letter, in form and substance satisfactory to the Administrative Agent,
duly executed and delivered by the Borrower, and the payment of all of the fees payable
thereunder;

 

15

 

6.1.3 the Intercreditor Agreement, in form and substance reasonably satisfactory to the
Facility Agents, duly executed and delivered by all parties thereto; and

6.1.4 duly executed copies of each of the Term Loan Documents, which shall be in form
and substance reasonably satisfactory to the Administrative Agent and its counsel;

6.2 As of the Effective Date, Available Credit shall be not less than $75,000,000 (after
giving effect to the borrowings, issuances of letters of credit and financial accommodations
hereunder and under the Canadian Facility, if any, in each instance, requested or deemed requested
to be made on the Effective Date and any payments or prepayments made under the Credit Agreement or
the Canadian Facility on the Effective Date); and

6.3 There shall have been paid all reasonable and documented fees and expenses (including
reasonable and documented fees and expenses of counsel) due and payable on or before the Effective
Date.

SECTION 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties 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. Signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that all signature
pages are attached to the same document. Delivery of an executed signature page of this Amendment
by facsimile transmission, electronic mail or by posting on the Approved Electronic Platform shall
be as effective as delivery of a manually executed counterpart hereof. A set of the copies of this
Amendment signed by all parties shall be lodged with the Borrower and the Administrative Agent.

SECTION 8. REFERENCES TO CREDIT AGREEMENT. From and after the effectiveness of this Amendment and the amendments contemplated hereby, all
references in the Credit Agreement to “this Agreement”, “hereof”, “herein”, and similar terms shall
mean and refer to the Credit Agreement, as amended and modified by this Amendment, and all
references in other documents to the Credit Agreement shall mean such agreement as amended and
modified by this Amendment.

SECTION 9. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto
shall be governed by, and construed and interpreted in accordance with, the internal law of the
State of New York.

 

16

 

SECTION 10. RATIFICATION AND CONFIRMATION. The Credit Agreement and each of the other Loan Documents is hereby ratified and confirmed and,
except as herein agreed, remains in full force and effect. The amendments and waiver contained
herein shall not be construed as a waiver or amendment of any other provision of the Credit
Agreement or the other Loan Documents or for any purpose except as expressly set forth herein or a
consent to any further or future action on the part of the Borrower or any other Loan Party that
would require the waiver or consent of any of the Lenders. Each of the Borrower and the Guarantors
hereby ratifies (i) its obligations and liabilities under the Credit Agreement and other Loan
Documents (including, without limitation, its Secured Obligations) and (ii) its grant of a security
interest in the Collateral in which it has an interest to secure the payment of the Obligations.

[Remainder of page intentionally left blank]

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their
respective authorized officers as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	Warnaco Inc., as Borrower	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jay Dubiner	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jay Dubiner	 	 
	 

	 	 	 	Title:
	 	Senior Vice President, General Counsel and Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	The Warnaco Group, Inc., as Group	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jay Dubiner	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jay Dubiner	 	 
	 

	 	 	 	Title:
	 	Senior Vice President, General Counsel and Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Authentic Fitness On-Line, Inc.	 	 
	 	 	Calvin Klein Jeanswear Company	 	 
	 	 	CCC Acquisition Corp.	 	 
	 	 	Ckj Holdings, Inc.	 	 
	 	 	Designer Holdings Ltd.	 	 
	 	 	Ocean Pacific Apparel Corp.	 	 
	 	 	Warnaco Puerto Rico, Inc.	 	 
	 	 	Warnaco Retail Inc.	 	 
	 	 	Warnaco Swimwear Inc.	 	 
	 	 	Warnaco Swimwear Products Inc.	 	 
	 	 	Cku.Com Inc.	 	 
	 	 	Warnaco U.S., Inc., as Guarantors	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Stanley P. Silverstein	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Stanley P. Silverstein	 	 
	 

	 	 	 	Title:
	 	President and Secretary	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Bank of America, N.A.,	 	 
	 	 	as Administrative Agent and Collateral Agent	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Seth Tyminski	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Seth Tyminski	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Lenders	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Bank of America, N.A.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Seth Tyminski	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Seth Tyminski	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Deutsche Bank Trust Company Americas	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Dusan Lazarov	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Dusan Lazarov	 	 
	 

	 	 	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Erin Morrissey	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Erin Morrissey	 	 
	 

	 	 	 	Title:
	 	Director	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	HSBC Bank USA, N.A.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Brian Gingue	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Brian Gingue	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	JPMorgan Chase Bank, N.A.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Sarah L. Freedman	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Sarah L. Freedman	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	RBS Business Capital, a division of RBS Asset Finance Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jennifer L. Mannila	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jennifer L. Mannila	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	U.S. Bank National Association	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jeffrey S. Gruender	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jeffrey S. Gruender	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	TD Bank N.A.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael Lockery	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Michael Lockery	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Branch Banking and Trust Company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Roberts Bass	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Roberts Bass	 	 
	 

	 	 	 	Title:
	 	Senior Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Capital One Leverage Finance Corp.	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Jon Oldham	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Jon Oldham	 	 
	 

	 	 	 	Title:
	 	Senior Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	The Bank of Nova Scotia	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ David Mahmood	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	David Mahmood	 	 
	 

	 	 	 	Title:
	 	Managing Director	 	 

[SIGNATURE PAGE TO  AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	UPS Capital Corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ William H. Talbot	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	William H. Talbot	 	 
	 

	 	 	 	Title:
	 	Director	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Intesa Sanpaolo S.p.A. New York Branch	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ John J. Michaelson	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	John J. Michaelson	 	 
	 

	 	 	 	Title:
	 	First Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Francesco Di Mario	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Francesco Di Mario	 	 
	 

	 	 	 	Title:
	 	First Vice President, Credit Manager	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]

 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	Israel Discount Bank of New York	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Esther Lainis	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Esther Lainis	 	 
	 

	 	 	 	Title:
	 	First Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ George J. Ahlmeyer	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	George J. Ahlmeyer	 	 
	 

	 	 	 	Title:
	 	Senior Vice President	 	 

[SIGNATURE PAGE TO AMENDMENT NO. 1]ex101.htm

Exhibit 10.1

 

Employment Agreement

This employment agreement (“Agreement”) is entered into as of June 20, 2011, by and between New Energy Systems Group (“Company”), a Nevada corporation with its business address at 116 West 23rd Street, 5th Fl, New York, New York, and Mr. Paul Yu Chiu Li (“Executive”), a citizen of the United States of America.

WHEREAS, the Executive desires to be employed by the Company as its Chief Financial Officer (“CFO”) and the Company wishes to employ Executive in such capacity;

NOW, THEREFORE, in consideration of the foregoing recitals and the respective covenants and agreements of the parties contained in this Agreement, the Company and Executive hereby agree as follows:

	
1.

	
Appointment

Effective August 16, 2011 (the “Effective Date”), the Company agrees to employ the Executive as the CFO of the Company.

	
2.

	
Remuneration

	
  

	
a. During the Employment Term, the Company shall pay Executive base salary of US $120,000 for the first year; base salary of US $138,000 for the second year; and base salary of US $158,700 for the third year. The Executive’s base salary shall be subject to annual review by the Board of Directors of the Company (or a committee thereof) (the “Board”) and withholding and other applicable taxes.

	 	
b. On the Effective Date, the Company agrees to grant to the Executive an option (hereinafter “Option”) to acquire, at the exercise price equals to $0.1 per share, 75,000 shares of the Company issued common stock with 1/3 vesting until the end of each year. The vested option will be exercisable at any time during three years commencing with the date of vest. If this Agreement is terminated within 3 years for any reason, any unexercised Options shall immediately be forfeited.

	 	
c. The Executive’s services shall be performed in both California, USA and Shenzhen, PRC with no less than three (3) months in each city per year. The Company will reimburse the Executive air tickets related to business conducted on behalf of the Company. The Executive selects California as his home base and shall be responsible for the costs of lodging and all other living expenses during his stay in California while the Company will bear reasonable lodging costs while the CFO is in Shenzhen and any other cities to conduct business on behalf of the Company.The Company will cover the Executive other reasonable travel expenses.

	
  

	
d. The Company will provide basic office equipments including a laptop for the Executive in both California and Shenzhen as necessary to conduct business on behalf of the Company.

	
3.

	
Responsibilities of the Executive

	
  

	
a. The Executive shall use his best efforts, skills and abilities to promote and protect the interests of the Company and devote his entire working time and energies to the business and affairs of the Company. The Executive shall regularly (and no less frequently than half month) report to the Chief Executive Officer (“CEO”) of the Company on all of his activities and shall maintain close and regular contact with the Company’s accounting and finance personnel.  Executive shall, at all times, conduct himself in a professional manner and adhere to the standards, ethical obligations, rules, policies, regulations and procedures of the Company which are presently in force or which may be established from time to time by the Company.  Executive shall take no action that violates any law, rule or regulation whatsoever while acting in his capacity as employee.  Executive shall, at all times, act in a fiduciary capacity for the Company and acknowledges the Company is relying upon and placing trust in Executive. Executive accepts the fiduciary responsibilities and trust placed in Executive by the Company.

.

  

1

  

 

 

	 	

b. During the term of this Agreement, the Executive shall serve as CFO of the Company, reporting to the CEO of the Company, and shall perform duties consistent with the position of a chief financial officer of a U.S. publicly-listed corporation with operations in the PRC. Without limiting the generality of the foregoing, the Executive shall be under the supervision and direction of the CEO. The responsibilities of the Executive include but are not limited to:

 

	
(i)  

	
Serve and execute all applicable documents, filings and reports as the principal accounting officer of the Company for purposes of the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”) and, in connection therewith, be responsible, in coordination with the Company’s existing accounting personnel, for: (A) all accounting and financial reporting and controls of the Company and its wholly-owned subsidiaries and (B) all financial related disclosure controls of the Company and its wholly-owned subsidiaries;

 

	
 (ii)  

	
Oversee all aspects of the Company’s annual audit, including communications and interactions with the Company’s independent registered accounting firm, the of Board or any designated audit committee thereof, the Chief Executive Officer and the Company’s outside legal counsel;

 

	
 (iii)  

	
Oversee the preparation and filing of the Company’s annual and quarterly financial statements and related SEC reports (including the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained therein) in conformance with all SEC rules and regulations and generally accepting accounting principles (“GAAP”) of the United States of America;

 

	
 (iv)  

	
Oversee the conversion of the Company’s financial statements from Chinese GAAP to U.S. GAAP;

 

	
(v)  

	
Design and implement relevant provisions of the Sarbanes-Oxley Act, and ensure that corporate internal governance of the Company is in compliance with relevant provisions of the U.S. securities laws and applicable stock market regulations;

 

	
(vi)  

	
Work with the Company’s  accounting and finance personnel to implement the finance function of the Company, including the preparation or review of budgets, projections and financial analyses;

 

	
(vii)  

	
Assist the Company in its communications with the SEC and all other applicable regulatory authorities;

 

	
(viii)  

	
Assist Company executives with the preparation and implementation of a strategic acquisition program and provide financial consultation and support for the Company’s acquisition initiatives;

 

	
(ix)  

	
During the Employment Term (defined below), the Executive shall lead and coordinate the Company’s investor relations activities which shall include, but is not limited to, communications with investors, analysts and media, and the Company’s public disclosure, and shall implement and monitor the corporate governance of the Company in compliance with all applicable laws and regulations. The Executive shall work in conjunction with other members of the executive management team to support the Company’s business growth;

 

	
(x)  

	
Assist the Chief Executive Officer in communications with the investment community;

 

	
(xi)   

	
Prepare road show presentations for the Company or introduce the Company to potential investors at meetings; and

 

	
(xii)  

	
Provide training to the senior management and financial staffs of the Company.

 

 

  

2

  

 

	 	

c. Executive shall never: (A) disclose any Confidential Information (defined below); or (B) directly or indirectly give or permit any person or entity to have access to any Confidential Information; or (C) make any use, commercial or otherwise, of any Confidential Information, except, solely as reasonably required to perform Executive’s employment duties with the Company and solely for the benefit of the Company.  “Confidential Information” means all confidential and proprietary information of, about, or relating to the Company and its subsidiaries and the Company’s business, including, without limitation, any and all documents received or generated by Executive, existing and potential customer lists, trade secrets (as defined under applicable state law), pricing, financial, corporate, and personnel information, customer data, methods of operation, business plans, techniques, prototypes, sketches, drawings, models, inventions, know-how, processes, apparatus, software programs, computer codes, source codes, equipment, algorithms, source documents, formulae, methods, data, descriptions relating to current, future, and proposed products and services, information concerning research, experimental work, development, specifications, engineering, procurement requirements, purchasing, agents and suppliers, business forecasts, marketing plans and information received from third parties (including customers) that is subject to a duty on Executive’s part to maintain its confidentiality.  Confidential Information does not include information that is generally known to the public, provided it is generally known to the public other than as a result of disclosure of such information by Executive in violation of this Agreement. Upon termination of his employment with the Company, the Executive shall return to the Company all documents, photographs, recorded or memory devices, papers and other property relating to the Company, containing Confidential Information, together with any copies thereof, and shall not retain any copies (either hard copy or electronic) of any Confidential Information.

 

In order to protect the goodwill of the Company and its subsidiaries and affiliates, to the fullest extent permitted by law, the Executive, both during and after the term of this Agreement, agrees not to publicly criticize, denigrate or otherwise disparage any of the Company, its subsidiaries or affiliates, and each such entity’s employees, officers, directors, consultants, other service providers, products, processes, policies, practices, standards of business conduct, or areas or techniques of research, manufacturing, or marketing.  In order to protect the business reputation of the Executive, to the fullest extent permitted by law, the Company, both during and after the term of this Agreement, agrees not to publicly criticize, denigrate, or otherwise disparage the Executive.  Nothing in this subsection shall prevent the Executive or the Company from cooperating in any governmental proceeding or from providing truthful testimony pursuant to a legally-issued subpoena.  The Executive promises to provide the Company with written notice of any request to so cooperate or provide testimony within five (5) days of being requested to do so, along with a copy of any such request, and the Company agrees to similarly provide the Executive with such notice.

 

This Clause 3 shall survive the termination of this Agreement for any reason. In the event the Executive breaches this Clause 3, the Executive acknowledges that there will be no adequate remedy at law, and the Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including monetary damages if appropriate). In any event, the Company shall have right to seek all remedies permissible under applicable law.

 

 

	
4.

	
Non-competition and Non-solicitation

In consideration of the salary paid to the Executive by the Company, the Executive agrees that during the term of the Employment and for a period of two (2) years following the termination of the Employment for whatever reason:

	
a.

	
The Executive will not approach clients, customers or contacts of the Company or other persons or entities introduced to the Executive in the Executive’s capacity as a representative of the Company for the purposes of doing business with such persons or entities which will harm the business relationship between the Company and such persons and/or entities;

	
b.

	
unless expressly consented to by the Company in writing, the Executive will not engage, own, manage, operate, control, be employed by, consult for, participate in, or be connected in any manner with the ownership, management, operation, or control of any business of any Competitor,  or provide services as a director or otherwise for any Competitor, or engage, whether as principal, partner, licensor or otherwise, in any Competitor;

	
c.

	
unless expressly consented to by the Company in writing, the Executive will not, directly or indirectly, recruit, solicit, or hire, or attempt to recruit, solicit or hire, any employee, or independent contractor of the Company to leave the employment (or independent contractor relationship) thereof, wheter or not any such employee or independent contractor is party to an employment agreement;

	
d.

	
attempt in any manner to solicit or accept from any customer of the Company, with whom the Company had significant contact during Executive’s employment by the Company (whether under this Agreement or otherwise), business of the kind or competitive with the business done by the Company with such customer or to persuade or attempt to persuade any such customer to cease to do business or to reduce the amount of business which such customer has customarily done or might do with the Company, or if any such customer elects to move its business to a person other than the Company, provide any services (of the kind or competitive with the business of the Company) for such customer, or have any discussions regarding any such service with such customer, on behalf of such other person;

	
e.

	
interfere with any relationship, contractual or otherwise, between the Company and any other party, including, without limitation, any supplier, distributor, co-venturer or joint venturer of the Company to discontinue or reduce its business with the Company or otherwise interfere in any way with the business of the Company; or

	
f.

	
have any equity or other ownership interest in, or become a director or manager of, or be otherwise associated with, or engaged or employed by, any customer, prospect or former customer of the Company or their subsidiary or parent entities or affiliates in any job or career that relates to or concerns any activity substantially similar, in whole or in part, to the Company’s business.

As used herein, “Competitor” refers to any business or activity which competes, directly or indirectly, with or carries on the business of the Company, or any business activity substantially similar to the Company’s business, as constituted, from time to time.

This Clause 4 shall survive the termination of this Agreement for any reason. In the event the Executive breaches this Clause 4, the Executive acknowledges that there will be no adequate remedy at law, and the Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including monetary damages if appropriate). In any event, the Company shall have right to seek all remedies permissible under applicable law.

 

 

  

3

  

 

	
5.

	
Responsibilities of the Company

	
a.

	
The Executive shall have been delegated appropriate authority to carry out its duties.

	
b.

	
During the term of this Agreement, the Executive shall be eligible to participate in welfare benefit plans, including but not limited to, health, medical, dental, vision, life  and disability insurance plans, to the extent that they are offered by the Company.

	
 

  c.

	
 

The Company shall obtain and maintain a policy or policies of director and officer liability insurance, in an amount not less than $5,000,000, providing the Executive with coverage for indemnifiable amounts and/or indemnifiable expenses in accordance with said insurance policy or policies to the extent provided in the Company’s bylaws and the laws of the state of Nevada during the Employment Term, provided that the Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Executive to the extent the Executive has otherwise received payment (under any insurance policy) of the amounts otherwise indemnifiable hereunder. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Executive, all amounts payable as a result of any applicable proceeding in accordance with the terms of such policies.

 

 

	
6.

	
Term of this Agreement

This Agreement shall have a term from the Effective Date until August 16, 2014 unless earlier terminated pursuant to the terms hereof (the “Employment Term”). This Agreement is renewable by written mutual consent by both parties at least two (2) months prior to the expiration of the initial term or any renewal term of the Agreement.

 

	
7.

	
Amendment

This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

	
8.

	
Termination of the Agreement

	
  

	
a. By the Company. The Company may terminate the Employment for Cause, at any time, without notice or remuneration, or for any other reason or no reason on sixty (60) days prior written notice to the Executive. “Cause” shall mean: (1) the Executive is convicted, or pleads guilty or nolo contendere to, a felony or to an act of fraud, misappropriation or embezzlement, (2) the Executive has been negligent or acted dishonestly to the detriment of the Company, (3) the Executive has engaged in actions amounting to gross negligence, misconduct, malfeasance, disloyalty, dishonesty or a breach of trust against the Company or failed to perform his duties hereunder and such failure continues after the Executive is afforded a reasonable opportunity to cure such failure, (4) the Executive’s intentional perpetration, participation in or attempted perpetration of fraud or other willful misconduct on the Company or its subsidiaries or affiliates; (5) the Executive has died, or (6) the Executive has a disability which shall mean a physical or mental impairment which, as reasonably determined by the Board renders Executive unable for a period of two (2) months to perform substantially his duties hereunder.

	
  

	
b. By the Executive. By giving a two months’ prior written notice, the Executive may resign prior to the expiration of the Agreement.

	
  

	
c. Notice of Termination. Any termination of the Executive’s employment under this Agreement shall be communicated by written notice of termination from the terminating party to the other party. The notice of termination shall indicate the specific provision(s) of this Agreement relied upon in effecting the termination.

 

	
9.

	
Notices.

All notices, requests, demands and other communications provided in connection with this Agreement shall be in writing and shall be deemed to have been duly given at the time when hand delivered, delivered by express courier, or sent by facsimile transmission (with receipt confirmed by the sender’s transmitting device) in accordance with the contact information provided below or such other contact information as the parties may have duly provided by notice.

 

 

	 	if to the Company:	 
	 	 	 
	 	 	 
	 	
New Energy Systems Group

116 West 23rd Street, 5th Floor

New York, NY 10011

Fax: (646) 367-3334

	 
	 	 	 
	 	 	 
	 	With a copy to:	 
	 	 	 
	 	 	 
	 	
Gregory Sichenzia, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Fax: (212) 930-9725

	 
	 	 	 
	 	 	 
	 	if to the Executive:	 
	 	 	 
	 	 	 
	 	
New Energy Systems Group

116 West 23rd Street, 5th Floor

New York, NY 10011

Fax: (646) 367-3334

	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

or such other address as may be designated in writing hereafter, in the same manner, by such Party.

 

 

  

4

  

 

	
10.

	
Miscellaneous Provisions

 

	
  

	
a. This Agreement embodies the entire understanding of the parties hereof, and supersedes all other oral or written agreements or understandings between them regarding the subject matter hereof. No other agreements, representations or understandings (whether oral or written) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter of this Agreement.

	 	
b. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement, which shall remain in full force and effect and the parties will act in good faith to seek to amend this Agreement so as to render the invalid or unenforceable provisions valid and enforceable while retaining the original intent and meaning of such provision to the maximum extent possible. No waiver of any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any such provision or as a waiver of any other provision of this Agreement.  No failure to exercise and no delay in exercising any right, remedy or power hereunder will preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.

	 	
c. This Agreement and all rights and obligations of the Executive hereunder are personal to the Executive and may not be transferred or assigned by the Executive at any time. The Company may assign its rights under this Agreement to any entity that assumes the Company’s obligations hereunder in connection with any sale or transfer of all or a substantial portion of the Company’s assets to such entity.

	 	
d. The headings of the paragraphs contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of any provision of this Agreement.

	 	
e. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

	 	
f. Executive acknowledges and agrees that: (A) all Work Product (as defined below) shall be deemed a work for hire; and (B) he hereby assigns all of his intellectual property and other rights in all other Work Product to the Company.  All right, title and interest in and to, and the right to pursue protection for, Work Product shall vest solely with the Company.  Upon request by the Company, Executive shall use reasonable efforts, at no additional expense, to assist the Company in securing any intellectual property protection for Work Product and shall execute all documents reasonably necessary to effect an assignment as contemplated herein. Executive hereby appoints the Company’s President or Chairman of the Board if there is no President, with full authority in the place and stead of Executive and in the name of the Executive or otherwise, from time to time in the Company’s discretion, to take any action and to execute any instrument which the Company may deem necessary or advisable to accomplish the purposes of this subsection.  Executive hereby acknowledges that such power of attorney and proxy are coupled with an interest and are irrevocable.  No license is granted to Executive in, to or under any Work Product or other intellectual property (including, but not limited to, patents, trade secrets, copyrighted materials and trademarks) owned, licensed or otherwise assertable by Executive by express or implied grant, estoppel or otherwise, except for a limited right to use any such intellectual property solely in the performance of Executive’s employment duties and solely for the benefit of the Company.  All benefits from the use of any such intellectual property, including Work Product, shall inure solely to the Company.  “Work Product” means all tangible or intangible works: (X) (1) created, produced or modified during or in connection with Executive’s employment by the Company; or (2) which are related to, or that can be utilized in, the Company Business; and (Y) that could qualify as the subject matter of a copyright, patent, trade secret or any other form of intellectual property; and shall include, without limitation, all work produced by or for the benefit of the Company, any affiliate of the Company, or any customers, former customers and prospective customers of the Company.

	 	
g. Executive agrees that all Company Property (as defined below) is the property solely of the Company and Executive waives and relinquishes any and all interests or property rights he may have therein in favor of the Company.  Executive shall immediately return all of the Company Property to the Company at such other location as may be directed by the Company upon: (A) the Company’s request at any time; and (B) upon the termination of Executive’s employment.  “Company Property” includes, but is not limited to: (X) records relating to customers, former customers, prospective customers and confidential information in whatever form they exist, and by whomever prepared, including, but not limited to, notes of Executive; (Y) tangible embodiments of or containing Work Product or confidential information; and (Z) tangible and intangible property pertaining to the Company’s business or arising out of or used by Executive in the performance of his duties for the Company.

	 	
h. Executive represents and warrants to the Company that the execution and delivery of this Agreement, compliance with the terms herein contained and Executive’s employment by the Company will not violate or cause a breach of any contract, agreement or fiduciary relationship to which Executive is a party, including, without limitation, any restrictive covenants binding Executive to a prior employer.  The Executive will not use any Work Product, the rights to which are owned by any former employer of the Executive or other person from whom the Executive has not obtained all required rights, and all Work Product developed by the Executive while employed with the Company shall be original to the Executive or developed in corroboration with other employees of the Company, and shall not infringe upon the intellectual property rights of any third party.

	 	
i. Executive shall hold the Company and its officers, directors, other employees, contractors and agents harmless from and against all claims, obligations, losses, damages, liabilities, fines, costs and expenses (including, without limitation, reasonable attorney’s fees pretrial, trial and appellate) arising out of or incurred as a result of or in connection with: (A) Executive’s failure to meet his or her obligations to the Company; (B) Executive’s breach of any covenant, warranty or representation set forth in this Agreement; and (C) Executive’s negligent, fraudulent or illegal acts.  The Company shall hold Executive harmless from and against all claims, obligations, losses, damages, liabilities, fines, reasonable costs and expenses (including, without limitation, reasonable attorney’s fees pretrial, trial and appellate) arising out of or incurred as a result of or in connection with: (X) the Company’s failure to meet its obligations to Executive hereunder, and (Y) the Company’s breach of any covenant, warranty or representation set forth in this Agreement.

	 	
j. This Agreement shall be construed and governed under and by the laws of the State of New York, USA.  Executive agrees that exclusive venue for any legal action authorized hereunder shall be in the state or federal courts located in the State of New York, city of New York.

	 	
k. The Executive shall provide his reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive’s employment hereunder, but only to the extent the Company requests such cooperation with reasonable advance notice to the Executive and in respect of such periods of time as shall not unreasonably interfere with the Executive’s ability to perform his duties with any subsequent employer; provided, however, the Company shall pay any reasonable travel, lodging and related expenses that the Executive may incur in connection with providing all such cooperation, to the extent approved by the Company prior to incurring such expenses.

SIGNATURE PAGE FOLLOWS

  

5

  

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

COMPANY

NEW ENERGY SYSTEMS GROUP

 

/s/ Nian Chen

By: Nian Chen

Title: Chief Executive Officer

New Energy Systems Group

 

EXECUTIVE

 

/s/ Paul Yu Chiu Li

By:  Paul Yu Chiu Li

 

 

6

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