Amendment To Senior Credit Facility

Execution Copy


AMENDMENT, dated as of June 22, 1998 (this "AMENDMENT"), to the Credit Agreement, dated as of October 30,1996 (as the same may be amended, supplemented, waived or otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized terms used herein but not otherwise defined herein shall be as defined in the Credit Agreement), among THE WILLIAM CARTER COMPANY, a Massachusetts corporation ("CARTER'S" or the "COMPANY"), as successor by merger to TWCC ACQUISITION CORP., a Massachusetts corporation, the several lenders from time to time parties thereto (the "LENDERS"), CHASE SECURITIES INC. ("CSI") and BT SECURITIES CORPORATION ("BTSC"), as arrangers (the "ARRANGERS"), CSI, as advisor to the Company in connection with the Merger (as defined in the Credit Agreement) and the other transactions contemplated by the Credit Agreement, BANKERS TRUST COMPANY, as syndication agent (in such capacity, the "SYNDICATION AGENT"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("GOLDMAN SACHS"), as documentation agent (in such capacity, the "DOCUMENTATION AGENT") and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT").


W I T N E S S E T H


WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make certain loans and other extensions of credit to the Company;


WHEREAS, the Company has requested that the Lenders amend the Credit Agreement to, among other things, (i) increase aggregate Revolving Credit Commitments to $65,000,000, (ii) provide that the Applicable Margin and commitment fees be based upon the financial leverage of the Company, (iii) increase the Letter of Credit sublimit to $15,000,000, (iv) permit the Company to retain Net Proceeds from the possible sale of its Textile Operations (as defined herein) subject to certain terms and conditions and (v) increase the Base Amount in respect of Capital Expenditures to $20,000,000 for each fiscal year of the Company;


WHEREAS, the Lenders are willing to agree to the requested amendments, but only upon the terms and conditions set forth herein;


NOW THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:


I. AMENDMENTS TO THE CREDIT AGREEMENT.


1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as defined therein.


2. AMENDMENT TO SUBSECTION 1.1 (DEFINED TERMS). Subsection 1.1 of the Credit Agreement is hereby amended by (a) deleting clause (b) from the definition of "Net Proceeds" therein in its entirety and substituting in lieu thereof the following clause (b):


"(b) any Asset Sale, excluding (i) any net proceeds received upon any
condemnation or exercise of rights of eminent domain to the extent the
same shall be deemed not to constitute Net Proceeds pursuant to the
proviso to subsection 8.5(d), (ii) any proceeds of insurance received upon
any casualty or loss, (iii) any net proceeds consisting of repayments or
prepayments, in whole or in part, of loans permitted under subsection
8.6(g) or any interest or other amounts paid in respect of such loans and
(iv) any net proceeds received from the sale or other disposition of the
Textile Operations not to exceed $30,000,000 in the aggregate (including
any net proceeds consisting of principal repayments or prepayments under
clause (iii)) PROVIDED that, in the case of clause (iv), (x) such net
proceeds (excluding any net proceeds under clause (iii)) are reinvested in
new or existing properties within eighteen months and (y) the Senior
Leverage Ratio based upon the date of the most recent financial statements
delivered to the Administrative Agent pursuant to subsection 7.1(c) prior
to the date of receipt of such net proceeds (excluding any net proceeds
under clause (iii)) shall be less than 2.50 to 1.00;";


(b) deleting the definitions of "Applicable Margin" and "Revolving Credit Commitment" therein in their entirety and substituting in lieu thereof in proper alphabetical order the following:


"APPLICABLE MARGIN": for any day, with respect to any Term
Loan, Revolving Credit Loan or Swing Line Loan of the Types set forth
below, or with respect to the commitment fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under each
caption for Term Loans, Revolving Credit Loans or Swing Line Loans, as the
case may be, of "Alternate Base Rate Loan" or "Eurodollar Loan" or under
the caption "Commitment Fee Rate", as the case may be, based upon the
Total Leverage Ratio as set forth under the relevant column heading below:


- ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
REVOLVING REVOLVING SWING COMMITMENT
TOTAL LEVERAGE RATIO: CREDIT LOANS CREDIT LOANS TERM LOANS TERM LOANS LINE LOANS FEE RATE


Alternate Eurodollar Alternate Eurodollar Alternate
Base Rate Loan Loan Base Loan Base Loan
Rate Loan - ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
4.75 and above 1.50% 2.50% 1.75% 2.75% 1.50% 0.50% - ---------------------------- --------------- -------------- -------------- ------------ ----------- ----------- 4.25 and above but less 1.25% 2.25% 1.50% 2.50% 1.25% 0.50%
than 4.75 - ---------------------------- --------------- -------------- -------------- ------------ ----------- ----------- 4.00 and above but less 1.00% 2.00% 1.25% 2.25% 1.00% 0.50%
than 4.25 - ---------------------------- --------------- -------------- -------------- ------------ ----------- ----------- 3.50 and above but less 0.75% 1.75% 1.00% 2.00% 0.75% 0.375%
than 4.00 - ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------
less than 3.50 0.50% 1.50% 1.00% 2.00% 0.50% 0.375% - ---------------------------- --------------- -------------- -------------- ------------ ----------- -----------


2


The Applicable Margin for any date shall be determined by reference to the
Total Leverage Ratio as of the last day of the fiscal quarter most
recently ended, and any change in the Applicable Margin shall become
effective upon the delivery to the Administrative Agent of a certificate
of the chief financial officer of the Company pursuant to subsection
7.2(b) (which certificate may be delivered prior to delivery of the
relevant financial statements) with respect to the financial statements to
be delivered pursuant to subsection 7.1(a) and (b) for the most recently
ended fiscal quarter or fiscal year, as the case may be, (x) setting forth
in reasonable detail the calculation of the Total Leverage Ratio at the
end of such fiscal quarter and (y) stating that the signer has reviewed
the terms of this Agreement and other Credit Documents and has made, or
caused to be made under his supervision, a review in reasonable detail of
the transactions and condition of the Company and its Subsidiaries during
the applicable fiscal quarter, and that the signer does not have knowledge
of the existence as of the date of such officers' certificate of any Event
of Default or Default and any such change in the Applicable Margin shall
apply (i) in the case of Alternate Base Rate Loans, to Alternate Base Rate
Loans outstanding on such delivery date or made on and after such delivery
date, (ii) in the case of Eurodollar Loans, to Eurodollar Loans
outstanding on such delivery date or made on and after such delivery date
and (iii) in the case of commitment fees, to the Available Revolving
Credit Commitments on and after such delivery date in accordance with
subsection 3.2. It is understood that the foregoing certificate of the
chief financial officer shall be permitted to be delivered prior to, but
in no event later than, the time of the actual delivery of the financial
statements required to be delivered pursuant to subsection 7.1.
Notwithstanding the foregoing, (i) at all times from the date of
effectiveness of the Amendment, dated as of June 22, 1998, to this
Agreement to the date on which the chief financial officer delivers the
certificate set forth in the first sentence of this paragraph in respect
of the financial statements delivered pursuant to subsection 7.1 for the
fiscal year of the Company ended January 2, 1999, the Applicable Margin
shall be (v) for Revolving Credit Loans which are Eurodollar Loans, 2.25%,
(w) for Revolving Credit Loans and Swing Line Loans which are Alternate
Base Rate Loans, 1.25%, (x) for Term Loans which are Eurodollar Loans,
2.50%, (y) for Term Loans which are Alternate Base Rate Loans, 1.50% and
(z) with respect to commitment fees payable hereunder, 0.50% or (ii) if
the Company fails to deliver the certificate required under subsection
7.2(b) with respect to a fiscal quarter or fiscal year, as the case may
be, then the Applicable Margin shall be (x) during the period from the
date upon which such certificate was required to be delivered until the
date upon which it actually is delivered, the Applicable Margin in effect
immediately prior to the date such certificate was due, and (y) if such
certificate, when actually delivered, would have required an increase in
the Applicable Margin over the Applicable Margin in effect immediately
prior to the date such certificate was due, the Company shall promptly
following the delivery of such certificate pay to the Lenders and the
Administrative Agent any additional amounts of interest or fees which
would have been payable on any previous Interest Payment Date had such
higher Applicable Margin been in effect from the date such certificate was
required to be delivered."


"REVOLVING CREDIT COMMITMENT": as to any Lender, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 3.1, and
to purchase its L/C Participating Interest in any Letter of Credit, in an
aggregate amount not to exceed the amount set forth under such Lender's
name in Schedule I opposite the caption "Revolving Credit Commitment" or
in Schedule 1 to the Assignment and Acceptance by which such Lender
acquired its Revolving Credit Commitment, as the same may be reduced fr ...