Exhibit 10.1
SECOND AMENDMENT
Dated as of September 26, 1997
This SECOND AMENDMENT among The Xxxxx Karan Company, a New York
general partnership, The Xxxxx Karan Company Store, G.P., a New York general
partnership, Xxxxx Karan Studio, a New York general partnership, and DK Footwear
Partners, a New York general partnership (collectively, the "Borrowers"), the
financial institutions from time to time parties thereto as lenders (the
"Lenders"), the financial institutions from time to time parties thereto as
issuing banks (the "Issuing Banks"), Citibank, N.A., in its capacity as
administration agent for the Lenders and the Issuing Banks (the "Administrative
Agent"), The Chase Manhattan Bank and Nationsbank, N.A., in their capacity as
co-agents (the "Co-Agents").
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders, the Issuing Banks, the Co-Agents and
the Administrative Agent have entered into an Amended and Restated Credit
Agreement dated as of May 30, 1997 (the "Credit Agreement"). Unless otherwise
defined herein, the terms defined in the Credit Agreement shall be used herein
as therein defined.
(2) The Borrowers and the Lenders have agreed to amend the Credit
Agreement as hereinafter set forth.
SECTION 1. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, hereby amended as follows:
(a) The definition for "Applicable Fixed Rate Margin" in Section 1.01
of the Credit Agreement is amended in full to read as follows:
"APPLICABLE FIXED RATE MARGIN" means initially a rate equal to 2.25%
per annum until the last day of the first fiscal quarter of 1998.
Thereafter, such rate will fluctuate quarterly on the first day of
each fiscal quarter, commencing with the second fiscal
quarter of 1998, based upon the Fixed Charge Coverage Ratio for the
preceding twelve-month period, calculated as of the last day of such
preceding twelve-month period, as set forth below:
If the Fixed Charge Applicable Fixed
Coverage Ratio is: Rate Margin
------------------- ----------------
Less than 3.0 2.25%
Greater than or equal to
3.0 but less than 4.0 1.75%
Greater than or equal to
4.0 but less than 5.0 1.50%.
Greater than or equal to
5.0 but less than 6.0 1.25%
Greater than or equal to
6.0 1.00%."
(b) The definition for "Applicable Floating Rate Margin" in Section
1.01 of the Credit Agreement is amended in full to read as follows:
"APPLICABLE FLOATING RATE MARGIN" means initially a rate equal to
1.00% per annum until the last day of the first fiscal quarter of
1998. Thereafter, such rate will fluctuate quarterly on the first day
of each fiscal quarter, commencing with the second fiscal quarter of
1998, based upon the Fixed Charge Coverage Ratio for the preceding
twelve-month period, calculated as of the last day of such preceding
twelve-month period, as set forth below:
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If the Fixed Charge Applicable Floating
Coverage Ratio is: Rate Margin
------------------- -------------------
Less than 3.0 1.0000%
Greater than or equal to
3.0 but less than 4.0 0.5000%
Greater than or equal to
4.0 but less than 5.0 0.2500%.
Greater than or equal to
5.0 but less than 6.0 0.1875%
Greater than or equal to
6.0 0.1250%"
(c) Clause (b) in the definition for "Borrowing Base" in Section 1.01
of the Credit Agreement is amended in full to read as follows:
"(b) up to eighty percent (80%) of Eligible Receivables (other than
those Eligible Receivables described in clause (a) of this definition)
LESS such reserves as the Administrative Agent, in its sole
discretion, deems appropriate PLUS"
(d) Section 1.03 of the Credit Agreement is amended in full to read
as follows:
"1.03. ACCOUNTING TERMS. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP. For purposes of calculating
the financial covenants herein, (i) the leases of the Borrowers with
respect to their computer equipment shall be treated as operating
leases in accordance with Borrowers' past practices and (ii) any gain
or loss that results from the sale of the beauty division shall not be
taken into account."
(e) Subsection (e) of Section 7.01 of the Credit Agreement is amended
in full to read as follows:
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"(e) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than (i) June 30, 1997 with
respect to Fiscal Year 1997, (ii) December 1, 1997 with respect to
Fiscal Year 1998 and (iii) with respect to each Fiscal Year
thereafter, thirty (30) days after the beginning of each such fiscal
year of Xxxxx Karan International, (A) a monthly budget for such
Fiscal Year; (B) an annual business plan for such Fiscal Year,
substantially in the form of the business plan heretofore delivered to
the Administrative Agent and the Lenders, accompanied by a report
reconciling all changes and departures from the business plan
delivered to the Administrative Agent and the Lenders for the
preceding Fiscal Year and (C) a consolidated and consolidating plan
and financial forecast, prepared in accordance with Xxxxx Karan
International's normal accounting procedures applied on a consistent
basis, for each succeeding Fiscal Year until the Commitment
Termination Date, including, without limitation, (I) a forecasted
consolidated balance sheet, and the related consolidated statements of
income, stockholders' equity and cash flows of Xxxxx Karan
International and its Subsidiaries for and as of the end of such
Fiscal Year, and the forecasted consolidating statements of income of
each Borrower for such Fiscal Year, (II) forecasted consolidated
balance sheets, and the related consolidated statements of income,
stockholders' equity and cash flows of Xxxxx Karan International and
its Subsidiaries for and as of the end of each fiscal month of such
Fiscal Year, and the forecasted consolidating statements of income of
each Borrower for and as of the end of each fiscal month of such
Fiscal Year, (III) the amount of forecasted Capital Expenditures for
such Fiscal Year and (IV) forecasted compliance with the provisions of
ARTICLE X."
(f) Subsection (a) of Section 7.02 of the Credit Agreement is amended
in full to read as follows:
"(a) The Borrowers shall provide the Administrative Agent and each
Lender with a Borrowing Base Certificate, certified as being true and
correct by the Borrowers' chief financial officer, controller or any
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other officer acceptable to the Administrative Agent, (i) with respect
to the period from September 26, 1997 to January 30, 1998, on the
seventh Business Day following the last day of each week and (ii)
with respect to all time thereafter, on the seventh Business Day
following the last day of each fiscal month, or more frequently if
requested by the Administrative Agent. Each subsequent Borrowing Base
Certificate shall be based upon, with respect to Receivables and
Inventory, information as of the last day of the immediately preceding
week or fiscal month, as the case may be. Each such Borrowing Base
Certificate shall set forth Borrowing Base calculations since the date
of the last prior Borrowing Base Certificate and shall include a
weekly summary aging of Receivables or monthly summary aging of
Receivables, as the case may be, a weekly or monthly schedule, as the
case may be, of each category of Eligible Inventory and all Eligible
Inventory that has become ineligible, specifying the applicable
category of ineligibility and such other information as the
Administrative Agent may request from time to time."
(g) Article VIII of the Credit Agreement is amended by adding at the
end thereof a new section to read as follows:
"8.13. AVAILABILITY. The Borrowers shall have at all times
Availability in an amount of at least $10,000,000; PROVIDED, HOWEVER,
that the Borrowers shall be permitted to have Availability in an
amount of less than $10,000,000 for a period of not more than five
consecutive days."
(h) Subsection (vii) of Section 9.01 of the Credit Agreement is
amended in full to read as follows:
"(vii) Accommodation Obligations in respect of performance guaranties
made by Xxxxx Karan International (A) on behalf of any of its
Subsidiaries or Xxxxx Karan Japan K.K. in an aggregate amount not to
exceed $10,000,000 at any one time outstanding or (B) on behalf of
Xxxxx Karan Studio and The Xxxxx Karan Company in connection with the
sale of the beauty division in an aggregate amount not to exceed
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$21,000,000 plus the amount of the indemnities owing by Xxxxx Karan
Studio and The Xxxxx Karan Company relating thereto;"
(i) Section 9.01 of the Credit Agreement is amended by deleting the
period at the end of subsection (viii) and substituting therefor "; and"
and by adding at the end thereof a new subsection (ix) to read as follows:
"(ix) subordinated indebtedness in an approximate amount of
$6,500,000 incurred by Xxxxx Karan Studio owing to Xxxxx Karan
individually containing terms and conditions satisfactory to the
Agent.
(j) Section 9.03 of the Credit Agreement is amended by deleting the
period at the end of subsection (vi) and substituting therefor "; and" and
by adding at the end thereof a new subsection (vii) to read as follows:
"(vii) the Lien of any financial institution in the computer hardware
of the Xxxxx Karan Group in connection with such financial
institution's refinancing of the Indebtedness secured by such
property."
(k) Subsection (vii) of Section 9.08 of the Credit Agreement is
amended in full to read as follows:
"(vii) the on-going royalty fees payable to Gabrielle Studio, Inc.
pursuant to the terms of the License Agreement, PROVIDED, HOWEVER,
that the royalty fees payable in November 1997 shall be payable in
cash only to the extent that an equivalent amount is made available to
Xxxxx Karan Studio on a subordinated basis as permitted in Section
9.01(ix);"
(l) Article IX of the Credit Agreement is amended by adding at the
end thereof a new section to read as follows:
"9.18. MAXIMUM CREDIT. The Borrowers shall not permit, at any time
during the periods set forth below, the sum of (i) the Revolving
Credit Obligations at such time PLUS (ii) the amount of the Foreign
Exchange Exposure at such time PLUS (iii) the amount of the
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Obligations at such time attributable to corporate credit cards or
cash management functions, including Automated Clearing House (ACH)
functions, performed by Citibank, to EXCEED the amount set forth
opposite such Period:
Period Amount
------ ------
September 1-30, 1997 $120,000,000
October 1-31, 1997 $120,000,000
November 1-30, 1997 $120,000,000
December 1, 1997 to
January 19, 1998 $115,000,000
January 20-30, 1998 $ 75,000,000
All times thereafter $ 60,000,000"
(m) Section 10.01 of the Credit Agreement is amended by adding a
PROVISO at the end thereof that reads as follows:
"PROVIDED, HOWEVER, that (i) for all times during the period from
September 26, 1997 to January 30, 1998, the Adjusted Net Worth of
Xxxxx Karan International and its Subsidiaries on a consolidated basis
shall not be less than $140,000,000 and (ii) as of January 31, 1998,
Borrowers shall be in compliance with the Adjusted Net Worth
requirements for the fourth fiscal quarter of 1997 as set forth
above."
SECTION 2. WAIVERS. The Lenders hereby waive, effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 3 hereof, compliance by the Borrowers with the provisions of
Sections 10.02, 10.03, 10.04 and 10.05 of the Credit Agreement during the period
from the date hereof until January 30, 1998; PROVIDED, HOWEVER, that as of
January 31, 1998, the Borrowers shall be in compliance with the provisions of
such Sections for the fourth fiscal quarter of 1997.
SECTION 3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall
become effective when (i) the Administrative Agent shall have received
counterparts of this Second Amendment executed by the Borrowers and the
Requisite Lenders and (ii) the Borrowers shall have paid to the Agent for the
benefit of each
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Lender that has executed this Amendment, a fee equal to 0.125% of such Lender's
Commitment.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each
Borrower represents and warrants as follows:
(a) After giving effect to this Second Amendment, all of the
representations and warranties contained in Section 6.01 of the Credit
Agreement and in the other Loan Documents shall be true in all material
respects.
(b) After giving effect to this Second Amendment, no Default or Event
of Default shall have occurred and be continuing.
(c) As of the date hereof, no material adverse change shall have
occurred in the condition (financial or otherwise), performance,
properties, operations or prospects of the Borrowers or Xxxxx Karan
International and its Subsidiaries, taken as a whole, since December 29,
1996 except as publicly disclosed prior to September 26, 1997.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon
the effectiveness of this Second Amendment, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and
all other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Loan Documents and all of the Collateral
described therein do and shall continue to secure the payment of all obligations
of the Borrowers under the Credit Agreement, the Notes and the other Loan
Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Second
Amendment shall not, except as expressly provided herein,
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operate as a waiver of any right, power or remedy of any Lender or the Agent
under any of the Loan Documents, nor constitute a waiver of any provision of any
of the Loan Documents.
SECTION 6. EXECUTION IN COUNTERPARTS. This Second Amendment may be
executed in any number of counterparts and by 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 agreement.
SECTION 7. GOVERNING LAW. This Second Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written.
THE XXXXX KARAN COMPANY
By: Xxxxx Karan International Inc., a general
partner
By: /s/
-------------------------------------
Title:
-------------------------------
XXXXX KARAN STUDIO
By: Xxxxx Karan International Inc., a general
partner
By: /s/
-------------------------------------
Title:
-------------------------------
THE XXXXX KARAN COMPANY STORE, G.P.
By: Xxxxx Karan International Inc., a general
partner
By: /s/
-------------------------------------
Title:
-------------------------------
DK FOOTWEAR PARTNERS
By: Xxxxx Karan International Inc., a general
partner
By: /s/
-------------------------------------
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Title:
-------------------------------
CITIBANK, N.A., as Administrative Agent
and Lender
By: /s/
--------------------------------------
Vice President
THE CHASE MANHATTAN BANK, as Co-Agent
and Lender
By: /s/
--------------------------------------
Vice President
NATIONSBANK N.A., as Co-Agent and Lender
By: /s/
--------------------------------------
Vice President
BANKBOSTON N.A.
By: /s/
--------------------------------------
Vice President
UNION BANK OF CALIFORNIA
By: /s/
--------------------------------------
Vice President
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