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Exhibit 10.4
FOURTH AMENDMENT
TO
FINANCING AGREEMENT
Fourth Amendment, dated as of September 30, 1996, to the
Financing Agreement, dated as of April 28, 1995, as amended and supplemented
prior to the date hereof, (as so amended and supplemented, the "Financing
Agreement"), by and among New Rio, L.L.C., a Delaware limited liability company
(the "Company"), Designer Holdings Ltd., a Delaware corporation formerly known
as Denim Holdings, Inc. ("Designer Holdings"), Jeanswear Holdings, Inc., a
Delaware corporation ("Jeanswear Holdings"), Rio Sportswear, Inc., a Delaware
corporation formerly known as New Rio Sportswear, Inc. ("Rio"), Xxxxxx Xxxxx
Jeanswear Company, a Delaware corporation ("Jeanswear" and together with Rio
each a "Borrower" and collectively the "Borrowers"), each of the financial
institutions a party hereto (each a "Lender" and collectively the "Lenders") and
The CIT Group/Commercial Services, Inc., as agent for the Lenders (in such
capacity, the "Agent").
BACKGROUND
Jeanswear, directly or through Outlet Holdings, Inc. ("Outlet
Holdings") and Outlet Stores, Inc. ("Outlet Stores"), each a newly formed
wholly-owned subsidiary of Jeanswear, proposes to enter into one or more
acquisition and license agreements with CK (as defined in the Financing
Agreement) pursuant to which Jeanswear or such subsidiaries, among other things,
will purchase the right to establish, maintain and operate free-standing
"outlet" stores identified by the name and trademark "Xxxxxx Xxxxx" throughout
the United States, Mexico and Canada and, in connection therewith, will purchase
the related leasehold improvements and inventory from CK (the "CK Acquisition").
On September 27, 1996, Broadway Jeanswear Holdings, Inc.
("Broadway Holdings"), Broadway Jeanswear Company, Inc. ("Broadway Jeanswear")
and Broadway Jeanswear Sourcing, Inc. ("Broadway Sourcing"), each a newly formed
direct wholly-owned subsidiary of Designer Holdings, entered into a 30-year
licensing agreement with DK Studio (as hereinafter defined) pursuant to which
they purchased, among other things, the license for the exclusive production,
sale and distribution of men's, women's and, with certain exceptions, children's
jeanswear under the DKNY jeans label and, in connection therewith, purchased
inventory and entered into certain related agreements (the "DKNY Acquisition").
In addition, Designer Holdings proposes to create
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a Delaware statutory business trust (the "Trust") and to cause the Trust to
issue Convertible Trust Originated Preferred Securities SM in an aggregate
amount not to exceed $142,268,050 for sale to the public by the Trust on
substantially the same terms as described in the Preliminary Prospectus to the
Registration Statement on Form S-1 (File No. 33-13097), filed by Designer
Holdings and the Trust with the Securities and Exchange Commission on September
30, 1996, as amended through October 22, 1996 (the "Public Financing").
In connection with the CK Acquisition, the DKNY Acquisition and
the Public Financing, the Company, Designer Holdings, Jeanswear Holdings and the
Borrowers desire to (i) make Outlet Holdings, Outlet Stores, Broadway Holdings,
Broadway Jeanswear and Broadway Sourcing Guarantors under the Financing
Agreement and to make each such subsidiary pledge its assets as collateral for
all of the Obligations (as defined in the Financing Agreement) under the
Financing Agreement, (ii) amend certain terms and conditions of the Financing
Agreement, and (iii) waive certain defaults under the Financing Agreement caused
by the CK Acquisition and/or the DKNY Acquisition. The Agent and the Lenders
agree to amend the Financing Agreement and grant such waivers, all upon the
terms and subject to the conditions herein set forth.
Accordingly, the Borrowers, the Guarantors, the Agent and the
Lenders hereby agree as follows:
1. Definitions. All capitalized terms used herein and not
otherwise defined herein are used herein as defined in the Financing Agreement.
2. Existing Definitions. (a) The definition of the term "License
Agreements" in Section 1.01 of the Financing Agreement is hereby amended by
deleting such definition in its entirety and inserting the following in its
place:
"'License Agreements' means, collectively, the Xxxxxx Xxxxx
License Agreement, the Xxxx Xxxxx License Agreement, the CK Store License
Agreement and the DKNY License Agreement."
(b) Clause (ii) of the definition of the term "Change of Control"
in Section 1.01 of the Financing Agreement is hereby amended by deleting such
definition in its entirety and inserting the following in its place:
"(ii) the Company shall cease to directly own and control, of
record and beneficially, at least 51% of the then outstanding voting stock of
Designer Holdings free and clear of all liens, provided that the foregoing
percentage of voting stock may be reduced below 51% as a result of the
conversion of the Subordinated Debentures into common stock of Designer Holdings
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pursuant to the Public Financing,"
3. New Definitions. The following new definitions are hereby
added to Section 1.01 of the Financing Agreement in the appropriate alphabetical
order:
"'Broadway Holdings' means Broadway Jeanswear Holdings, Inc., a
Delaware corporation and direct wholly-owned subsidiary of Designer Holdings."
"'Broadway Jeanswear' means Broadway Jeanswear Company, Inc., a
Delaware corporation and direct wholly-owned subsidiary of Designer Holdings."
"'Broadway Sourcing' means Broadway Jeanswear Sourcing, Inc., a
Delaware corporation and direct wholly-owned subsidiary of Designer Holdings."
"'CK Acquisition' means the acquisition by Jeanswear, directly or
through Outlet Holdings and/or Outlet Stores, from CK of, among other things,
the right to establish, maintain and operate free-standing "outlet" stores
identified by the name "Xxxxxx Xxxxx" throughout the United States, Mexico and
Canada, and in connection therewith, the purchase from CK of related leasehold
improvements and "inventory."
"'CK Acquisition Agreement' means the Asset Purchase Agreement
dated as of October 28, 1996 between Outlet Stores and CK."
"'CK Outlet Stores' has the meaning specified for the term
"Stores" in the CK Store License Agreement."
"'CK Store License Agreement' means the Store License Agreement
dated as of October 28, 1996 between CK and Jeanswear."
"'CK Store Leases' means the leases of the CK Outlet Stores
entered into and/or assumed by Outlet Stores, as lessee, at the time of closing
of the CK Store License Agreement and thereafter."
"'Common Securities Guarantee' means the guarantee to be entered
into by Designer Holdings guaranteeing the obligations of the Trust with respect
to the common securities of the Trust representing undivided beneficial
interests in the assets of the Trust.
"'Creative Services Agreement' means the letter agreement dated
September 27, 1996 among Xxxxx Karan Creative Services, a division of The Xxxxx
Karan Company, The Xxxxx Karan Company and Broadway Jeanswear."
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"'Declaration of Trust' means the Amended and Restated
Declaration of Trust of the Trust to be entered into among Designer Holdings, as
sponsor, IBJ Xxxxxxxx Bank & Trust Company, as property trustee, Delaware Trust
Capital Management, Inc., as Delaware trustee, and Xxxxxx X. Xxxxxxx and Xxxxxx
X. Xxxxx, as trustees."
"'DKNY Acquisition' means the acquisition by the DKNY Licensees,
pursuant to the DKNY License Agreement and the documents and agreements entered
into in connection therewith, of the 30-year license for the exclusive
production, sale and distribution of men's, woman's and, with certain
exceptions, children's jeanswear under the DKNY jeans label, and the purchase of
inventory in connection therewith.
"'DKNY License Agreement' means the Jeanswear License Agreement
dated September 27, 1996, among DK Studio and the DKNY Licensees."
"'DKNY Licensees' means, collectively, Broadway Holdings,
Broadway Jeanswear and Broadway Sourcing."
"'DK Studio' means Xxxxx Karan Studio, a New York partnership and
a subsidiary of Xxxxx Karan International Inc."
"'Indenture' means the Indenture to be entered into between
Designer Holdings and IBJ Xxxxxxxx Bank & Trust Company, as indenture trustee
relating to the Subordinated Debentures."
"'Occupancy Agreement' means the Occupancy Agreement made as of
the 27th day of September, 1996, between DK Studio and Broadway Jeanswear."
"'Preferred Securities' means up to $138,000,000 amount of the
Convertible Trust Originated Preferred Securities SM proposed to be issued by
the Trust in connection with the Public Financing."
"'Preferred Securities Guarantee' means the Preferred Securities
Guarantee Agreement to be entered into between Designer Holdings, as guarantor,
and IBJ Xxxxxxxx Bank & Trust Company, as guarantee trustee, with respect to the
Preferred Securities pursuant to the Public Financing."
"'Public Financing' means the issuance of the Preferred
Securities in aggregate amount not to exceed $142,268,050 for sale to the public
by the Trust on substantially the same terms as described in the Preliminary
Prospectus to the Registration Statement on Form S-1 (File No. 33-13097) filed
by Designer Holdings and the Trust with the Securities and Exchange Commission
on September 30, 1996, as amended through October 22,
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1996."
"'Public Financing Documents' means, collectively, the Indenture,
the Declaration of Trust, the Preferred Securities, the Subordinated Debentures,
the Public Financing Guarantees and any other document or agreement entered into
or created pursuant to or in connection with the Public Financing."
"'Public Financing Guarantees' means, collective- ly, the Common
Securities Guarantee and the Preferred Securities Guarantee."
"'Secaucus Lease' has the meaning specified therefor in Section
7.02(c)(ix) hereto."
"'Subordinated Debentures' means the Convertible Subordinated
Debentures which Designer Holdings proposes to issue and sell to the Trust in
connection with the Public Financing in an aggregate principal amount not to
exceed $142,268,050."
"'Trust' means Designer Finance Trust, a statutory business trust
formed under the laws of the State of Delaware in connection with the Public
Financing, the assets of which will consist solely of the Subordinated
Debentures and the common securities of which will be wholly owned directly or
indirectly by Designer Holdings."
4. Use of Proceeds. (a) Paragraph (w) of Section 6.01 of the
Financing Agreement is hereby amended by deleting such paragraph (w) in its
entirety and inserting the following in its place:
"(w) Use of Proceeds. The proceeds of the Loans shall be used
to refinance existing Indebtedness of the Borrowers, to make certain
other payments in connection with the reorganization of the Company and
its Subsidiaries, the Public Financing, the DKNY Acquisition and the CK
Acquisition and for general working capital purposes of Designer
Holdings and its Subsidiaries. The Letters of Credit will be used to
purchase and finance Inventory in the ordinary course of Designer
Holdings' and its Subsidiaries' businesses and for other general
working capital purposes."
(b) Paragraph (z) of Section 6.01 of the Financing Agreement is hereby
amended by deleting the first clause thereof in its entirety beginning with the
word "After" through the words "Letter of Credit" immediately preceding the
colon and by inserting the following in its place:
"After giving effect to the Restructuring, the CK
Acquisition, the DKNY Acquisition, the Public Financing and other
transactions contemplated or required to occur by the
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terms of this Agreement and before giving effect to each
Loan and Letter of Credit"
5. Affirmative Covenants. (a) Clause (xii) of Section 7.01 (a) of
the Financing Agreement is hereby amended by deleting such clause (xii) thereof
in its entirety and inserting the following in its place:
"(xii) as soon as possible and in any event (A) within 5 days after
receipt or delivery thereof, copies of any material notices that (i)
the Borrowers or the DKNY Licensees receive from or send to Xxxx Xxxxx,
DK Studio or CK in connection with the License Agreements, (ii)
Broadway Jeanswear receives from or sends to DK Studio in connection
with the Occupancy Agreement or Xxxxx Karan Creative Services or The
Xxxxx Karan Company in connection with the Creative Services Agreement,
(iii) Outlet Stores receives from or sends to CK in connection with the
CK Acquisition Agreement or (iv) Designer Holdings or the Trust receive
from or send to any Person in connection with the Public Financing and
(B) within 5 Business Days prior to the effective date thereof, copies
of any amendments, modifications, waivers or other changes to any of
the License Agreements, the Occupancy Agreement, the Creative Services
Agreement, the CK Acquisition Agreement or any of the Public Financing
Documents;"
(b) Section 7.01(a) of the Financing Agreement is hereby amended
by deleting the word "and" after clause (xiv) thereof, by re-numbering clause
(xv) thereof to be clause (xvi) and by adding the following new clause (xv):
"(xv) as soon as possible and in any event within two days of
the filing thereof, copies of all filings made with the Securities and
Exchange Commission in connection with the Public Financing; and"
(c) Section 7.01 of the Financing Agreement is hereby amended by
adding the following new paragraphs (q) and (r) after paragraph (p) thereof:
"(q) Public Financing. (i) Designer Holdings shall provide the
Agent with copies of the Indenture, the Declaration of Trust, the form
of Subordinated Debenture and Preferred Security, the Public Financing
Guarantees and all other material Public Financing documents prior to
the execution or effectiveness thereof and each of the Indenture, the
Public Financing Guarantees, the Declaration of Trust, the Subordinated
Debenture and the Preferred Securities shall be in substantially the
same form as the copies thereof delivered to the Agent on October 29,
1996, with such changes as the Agent may approve, and each of the other
Public Financing Documents shall be satisfactory in form and
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substance to the Agent.
(ii) Upon receipt by Designer Holdings of notice from the Agent
that an Event of Default has occurred and is continuing under this
Agreement, Designer Holdings will, if so required by the Agent,
immediately thereafter take all actions necessary pursuant to the
Indenture to defer interest payments on the Subordinated Debentures and
effect an Extension Period (as defined in the Indenture) pursuant to
the Indenture, which Extension Period shall remain in effect until such
time as such Event of Default has either been cured or waived pursuant
to the terms of this Agreement. During any such Extension Period,
Designer Holdings shall not directly or indirectly, by deposit of
monies or otherwise, prepay, purchase, redeem, retire, defease or
otherwise acquire, or make any payment on account of any principal of,
premium or interest payable in connection with the payment, prepayment,
redemption, defeasance or retirement of any Subordinated Debentures.
Notwithstanding anything herein or in the Public Financing Documents to
the contrary, Designer Holdings shall not, without the prior written
consent of the Required Lenders, permit any Extension Period or the
aggregate of all Extension Periods to exceed 17 quarters."
"(r) CK Acquisition. (i) Each of Outlet Holdings and Outlet
Stores shall provide the Agent with copies of the CK Acquisition
Agreement, the CK Store License Agreement and all other material
documents or agreements entered into or created in connection therewith
prior to the execution or effectiveness thereof and each of the CK
Acquisition Agreement and the CK Store License Agreement shall be in
substantially the same form as the copies thereof delivered to the
Agent on October 29, 1996, with such changes as the Agent may approve,
and each of such other material documents shall be satisfactory in form
and substance to the Agent."
6. Negative Covenants. (a) Paragraph (b) of Section 7.02 of the
Financing Agreement is hereby amended by (1) deleting the word "or" prior to
"(B)" and inserting a comma in its place and by adding the words "or (C) to
Designer Holdings by the DKNY Licensees" before the word "provided" and (2)
deleting the word "and" after clause (vii) thereof, by deleting the period after
clause (viii) thereof and inserting a semicolon in its place and by adding the
following:
"(ix) Indebtedness consisting of (A) the Bonus (as defined in
the DKNY License Agreement) payable to DK Studio in the aggregate
amount of $54,000,000 and (B) the Guaranteed Minimum Royalty (as
defined in the DKNY License Agreement) payable to DK Studio; and
(x) provided the transactions effecting the Public Financing
are consummated, (A) Indebtedness of Designer Holdings under the
Subordinated Debentures in an aggregate amount not to exceed
$142,268,050, provided that Designer Holdings shall promptly make a
prepayment of any outstanding Loans with the Net Proceeds received by
it from the Public Financing, to be first applied to the principal
installments of the Term Loans in the inverse order of maturity and
accompanied by any accrued interest thereon and second to the Revolving
Credit Loans then outstanding and any accrued interest thereon."
(b) Paragraph (c) of Section 7.02 of the Financ-
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ing Agreement is hereby amended by deleting the word "and" after clause (iv)
thereof, by deleting the period after clause (v) thereof and inserting a
semicolon in its place and by adding the following:
"(vi) the Guaranty dated September 27, 1996, made by Designer
Holdings in favor of DK Studio guaranteeing the obligation of the DKNY
Licensees pursuant to the DKNY License Agreement;
(vii) guarantees made by Designer Holdings in favor of the
lessors of the CK Outlet Stores guaranteeing the Operating Lease
Obligations of Outlet Stores under the CK Store Leases permitted by
clause (C) of Section 7.02(g) of this Agreement;
(viii) the Public Financing Guarantees;
(ix) the Lease Guaranty by Designer Holdings guaranteeing the
obligations of Floor Ready Apparel, a New Jersey limited liability
company, as tenant under the Lease Agreement between Floor Ready
Apparel and Security Capital Industrial Trust, as landlord (the
"Secaucus Lease"), in each case in form and substance satisfactory to
the Agent; and
(x) the Guaranties, each dated October 28, 1996, made by
Jeanswear and Designer Holdings, respectively, in favor of CK
guaranteeing the obligations of Outlet Stores pursuant to the CK Store
License Agreement."
(c) Paragraph (e) of Section 7.02 of the Financing Agreement is
hereby amended by deleting such paragraph (e) in its entirety and inserting the
following in its place:
"(e) Change in Nature of Business. Except for the businesses
carried on or proposed to be carried on as a result of the CK
Acquisition and the DKNY Acquisition, make, or permit any of their
Subsidiaries to make, any substantial change in the nature of its
business as carried on at the date hereof (after giving effect to the
transactions contemplated by the Loan Documents)."
(d) Paragraph (f) of Section 7.02 of the Financ-
ing Agreement is hereby amended by: (1) deleting clause (iii)
thereof in its entirety and inserting the following in its place:
"(iii) (A) loans or advances made by any Borrower to the
other Borrower, (B) loans or advances by Jeanswear to its Subsidiaries
or by the Subsidiaries of Jeanswear to Jeanswear and (C) loans or
advances made by Designer Holdings to the DKNY Licensees, provided that
(v) the aggregate
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amount of loans or advances made by Jeanswear to its Subsidiaries other
than Outlet Stores and Outlet Holdings after the Effective Date shall
not exceed $1,000,000; (w) the aggregate amount of loans or advances
made by Jeanswear to Outlet Stores and Outlet Holdings shall not exceed
$10,000,000 outstanding at any time; (x) the aggregate amount of loans
or advances made by Designer Holdings to the DKNY Licensees shall not
exceed $10,000,000 outstanding at any time; (y) the repayment of all
such loans or advances is subordinated to the payment of the
Obligations on terms approved in writing by the Agent; and (z) all such
indebtedness shall be evidenced by one or more promissory notes and
such notes or other instruments evidencing such Indebtedness shall be
pledged to the Agent for the benefit of the Lenders;"
and (2) deleting the word "and" after the semicolon at the end of clause (vi)
thereof, by re-numbering clause (vii) thereof to be clause (x) and by inserting
the following after clause (vi) thereof:
"(vii) the investment by Designer Holdings in the common
securities of the Trust and the purchase by the Trust of Subordinated
Debentures from Designer Holdings;
(viii) an advance by the DKNY Licensees of the Guaranteed
Minimum Royalty for the first annual period pursuant to the DKNY
License Agreement;
(ix) the investment by Designer Holdings in Outlet Holdings
and Outlet Stores and the investment by Jeanswear in each of Broadway
Holdings, Broadway Jeanswear and Broadway Sourcing; and"
(e) Paragraph (g) of Section 7.02 of the Financing Agreement is
hereby amended by deleting such Paragraph (g) in its entirety and inserting the
following in its place:
"(g) Lease Obligations. Create, incur or suffer to exist, or
permit any of their Subsidiaries to create, incur or suffer to exist,
any obligations as lessee (i) for the payment of rent for any real or
personal property in connection with any sale and leaseback
transaction, or (ii) for the payment of rent for any real or personal
property under leases or agreements to lease other than (A) obligations
under Capitalized Leases (other than the existing Capitalized Leases
set forth on Schedule 7.02(g) hereto) which would not cause the
aggregate amount of all obligations under Capitalized Leases entered
into after the Effective Date owing by the Loan Parties in any Fiscal
Year to exceed the amounts set forth in subsection (h) of this Section
7.02, (B) Operating Lease Obligations which would
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not cause the aggregate amount of all Operating Lease Obligations
(other than Operating Lease Obligations set forth on Schedule 7.02(g)
hereto, including Operating Lease Obligations of Outlet Stores under
the CK Store Leases and assumed in connection with the CK Acquisition
and Operating Lease Obligations of Broadway Jeanswear under the
Occupancy Agreement) owing by the Loan Parties in any Fiscal Year to
exceed $250,000 or such greater amount as shall be approved by the
Required Lenders, (C) Operating Lease Obligations of Outlet Stores
under the CK Store Leases which would not cause the aggregate amount of
all Operating Lease Obligations of Outlet Stores under the CK Store
Leases (other than the Operating Lease Obligations under the CK Store
Leases set forth on Schedule 7.02(g) hereto) to exceed $2,000,000 in
any Fiscal Year or such greater amount as shall be approved by the
Required Lenders, (D) Operating Lease Obligations of Broadway Jeanswear
under the Occupancy Agreement in an aggregate amount not to exceed
$600,000 in any Fiscal Year or such greater amount as shall be approved
by the Required Lenders and (E) Operating Lease Obligations of Designer
Holdings under the Secaucus Lease resulting from an assignment of such
lease to Designer Holdings from Floor Ready Apparel or a sublease of
the Premises (as defined in the Secaucus Lease) by Floor Ready Apparel
to Designer Holdings, in an aggregate amount not to exceed $3,500,000
in any Fiscal Year or such greater amount as shall be approved by the
Required Lenders."
(f) Paragraph (h) of Section 7.02 of the Financing Agreement is
hereby amended by deleting the first sentence thereof in its entirety and
inserting the following in its place:
"Make or be committed to make, or permit any of its
Subsidiaries to make or be committed to make, any expenditure
(by purchase or Capitalized Lease) for fixed or capital assets
other than (i) expenditures (including obligations under
Capitalized Leases) which would not cause the aggregate amount
of all such expenditures to exceed $3,800,000 for the Fiscal
Year ended December 31, 1995, $10,000,000 for the Fiscal Year
ended December 31, 1996, $1,200,000 for the Fiscal Year ended
December 31, 1997, $1,100,000 for the Fiscal Year ended
December 31, 1998 and $1,000,000 for each Fiscal Year
thereafter, provided that for any Fiscal Year an amount equal
to the carryover amount for such Fiscal Year may be carried
over to the next succeeding Fiscal Year (but no further
succeeding fiscal year) and (ii) expenditures by Outlet Stores
made in connection with the CK Acquisition and the operation
of the CK Outlet Stores in an amount not to exceed
$4,000,000."
(g) Section 7.02 (i) of the Financing Agreement
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is hereby amended by adding the words "or permit any of its Subsidiaries to do
any of the foregoing" before the semicolon immediately preceding the proviso and
by deleting the proviso thereof in its entirety and inserting the following in
its place:
"provided, however, that (i) Abbeville and Kaijay may declare
and pay dividends to Jeanswear and (ii) subject to Sections 7.01(q) and
7.02(t) hereof, Subsidiaries of Designer Holdings may pay dividends or
make other payments to Designer Holdings in an aggregate amount
necessary to enable Designer Holdings to make payments of interest
(including additional interest) and expenses required to be made
pursuant to the terms of the Subordinated Debentures and the Indenture
(and Designer Holdings may make payments of interest (including
additional interest) and expenses on the Subordinated Debentures), and
the Trust may pay dividends to the holders of the Preferred Securities,
in each case pursuant to the terms and conditions as described in the
Prospectus for the Public Offering dated September 30, 1996, as amended
through the date hereof."
(h) Section 7.02 of the Financing Agreement is hereby amended by
adding the following new paragraphs after paragraph (r) thereof:
"(s) Public Financing. Permit (A) the obligations of Designer
Holdings under the Public Financing Guarantees or the Subordinated
Debentures or any other obligations of Designer Holdings in connection
with the Public Financing to become secured obligations or to rank pari
passu with or senior to any of the Obligations, (B) the Trust to engage
in any activity other than the (i) issuing the Preferred Securities and
common securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Preferred
Securities and the common securities of the Trust in the Subordinated
Debentures and (iii) only those other activities necessary or
incidental thereto, or (C) any change in any material term of the
Public Financing as described in the Preliminary Prospectus to the
Registration Statement on Form S-1 (File No. 33-13097) filed by
Designer Holdings and the Trust with the Securities and Exchange
Commission on September 30, 1996, as amended through October 22, 1996,
or include in any document or agreement any material term not so
described therein, without the prior written consent of the Required
Lenders.
(t) Amendment or Waiver of Public Financing
Documents; Prepayment of Subordinated Debentures. (i)
Agree, or permit any of its Subsidiaries to agree, to any
amendment or other change to (or make any payment consistent
with any amendment or other change to), or waive any of its
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rights under, any of the Public Financing Documents or refinance any of
the Subordinated Debentures without obtaining the prior written consent
of the Required Lenders to such amendment, modification, payment,
waiver, change or refinancing, provided that such consent shall not be
required if such amendment, modification, waiver, change or refinancing
(A) does not increase the amount payable under or in connection with
any of the Subordinated Debentures or the obligations of Designer
Holdings or any of its Subsidiaries thereunder or under any of the
other Public Financing Documents, (B) is not adverse to the interests
of the Lenders and (C) does not provide for terms more restrictive to
Designer Holdings or any of its Subsidiaries than those terms in effect
prior to such amendment, modification, waiver, change or refinancing;
or
(ii) Directly or indirectly, by deposit of monies or
otherwise, prepay, purchase, redeem, retire, defease or otherwise
acquire, or make any payment on account of any principal of, premium or
interest payable in connection with the payment, prepayment,
redemption, defeasance or retirement of any Subordinated Debentures
during any Extension Period which is in effect or required to be in
effect as a result of any Event of Default hereunder pursuant to
Section 7.01(q) hereof, provided that during any period when an
Extension Period is not in effect or required to be in effect as a
result of any Event of Default hereunder pursuant to Section 7.01(q)
hereof, payments of interest (including additional interest) may be
made pursuant to the terms of the Subordinated Debentures and payments
of dividends may be made to holders of the Preferred Securities
pursuant to the Public Financing Documents."
7. Events of Default. (a) Paragraph (p) of Section 10.01 of the
Financing Agreement is hereby amended by deleting such paragraph in its entirety
and inserting the follow- ing in its place:
"(p) A breach, default or event of default shall occur under
any License Agreement if the effect of such breach, default or event of
default is to permit Xxxx Xxxxx, DK Studio or CK to terminate its
respective License Agreement or License Agreements, any License
Agreement shall terminate for any reason or Xxxx Xxxxx, DK Studio or CK
shall exercise any remedies under any License Agreement which exercise
of remedies could reasonably be expected to adversely affect the
ability of the Borrowers to repay or otherwise perform their
Obligations under this Agreement or the ability of the Guarantors to
perform their obligations under the Loan Documents to which they are a
party or any breach, default or event of default shall occur under any
of the CK Acquisition Agreement, the Creative Services Agree-
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ment or the Occupancy Agreement on the part of Outlet Stores or any
DKNY Licensee, as the case may be, if the effect of such breach,
default or event of default is to permit the other party or parties
thereto to terminate any such Agreement or such party or parties shall
exercise any of its remedies thereunder, which exercise of remedies
could reasonably be expected to adversely affect the ability of the
Borrowers to repay or otherwise perform their Obligations under this
Agreement or the ability of any of the Guarantors to perform their
Obligations under the Loan Documents to which they are a party;"
(b) Section 10.01 of the Financing Agreement is hereby amended by adding
the following after paragraph (p) thereof:
"(q) A breach, default or event of default shall occur under
the Indenture, the Declaration of Trust, the Public Financing
Guarantees or any other Public Financing Document, if the effect of
such breach, default or event of default is to accelerate, or to permit
the acceleration of, the maturity of any Subordinated Debenture or
Preferred Securities."
8. Miscellaneous. (a) From and after the Amendment Effective
Date, the Schedules to the Financing Agreement shall be deemed to include, where
applicable, each of Outlet Holdings, Outlet Stores and the DKNY Licensees. Each
of Schedules 6.01(e), 6.01(f), 6.01(y), 6.01(aa) and 7.02(g) are hereby amended
to include the information set forth in Annex I, Annex II, Annex III, Annex IV
and Annex V, respectively, to this Amendment.
(b) The Borrowers and the Guarantors shall deliver to the Agent
(A) within 30 days of the Amendment Effective Date, certified copies of requests
for copies of information on Form UCC-11, listing all effective financing
statements which name as debtor any of Outlet Holdings, Outlet Stores or the
DKNY Licensees and which are filed in the offices which in the reasonable
opinion of the Agent are desirable to perfect the security interests purported
to be created by the Security Agreements, together with copies of such financing
statements, none of which, except as otherwise agreed to in writing by the
Agent, shall cover any of the Collateral and (B) within 10 days of the Amendment
Effective Date, an opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel to
the Borrowers and the Guarantors (including Outlet Holdings, Outlet Stores and
the DKNY Licensees), in form and substance satisfactory to the Agent and its
counsel.
(c) The parties hereto acknowledge that the terms of the Public
Financing as described in the Preliminary Prospectus to the Registration
Statement on Form S-1 (File No. 33-13097) filed by Designer Holdings and the
Trust with the Securities and
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Exchange Commission on September 30, 1996, as amended through October 22, 1996
and in accordance with the terms and conditions set forth herein with respect
thereto will not be a violation of Section 7.02(m) of the Financing Agreement.
9. Conditions to Effectiveness. This Amendment shall become
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions shall have been satisfied being
herein called the "Amendment Effective Date"):
(i) The representations and warranties contained in
this Amendment and in Article VI of the Financing Agreement shall be
correct in all material respects on and as of the Amendment Effective
Date as though made on and as of such date (except where such
representations and warranties relate to an earlier date in which case
such representations and warranties shall be true and correct as of
such earlier date); no Event of Default or Default shall have occurred
and be continuing (except as and to the extent expressly waived herein)
on the Amendment Effective Date, or result from this Amendment becoming
effective in accordance with its terms.
(ii) The Agent shall have received counterparts of
this Amendment which bear the signatures of the Borrowers, the
Guarantors (including Outlet Holdings, Outlet Stores and the DKNY
Licensees) and each of the Lenders.
(iii) Each of Designer Holdings and Jeanswear shall
have executed and delivered to the Agent an amendment to its Pledge
Agreement, pledging the Capital Stock of each of Broadway Holdings,
Broadway Jeanswear and Broadway Sourcing, in the case of Designer
Holdings, and Outlet Holdings and Outlet Stores, in the case of
Jeanswear (the "Specified Stock"), and shall have delivered to the
Agent the original stock certificates representing all of the Specified
Stock, together with undated stock powers executed in blank.
(iv) The Agent shall have received a copy of the
resolutions adopted by the Board of Directors of each of the Borrowers
and the Guarantors (including Outlet Holdings, Outlet Stores and the
DKNY Licensees), certified as of the Amendment Effective Date by
authorized officers thereof, authorizing, (A) the transactions
contemplated by the Financing Agreement as amended hereby, and (B) the
execution, delivery and performance by each of the Borrowers and the
Guarantors (including Outlet Holdings, Outlet Stores and the DKNY
Licensees) of this Amendment and each other document executed in
connection with or contemplated by this
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Amendment, including, without limitation, in the case of Jeanswear, the
execution, delivery and performance by Jeanswear of the CK Store
License Agreement, in the case of Outlet Stores, the execution,
delivery and performance of the CK Acquisition Agreement, in the case
of the DKNY Licensees, the execution, delivery and performance by the
DKNY Licensees of the DKNY License Agreement and, in the case of
Designer Holdings, the execution, delivery and performance of the
Public Financing Documents.
(v) The Agent shall have received a certificate of
authorized officers of the Borrowers and Guarantors (including Outlet
Holdings, Outlet Stores and the DKNY Licensees) certifying the names
and true signatures of the officers of the Borrowers and the Guarantors
authorized to sign this Amendment and all other documents executed in
connection with this Amendment together with evidence of the incumbency
of such authorized officers.
(vi) The Agent shall have received a certificate of
the chief executive officer or the chief financial officer of each of
the Borrowers and Guarantors (including Outlet Holdings, Outlet Stores
and the DKNY Licensees) certifying as to the matters set forth in
subsection (i) of this Section 9.
(vii) The Agent shall have received a guaranty,
substantially in the form of Exhibit C to the Financing Agreement,
guaranteeing the Obligations, executed by each of Outlet Holdings,
Outlet Stores, Broadway Holdings, Broadway Jeanswear and Broadway
Sourcing;
(viii) The Agent shall have received a security
agreement, substantially in the form of Exhibit D to the Financing
Agreement, securing the guaranty described in clause (vii) above,
executed by each of Outlet Holdings, Outlet Stores, Broadway Holdings,
Broadway Jeanswear and Broadway Sourcing;
(ix) The Agent shall have received the appropriate
financing statements on Form UCC-1, duly executed by each of Outlet
Holdings, Outlet Stores and each DKNY Licensee and duly filed in such
office or offices as may be necessary or, in the reasonable opinion of
the Agent, desirable to perfect the security interests purported to be
created by the Security Agreements;
(x) The Agent shall have received a certificate of
the appropriate official(s) of the states of incorporation and each
state of foreign qualification of each of Outlet Holdings, Outlet
Stores and the DKNY Licensees, certifying as to the subsistence in good
standing of,
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and the payment of taxes by, such Persons in such states and listing
all charter documents of such Persons on file with such official(s),
together with confirmation by telephone or telegram (where available)
on the Amendment Effective Date from such official(s) as to such
matters;
(xi) The Agent shall have received a copy of the
charter or articles of incorporation, as appropriate, of each of Outlet
Holdings, Outlet Stores and the DKNY Licensees certified by the
appropriate official(s) of the state of organization of such Person and
as of the Amendment Effective Date by an authorized officer of such
Person;
(xii) The Agent shall have received a copy of the
by-laws of each of Outlet Holdings, Outlet Stores and the DKNY
Licensees, certified as of the Effective Date by an authorized officer
of such person;
(xiii) The Agent shall have received a copy of each
of the DKNY License Agreement, the Creative Services Agreement and the
Occupancy Agreement as in effect on the Amendment Effective Date,
certified as a true and correct copy thereof by the chief executive
officer or the chief financial officer of each of the DKNY Licensees,
as the case may be, together with a certification that such Agreements
remain in full force and effect and that the applicable DKNY Licensees
have not breached or defaulted in any of their obligations under any
of such Agreements;
(xiv) The Agent shall have received a certificate
of insurance evidencing the insurance required to be maintained by the
Company and its Subsidiaries pursuant to Section 7.01(h) of the
Financing Agreement, naming the Agent as additional insured and loss
payee, using a long form loss payee endorsement for all insurance
maintained by the Company and its Subsidiaries;
(xv) The Agent shall have received a copy of each
of the Indenture, the Declaration of Trust, the Public Financing
Guarantees, the CK Store Leases, the CK Acquisition Agreement and the
CK Store License Agreement certified as a true and correct copy thereof
by the chief executive officer or chief financial officer of Jeanswear
and Designer Holdings together with a certification that each such
agreement is in substantially final form.
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(xvi) The Agent shall have received such other
agreements, instruments, approvals, opinions and other documents as the
Agent may reasonably request; and
(xvii) All legal matters incident to this Amendment
shall be satisfactory to the Agent and its counsel.
10. Representations and Warranties. Each of the Borrowers and the
Guarantors represents and warrants to the Lenders as follows:
(a) Each Borrower and Guarantor (i) is duly organized, validly
existing and in good standing under the laws of the state of its organization
and (ii) has all requisite power, authority and legal right to execute, deliver
and perform this Amendment, the CK Store License Agreement, in the case of
Jeanswear, the CK Acquisition Agreement, in the case of Outlet Stores, the DKNY
License Agreement, the Creative Services Agreement, the Occupancy Agreement, in
the case of the applicable DKNY Licensees, the Public Financing Documents, in
the case of Designer Holdings and all other documents executed by it in
connection with or contemplated by this Amendment, and to perform the Financing
Agreement, as amended hereby.
(b) The execution, delivery and performance by each of the
Borrowers and the Guarantors of this Amendment and all other documents executed
by it in connection with or contemplated by this Amendment, including, without
limitation, in the case of Jeanswear, the CK Store License Agreement, in the
case of Outlet Stores, the CK Acquisition Agreement, and, in the case of the
applicable DKNY Licensees, the DKNY License Agreement, the Creative Services
Agreement and the Occupancy Agreement and the performance by each of the
Borrowers and the Guarantors of the Financing Agreement as amended hereby and,
in the case of Jeanswear, the CK Store License Agreement and, in the case of
Outlet Stores, the CK Acquisition Agreement and, in the case of the applicable
DKNY Licensees, the DKNY License Agreement, the Creative Services Agreement and
the Occupancy Agreement, (i) have been duly authorized by all necessary action,
(ii) do not and will not violate or create a default under any Borrower's or
Guarantor's organizational documents, any applicable law or any contractual
restriction binding on or otherwise affecting any Borrower or Guarantor or any
of such Borrower's or Guarantor's properties, and (iii) except as provided in
the Loan Documents, do not and will not result in or require the creation of any
Lien, upon or with respect to any Borrower's or Guarantor's property.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due
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execution, delivery and performance by any of the Borrowers and the Guarantors
of this Amendment and all other documents executed by it in connection with or
as contemplated by this Amendment, and the performance by the Borrowers and the
Guarantors of the Financing Agreement as amended hereby.
(d) This Amendment and the Financing Agreement, as amended
hereby, and all other documents executed in connection with this Amendment
constitute the legal, valid and binding obligations of the Borrowers and the
Guarantors party thereto, enforceable against such Persons in accordance with
their terms.
(e) The representations and warranties contained in Article VI of
the Financing Agreement are correct on and as of the Amendment Effective Date as
though made on and as of the Amendment Effective Date (except to the extent such
representations and warranties expressly relate to an earlier date), and no
Event of Default or Default, has occurred and is continuing on and as of the
Amendment Effective Date.
(f) The Escrow Agreement dated September 27, 1996 among DK
Studio, the DKNY Licensees and Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Xxxxxx LLP has
expired in accordance with its terms (without acceleration or early termination)
and is of no further force and effect.
11. Waivers and Consents. (a) Pursuant to the request of the
Borrowers and the Guarantors and in accordance with Section 12.03 of the
Financing Agreement, and subject to the satisfaction of the conditions to
effectiveness set forth in Section 9 of this Amendment, the Lenders and the
Agent hereby consent to, and waive any Event of Default that would otherwise
arise under Section 10.01 of the Financing Agreement from (i) any non-compliance
by the Borrowers with the provisions of Sections 7.02(b), 7.02(c), 7.02(e),
7.02(f), 7.02(g) and 7.02(h) of the Financing Agreement by reason of the
creation of new Subsidiaries by Jeanswear and Designer Holdings and the
consummation of the CK Acquisition and the DKNY Acquisition, (ii) any
non-compliance by the Borrowers with the provisions of Section 7.02(b) of the
Financing Agreement in connection with expenditures for fixed or capital assets
for the Fiscal Year ended December 31, 1996 exceeding the amount permitted under
Section 7.02(h) of the Financing Agreement provided that such expenditures do
not in the aggregate exceed $10,000,000, (iii) any non-compliance by Designer
Holdings and Jeanswear with the provisions of Section 7.01(b) of the Financing
Agreement by reason of the failure of Designer Holdings and Jeanswear, as the
case may be, to cause each of Broadway Holdings, Broadway Jeanswear and Broadway
Sourcing, in the case of Designer Holdings and Outlet Holdings and Outlet
Stores, in the case of Jeanswear, to execute a guaranty and a security agreement
and (iv) any non-compliance by Designer Holdings and Jeanswear with the
provisions of Section 7.01(b) of the Financing Agreement by reason of the
failure of Designer Holdings and Jeanswear, as the case may be, to pledge the
Capital Stock of Broadway Holdings, Broadway Jeanswear and Broadway Sourcing, in
the case of Designer Holdings and Outlet Holdings and Outlet Stores, in the case
of Jeanswear.
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(b) The waivers and consents in this Section 10 shall be
effective only in this specific instance and for the specific purposes set forth
herein and do not allow for any other or further departure from the terms and
conditions of the Financing Agreement or any other Loan Document, which terms
and conditions shall continue in full force and effect.
12. Continued Effectiveness of Financing Agreement. Each of the
Borrowers and the Guarantors hereby (i) confirms and agrees that each Loan
Document to which it is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Amendment Effective Date of this Amendment all references in any such
Loan Document to "the Financing Agreement", "thereto", "thereof", "thereunder"
or words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment, and (ii) confirms and agrees
that to the extent that any such Loan Document purports to assign or pledge to
the Agent, or to grant to the Agent a Lien on any collateral as security for the
Obligations of the Borrowers or the Guarantors from time to time existing in
respect of the Financing Agreement and the Loan Documents, such pledge,
assignment and/or grant of a Lien is hereby ratified and confirmed in all
respects.
13. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
(d) The Borrowers will pay on demand all fees, costs and expenses
of the Agent in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the reasonable fees, disbursements and
other charges of Xxxxxxx Xxxx & Xxxxx LLP, counsel to the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
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NEW RIO, L.L.C.
By: /s/ Xxxx X. Xxxxx
Title:
DESIGNER HOLDINGS LTD.
By: /s/ Xxxx X. Xxxxx
Title:
JEANSWEAR HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxx
Title:
RIO SPORTSWEAR, INC.
By: /s/ Xxxx X. Xxxxx
Title:
XXXXXX XXXXX JEANSWEAR COMPANY
By: /s/ Xxxx X. Xxxxx
Title:
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AGENT AND LENDER
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By: /s/ Xxxxx Xxxxxxxx
Title:
LENDERS
BTM CAPITAL CORPORATION, formerly
known as BOT Financial Corporation
By: /s/ Xxxxxx Xxxxxxx
Title:
FLEET CAPITAL CORPORATION,
as successor-in-interest to
SHAWMUT CAPITAL CORPORATION
By:
Title:
THE CHASE MANHATTAN BANK
By: /s/ Xxxxxx Xxxxxxxx
Title:
IBJ XXXXXXXX BANK & TRUST COMPANY
By: /s/ Xxxx Xxxxx
Title:
LASALLE BUSINESS CREDIT, INC.
By: /s/ Xxxxxx X. Xxxxx
Title:
NATIONAL CITY COMMERCIAL FINANCE, INC.
By: /s/ Xxx Xxxxx
Title:
BANK LEUMI TRUST COMPANY OF
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NEW YORK
By: /s/ Xxxxxx Xxxxxxxx
Title:
BNY FINANCIAL CORPORATION
By:
Title:
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ACKNOWLEDGMENT
By signing below, the undersigned hereby acknowledge and agree to the terms of
Sections 10, 11 and 12 of this Amendment as if such Sections were applicable to
the undersigned.
BROADWAY JEANSWEAR HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxx
Title:
BROADWAY JEANSWEAR COMPANY, INC.
By: /s/ Xxxx X. Xxxxx
Title:
BROADWAY JEANSWEAR SOURCING, INC.
By: /s/ Xxxx X. Xxxxx
Title:
OUTLET STORES, INC.
By: /s/ Xxxx X. Xxxxx
Title:
OUTLET HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxx
Title:
ABBEVILLE ACQUISITION COMPANY
By: /s/ Xxxx X. Xxxxx
Title:
AEI MANAGEMENT COMPANY
By: /s/ Xxxx X. Xxxxx
Title:
KAIJAY ACQUISITION COMPANY
By: /s/ Xxxx X. Xxxxx
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Title:
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ANNEX I
SCHEDULE 6.01(e)
Inventory Locations, Places of Business; Chief Executive Office
1
26
ANNEX II
SCHEDULE 6.01(f)
SUBSIDIARIES
2
27
ANNEX III
SCHEDULE 6.01(y)
TRADENAMES
3
28
ANNEX IV
SCHEDULE 6.01(aa)
MATERIAL CONTRACTS
4
29
ANNEX V
SCHEDULE 7.02(g)
CK STORE LEASE OPERATING LEASE OBLIGATIONS
5
