Exhibit 10.28
EXECUTION COPY
FOURTH AMENDMENT
Dated as of February 14, 2000
This FOURTH AMENDMENT (the "Fourth 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 a Second Amended and
Restated Credit Agreement dated as of January 29, 1998, as amended from time to
time (as so amended, 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 2 hereof, hereby amended as follows:
(a) The definition of "Acceptance Termination Date" set forth
in Section 1.01 of the Credit Agreement is amended by deleting such
definition in its entirety and substituting therefor the following:
"'ACCEPTANCE TERMINATION DATE' means the day which is the
earliest of (i) January 31, 2003, (ii) the termination of the
Commitments pursuant to SECTION 11.02(a), (iii) the date of
termination in whole of the Domestic Commitments pursuant to
SECTION 3.01(a) and (iv) the date of the termination of the
Acceptance Commitment pursuant to SECTION 2.04(l)."
(b) The first sentence of the definitions of "Applicable Fixed
Rate Margin" and the "Applicable Floating Rate Margin" is amended by
inserting the word "first" before the term "EBITDA certificate".
(c) The definition of "Commitment Termination Date" set forth
in Section 1.01 of the Credit Agreement is amended by deleting such
definition in its entirety and substituting therefor the following:
"'COMMITMENT TERMINATION DATE' means the day which is the
earliest of (A) May 1, 2003, (B) the termination of the
Commitments pursuant to SECTION 11.02(a) and (C) the date of
termination in whole of the Commitments pursuant to SECTION
3.01(a)."
(d) The definition of "EBITDA" set forth in Section 1.01 of
the Credit Agreement is amended by deleting such definition in its
entirety and substituting therefor the following:
"'EBITDA' means, for any Financial Covenant Period, for Xxxxx
Karan International and its Subsidiaries on a consolidated
basis (i) the sum of the amounts for such period of (A) Net
Income, (B) depreciation and amortization expense, (C)
interest expense, (D) federal, state, local and foreign income
taxes and (E) unusual expense associated with the write-off of
the capitalized portion of financing costs; MINUS (ii) gains
from Asset Sales (but including expense reimbursements in
connection with Asset Sales closing in 1996); PLUS (iii)
losses from Asset Sales; MINUS (iv) extraordinary gains; MINUS
(v) interest income; MINUS (vi) any gain relating to the
accumulated effect of any change in accounting method; PLUS
(vii) any loss relating to the accumulated effect of any
change in accounting method; PLUS (viii) the non-cash
restructuring charges and other non-recurring non-cash charges
incurred in Fiscal Year 1999 in an amount not to exceed
$7,000,000, each item in clauses (i) through (viii) calculated
in conformity with GAAP for such period."
(e) The definition of "Fixed Charge Coverage Ratio" set forth
in Section 1.01 of the Credit Agreement is amended by deleting such
definition in its entirety and substituting therefor the following:
"'FIXED CHARGE COVERAGE RATIO' means, for any Financial
Covenant Period, the ratio of (i) EBITDA PLUS the Net Cash
Proceeds of Asset Sales received during such period MINUS
Capital Expenditures made during such period (excluding
$9,200,000, representing the cash portion of the purchase
price for the UK Acquisition, from the fourth fiscal quarter
of 1999) MINUS the Investments made pursuant to SECTION
9.04(iv) during such period MINUS any dividends payments or
stock repurchases with respect to the Common Stock during such
period MINUS any cash payment of taxes made during such
period, to (ii) Cash Interest Expense for such period PLUS any
principal payment of Funded Debt made during such period
(excluding for each fiscal quarter in Fiscal Year 2002, the
amount of any repayment of the subordinated indebtedness
incurred by The Xxxxx Karan Company and Xxxxx Karan Stores
(U.K.) Limited owing to X.X. Xxx/Club 21 and/or its affiliates
provided that such amount does not exceed $8,700,000."
2
(f) The definition of "Indebtedness" set forth in Section 1.01
of the Credit Agreement is amended by deleting such definition in its
entirety and substituting therefor the following:
"'INDEBTEDNESS' means, as applied to any Person at any time,
(a) all indebtedness, obligations or other liabilities of such
Person (i) for borrowed money or evidenced by debt securities,
debentures, acceptances, notes or other similar instruments,
and any accrued interest, fees and charges relating thereto,
(ii) under profit payment agreements or in respect of
obligations to redeem, repurchase or exchange any Securities
of such Person or to pay dividends in respect of any stock,
(iii) with respect to letters of credit issued for such
Person's account, (iv) to pay the deferred purchase price of
property or services, except accounts payable and accrued
expenses arising in the ordinary course of business, (v) in
respect of Capital Leases; (b) Accommodation Obligations with
respect to indebtedness, obligations or other liabilities of a
Person of a type set forth in clause (a); (c) all
indebtedness, obligations or other liabilities of such Person
or others secured by a Lien (other than a Customary Permitted
Lien) on any property of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by such
Person, all as of such time; (d) all indebtedness, obligations
or other liabilities of such Person in respect of Interest
Rate Contracts and foreign exchange contracts, net of
liabilities owed to such Person by the counterparties thereon;
(e) all preferred stock subject (upon the occurrence of any
contingency or otherwise) to mandatory redemption; and (f) all
contingent Contractual Obligations with respect to any of the
foregoing."
(g) Clause (f) of Section 7.01 of the Credit Agreement is
amended by deleting such Section in its entirety and substituting
therefor the following:
"(f) EBITDA REPORT. On or prior to February 28 of each Fiscal
Year, a certificate, signed by Xxxxx Karan International's
chief financial officer or controller, setting forth
calculations (with such specificity as the Requisite Lenders
may reasonably request) for the determination of EBITDA for
the immediately preceding Fiscal Year and compliance with
Section 10.06."
(h) Clause (v) of Section 9.01 of the Credit Agreement is
amended by deleting such Section in its entirety and substituting
therefor the following:
"(v) Indebtedness incurred under foreign exchange hedging
contracts;"
(i) Section 9.01 of the Credit Agreement is further amended by
adding at the end thereof a new clause (x) to read as follows:
"(x) Indebtedness incurred by one member of the Xxxxx Karan
Group owing to another member of the Xxxxx Karan Group."
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(j) Section 9.03 of the Credit Agreement is amended by adding
at the end thereof a new clause (viii) to read as follows:
"(viii) Liens on cash in an aggregate amount not to exceed
$4,000,000 securing Indebtedness permitted under SECTION
9.01(v)."
(k) Section 9.04 of the Credit Agreement is amended by adding
at the end thereof a new clause (v) to read as follows:
"(v) Investments by any member of the Xxxxx Karan Group in any
of its Subsidiaries in existence on February 1, 2000 and any
Subsidiary created in compliance with SECTION 9.09(b)."
(l) Section 9.06 of the Credit Agreement is amended by adding
at the end thereof a new clause (viii) to read as follows:
"(viii) the repayment of the subordinated indebtedness
incurred by The Xxxxx Karan Company and Xxxxx Karan Stores
(U.K.) Limited owing to X.X. Xxx/Club 21 and/or its affiliates
in an amount not to exceed $8,700,000; PROVIDED that at the
time of such repayment and after giving effect thereto the
Borrowers have Availability of at least $30,000,000."
(m) Section 9.13 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"9.13. OPERATING LEASES. No member of the Xxxxx Karan Group
shall become liable in any way, whether directly or by
assignment or by Accommodation Obligation, for the obligations
of a lessee under any Operating Lease, except:
(a) the Operating Lease entered into in December 1997
by The Xxxxx Karan Company Stores G.P. for the Madison Avenue
store in New York, New York; and
(b) Operating Leases, if immediately after giving
effect to the incurrence of Rental Payments with respect
thereto, the aggregate amount of all Rental Payments with
respect to such Operating Leases does not exceed (i) in Fiscal
Years 2000 and 2001, an amount equal to $45,000,000 MINUS the
amount of Rental Payments for such Fiscal Year with respect to
the Operating Lease permitted by SECTION 9.13(a), (ii) in
Fiscal Year 2002, an amount equal to $55,000,000 MINUS the
amount of Rental Payments for such Fiscal Year with respect to
the Operating Lease permitted by SECTION 9.13(a), and (iii) in
Fiscal Year 2003, an amount equal to $65,000,000 MINUS the
amount of Rental Payments for such Fiscal Year with respect to
the Operating Lease permitted by SECTION 9.13(a)."
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(n) Section 9.14 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"9.14. CAPITAL EXPENDITURES. No member of the Xxxxx Karan
Group shall make or incur Capital Expenditures (a) during
Fiscal Year 2000 if the aggregate amount of Capital
Expenditures for the Xxxxx Karan Group PLUS the aggregate
amount of the Investments made pursuant to SECTION 9.04(iv)
would exceed Twenty Million Five Hundred Thousand Dollars
($20,500,000) for such Fiscal Year, (b) during Fiscal Years
2001 and 2002 if the aggregate amount of Capital Expenditures
for the Xxxxx Karan Group PLUS the aggregate amount of the
Investments made pursuant to SECTION 9.04(iv) would exceed
Twenty Seven Million Five Hundred Thousand Dollars
($27,500,000) for any such Fiscal Year and (c) during the
first six months of Fiscal Year 2003 if the aggregate amount
of Capital Expenditures for the Xxxxx Karan Group PLUS the
aggregate amount of the Investments made pursuant to SECTION
9.04(iv) would exceed Thirteen Million Seven Hundred Fifty
Thousand Dollars ($13,750,000) for such six month period;
PROVIDED, HOWEVER, that the Xxxxx Karan Group may carry
forward from one Fiscal Year to another Fiscal Year any
Capital Expenditures permitted hereunder, but not made or
incurred in such Fiscal Year, in an amount of up to Twelve
Million Dollars ($12,000,000); PROVIDED, FURTHER, that cost of
Equipment purchased to replace Equipment damaged or destroyed
shall not be included in the calculations for Capital
Expenditures under this SECTION 9.14 to the extent of the
amount of insurance proceeds received and applied against the
Obligations."
(o) Section 10.01 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.01. MINIMUM ADJUSTED NET WORTH. The Adjusted Net Worth of
Xxxxx Karan International and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter set forth
below shall not be less than the amount set forth opposite
such quarter:
Fiscal Quarter Minimum Amount
-------------- --------------
First Fiscal Quarter 1998 $100,000,000
Second Fiscal Quarter 1998 $ 95,000,000
Third Fiscal Quarter 1998 $100,000,000
Fourth Fiscal Quarter 1998 $115,000,000
First Fiscal Quarter 1999 $115,000,000
Second Fiscal Quarter 1999 $115,000,000
Third Fiscal Quarter 1999 $120,000,000
Fourth Fiscal Quarter 1999 $120,000,000
First Fiscal Quarter 2000 $120,000,000
Second Fiscal Quarter 2000 $120,000,000
Third Fiscal Quarter 2000 $125,000,000
Fourth Fiscal Quarter 2000 $125,000,000
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First Fiscal Quarter 2001 $125,000,000
Second Fiscal Quarter 2001 $125,000,000
Third Fiscal Quarter 2001 $125,000,000
Fourth Fiscal Quarter 2001 $125,000,000
First Fiscal Quarter 2002 $125,000,000
Second Fiscal Quarter 2002 $125,000,000
Third Fiscal Quarter 2002 $125,000,000
Fourth Fiscal Quarter 2002 $125,000,000
First Fiscal Quarter 2003 $125,000,000
(p) Section 10.02 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.02. MINIMUM INTEREST COVERAGE RATIO. The Interest Coverage
Ratio of Xxxxx Karan International and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter set forth
below shall not be less than the ratio set forth opposite such
quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth Fiscal Quarter 1998 3.00 to 1.0
First Fiscal Quarter 1999 3.00 to 1.0
Second Fiscal Quarter 1999 3.00 to 1.0
Third Fiscal Quarter 1999 3.00 to 1.0
Fourth Fiscal Quarter 1999 4.50 to 1.0
First Fiscal Quarter 2000 4.50 to 1.0
Second Fiscal Quarter 2000 5.00 to 1.0
Third Fiscal Quarter 2000 5.00 to 1.0
Fourth Fiscal Quarter 2000 5.00 to 1.0
First Fiscal Quarter 2001 5.00 to 1.0
Second Fiscal Quarter 2001 5.00 to 1.0
Third Fiscal Quarter 2001 5.00 to 1.0
Fourth Fiscal Quarter 2001 5.00 to 1.0
First Fiscal Quarter 2002 5.00 to 1.0
Second Fiscal Quarter 2002 5.00 to 1.0
Third Fiscal Quarter 2002 5.00 to 1.0
Fourth Fiscal Quarter 2002 5.00 to 1.0
First Fiscal Quarter 2003 5.00 to 1.0"
(q) Section 10.03 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.03. MINIMUM FIXED CHARGE COVERAGE RATIO. The Fixed Charge
Coverage Ratio of Xxxxx Karan International and its
Subsidiaries on a consolidated basis at the end of each fiscal
quarter set forth below shall not be less than the ratio set
forth opposite such quarter:
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Fiscal Quarter Ratio
-------------- -----
First Fiscal Quarter 2000 2.00 to 1.0
Second Fiscal Quarter 2000 2.00 to 1.0
Third Fiscal Quarter 2000 2.00 to 1.0
Fourth Fiscal Quarter 2000 3.00 to 1.0
First Fiscal Quarter 2001 3.00 to 1.0
Second Fiscal Quarter 2001 3.00 to 1.0
Third Fiscal Quarter 2001 3.00 to 1.0
Fourth Fiscal Quarter 2001 3.00 to 1.0
First Fiscal Quarter 2002 3.00 to 1.0
Second Fiscal Quarter 2002 3.00 to 1.0
Third Fiscal Quarter 2002 3.00 to 1.0
Fourth Fiscal Quarter 2002 3.00 to 1.0
First Fiscal Quarter 2003 3.00 to 1.0"
(r) Section 10.04 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.04. MINIMUM WORKING CAPITAL RATIO. The Working Capital
Ratio of Xxxxx Karan International and its Subsidiaries on a
consolidated basis at the end of each fiscal quarter set forth
below shall not be less than the ratio set forth opposite such
quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth Fiscal Quarter 1999 1.40 to 1.0
First Fiscal Quarter 2000 1.40 to 1.0
Second Fiscal Quarter 2000 1.40 to 1.0
Third Fiscal Quarter 2000 1.40 to 1.0
Fourth Fiscal Quarter 2000 1.40 to 1.0
First Fiscal Quarter 2001 1.40 to 1.0
Second Fiscal Quarter 2001 1.40 to 1.0
Third Fiscal Quarter 2001 1.40 to 1.0
Fourth Fiscal Quarter 2001 1.40 to 1.0
First Fiscal Quarter 2002 1.40 to 1.0
Second Fiscal Quarter 2002 1.40 to 1.0
Third Fiscal Quarter 2002 1.40 to 1.0
Fourth Fiscal Quarter 2002 1.40 to 1.0
First Fiscal Quarter 2003 1.40 to 1.0"
(s) Section 10.05 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.05. MAXIMUM LEVERAGE RATIO. The Leverage Ratio of Xxxxx
Karan International and its Subsidiaries on a consolidated
basis at the end of each fiscal
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quarter set forth below shall not be greater than the ratio
set forth opposite such quarter:
Fiscal Quarter Ratio
-------------- -----
Fourth Fiscal Quarter 1998 2.00 to 1.0
First Fiscal Quarter 1999 2.00 to 1.0
Second Fiscal Quarter 1999 2.00 to 1.0
Third Fiscal Quarter 1999 3.00 to 1.0
Fourth Fiscal Quarter 1999 2.00 to 1.0
First Fiscal Quarter 2000 2.00 to 1.0
Second Fiscal Quarter 2000 2.00 to 1.0
Third Fiscal Quarter 2000 2.00 to 1.0
Fourth Fiscal Quarter 2000 2.00 to 1.0
First Fiscal Quarter 2001 2.00 to 1.0
Second Fiscal Quarter 2001 2.00 to 1.0
Third Fiscal Quarter 2001 2.00 to 1.0
Fourth Fiscal Quarter 2001 2.00 to 1.0
First Fiscal Quarter 2002 2.00 to 1.0
Second Fiscal Quarter 2002 2.00 to 1.0
Third Fiscal Quarter 2002 2.00 to 1.0
Fourth Fiscal Quarter 2002 2.00 to 1.0
First Fiscal Quarter 2003 2.00 to 1.0"
(t) Section 10.06 of the Credit Agreement is amended by
deleting such Section in its entirety and substituting therefor the
following:
"10.06. EBITDA. The EBITDA for Xxxxx Karan International and
its Subsidiaries on a consolidated basis at the end of the
fourth fiscal quarter for each Fiscal Year set forth below
shall not be less than the amount set forth opposite such
Fiscal Year:
Fiscal Year Amount
----------- ------
1999 $25,000,000
2000 $33,000,000
2001 $35,000,000
2002 $40,000,000"
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Fourth Amendment
shall become effective when (a) the Administrative Agent shall have received
counterparts of this Fourth Amendment executed by the Borrowers and the Lenders
and (b) the Borrowers shall have paid to the Administrative Agent, for the
ratable benefit of the Lenders, a fee in the amount of one-eighth of one percent
(0.125%) of the amount of the Commitments.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.
Each Borrower represents and warrants as follows:
(a) After giving effect to this Fourth 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 Fourth Amendment, no Default
or Event of Default shall have occurred and be continuing.
SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a)
Upon the effectiveness of this Fourth 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 Fourth
Amendment shall not, except as expressly provided herein, 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 5. EXECUTION IN COUNTERPARTS. This Fourth 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 6. GOVERNING LAW. This Fourth 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 Fourth
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: Full Requirements Merchandising, 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/
---------------------------------
Title:___________________________
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CITIBANK, N.A., as Administrative Agent and Lender
By: /s/
---------------------------------
Vice President
THE CHASE MANHATTAN BANK, as Co-Agent
and Lender
By: /s/
---------------------------------
Title:
NATIONSBANK N.A., as Co-Agent and Lender
By: /s/
---------------------------------
Title:
PNC BANK NATIONAL ASSOCIATION
By: /s/
---------------------------------
Title:
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/
---------------------------------
Title:
11
NATIONAL CITY COMMERCIAL FINANCE, INC.
By: /s/
---------------------------------
Title:
XXXXXXX NATIONAL LIFE INSURANCE CO.,
By: PPM FINANCE, INC., its Attorney-in-Fact
By: /s/
---------------------------------
Title:
12
