Exhibit 10.20
EXECUTION COPY
AMENDED AND RESTATED SECOND AMENDMENT
Dated as of October 30, 1998
This AMENDED AND RESTATED SECOND AMENDMENT (the "Second Amendment")
among The ▇▇▇▇▇ Karan Company, a New York general partnership, The ▇▇▇▇▇ Karan
Company Store, G.P., a New York general partnership, ▇▇▇▇▇ 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"). This Second
Amendment amends and restates the Second Amendment dated as of April 30, 1998
among the Borrowers, the Lenders, the Issuing Banks, the Administrative Agent
and 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 "Applicable Fixed Rate Margin" set forth in
Section 1.01 of the Credit Agreement is amended by deleting such
definition in its entirety and substituting therefor the following:
"'Applicable Fixed Rate Margin' means a rate equal to 2.50% per
annum until the day that the Borrowers deliver the EBITDA
certificate pursuant to Section 7.01(f). Thereafter, such rate will
fluctuate on such date and on the first day of each subsequent
fiscal quarter 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 4.00 2.50%
Greater than or equal to
4.00 but less than 5.00 2.25%
Greater than or equal to 5.00 2.00%"
(b) The definition of "Applicable Floating Rate Margin" set forth in
Section 1.01 of the Credit Agreement is amended by deleting such
definition in its entirety and substituting therefor the following:
"'Applicable Floating Rate Margin' means a rate equal to 1.50% per
annum until the day that the Borrowers deliver the EBITDA
certificate pursuant to Section 7.01(f). Thereafter, such rate will
fluctuate on such date and on the first day of each subsequent
fiscal quarter 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 Floating
Coverage Ratio is: Rate Margin
------------------ -----------
Less than 4.00 1.50%
Greater than or equal to
4.00 but less than 5.00 1.25%
Greater than or equal to 5.00 1.00%"
(c) The definition of "Investment" in Section 1.01 of the Credit
Agreement is amended by deleting the period at the end thereof and adding
in substitution therefor the following:
"; provided, however, that the subordinated indebtedness permitted
under Section 9.01(x) issued in connection with the UK Acquisition
shall be excluded from the calculation of Investments."
(d) The definition of "Special Advance" set forth in Section 1.01 of
the Credit Agreement is amended by deleting such definition in its
entirety and substituting therefor the following:
"'Special Advance Amount' means, at any time during July 1999 and
August 1999, the lesser of (a) the amount which equals the product
of ninety-five percent (95%) of Eligible Finished Goods Inventory
and Eligible Raw Materials minus the Borrowing Base Inventory
Availability and (b) $10,000,000 during July 1999 and $10,000,000
during August 1999; provided, however, (i) upon receipt of Net Cash
Proceeds from one or more Asset Sales in an amount of up to
$10,000,000 in the aggregate or (ii) if the Commitments are
permanently reduced pursuant to Section 3.01, each such Special
Advance Amount shall be reduced, on a dollar for dollar basis, at
such time and for all times thereafter, by the amount of such Net
Cash Proceeds or such permanent reduction, as the case may be."
(e) Section 1.01 of the Credit Agreement is amended by adding a new
definition after the term "Type" and before the term "Uniform Commercial
Code" to read as follows:
"'UK Acquisition' means the acquisition by one of the Borrowers or
one of its direct or indirect wholly-owned Subsidiaries of the ▇▇▇▇▇
Karan and DKNY United Kingdom
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retail operations from affiliates of ▇.▇. ▇▇▇/Club 21 for an upfront
cash payment of up to $9,200,000 and the issuance of subordinated
debt in the principal amount of up to $12,000,000, which
subordinated debt shall be on terms and conditions satisfactory to
the Administrative Agent."
(f) Section 7.01 of the Credit Agreement is amended by adding a new
subsection (f) at the end thereof to read as follows:
"(f) EBITDA Report. On or prior to January 31, 2000, a certificate,
signed by ▇▇▇▇▇ 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 Fiscal Year 1999 and compliance with Section 10.06."
(g) Section 9.01 of the Credit Agreement is amended by adding at the
end thereof a new clause (x) to read as follows:
"(x) subordinated indebtedness issued by one of the Borrowers or one
of its direct or indirect wholly-owned Subsidiaries in connection
with the UK Acquisition, which subordinated indebtedness shall be
evidenced by a non-amortizing subordinated note in the principal
amount of up to $12,000,000 with a maturity date no earlier than
January 20, 2002 and have terms satisfactory to the Administrative
Agent."
(h) Section 9.03 of the Credit Agreement is amended by adding at the
end thereof a new clause (viii) to read as follows:
"(viii)Lien on the assets acquired in connection with the UK
Acquisition or a Lien on a wholly-owned Subsidiary of a Borrower (so
long as such Subsidiary holds nothing but the assets acquired in
connection with the UK Acquisition), securing the subordinated
indebtedness permitted under Section 9.01(x), provided that an
intercreditor agreement, in form and substance satisfactory to the
Administrative Agent, is entered into by the holder of such Lien and
subordinated indebtedness."
(i) 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 ▇▇▇▇▇ Karan Group
shall make or incur Capital Expenditures (a) during Fiscal Year 1998
if the aggregate amount of Capital Expenditures for the ▇▇▇▇▇ Karan
Group plus the aggregate amount of the Investments made pursuant to
Section 9.04(iv) plus the $9,200,000 for the UK Acquisition would
exceed Twenty-Seven Million Dollars ($27,000,000) for such Fiscal
Year, (b) during Fiscal Year 1999 if the aggregate amount of Capital
Expenditures for the ▇▇▇▇▇ Karan Group plus the aggregate amount of
the Investments made pursuant to Section 9.04(iv) would exceed
Seventeen Million Two Hundred Thousand Dollars ($17,200,000) for
such Fiscal Year, and (c) during Fiscal Year 2000 if the aggregate
amount of Capital Expenditures for the ▇▇▇▇▇ 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; provided, however, that the
▇▇▇▇▇ 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 Five
Million Dollars ($5,000,000); provided, further, that cost of
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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."
(j) 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 ▇▇▇▇▇
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
(k) 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 ▇▇▇▇▇ 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"
(l) Section 10.03 of the Credit Agreement is amended by deleting
such Section in its entirety and substituting therefor the following:
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"10.03. Minimum Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio of ▇▇▇▇▇ 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 10.50 to 1.0
Fourth Fiscal Quarter 1999 2.50 to 1.0
First Fiscal Quarter 2000 3.00 to 1.0
Second Fiscal Quarter 2000 3.00 to 1.0
Third Fiscal Quarter 2000 3.00 to 1.0
Fourth Fiscal Quarter 2000 3.00 to 1.0"
(m) 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
▇▇▇▇▇ 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"
(n) 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 ▇▇▇▇▇ Karan
International and its Subsidiaries on a consolidated basis at the
end of each fiscal 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"
(o) Article X of the Credit Agreement is amended by adding a new
Section at the end thereof to read as follows:
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"10.06. EBITDA. The EBITDA for ▇▇▇▇▇ Karan International and its
Subsidiaries on a consolidated basis at the end of the fourth fiscal
quarter of 1999 shall be at least $30,000,000."
SECTION 2. Conditions of Effectiveness. This Second Amendment shall
become effective when the Administrative Agent shall have received (i)
counterparts of this Second Amendment executed by the Borrowers and the
Requisite Lenders and (ii) the documents set forth on Schedule I attached
hereto.
SECTION 3. 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 ▇▇▇▇▇ Karan
International and its Subsidiaries, taken as a whole, since December 29,
1996 except as publicly disclosed prior to the date hereof.
SECTION 4. 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, 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 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 6. 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 ▇▇▇▇▇ KARAN COMPANY
By: ▇▇▇▇▇ Karan International Inc., a general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Executive Vice President
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▇▇▇▇▇ KARAN STUDIO
By: ▇▇▇▇▇ Karan International Inc., a general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Executive Vice President
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THE ▇▇▇▇▇ KARAN COMPANY STORE, G.P.
By: ▇▇▇▇▇ Karan International Inc., a general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Executive Vice President
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DK FOOTWEAR PARTNERS
By: ▇▇▇▇▇ Karan International Inc., a general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Executive Vice President
--------------------------------------
CITIBANK, N.A., as Administrative Agent and Lender
By: /s/
---------------------------------------------
Vice President
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THE CHASE MANHATTAN BANK, as Co-Agent and Lender
By: /s/
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Title:
NATIONSBANK N.A., as Co-Agent and Lender
By: /s/
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Title:
PNC BANK NATIONAL ASSOCIATION
By: /s/
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Title:
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By: /s/
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Title:
NATIONAL CITY COMMERCIAL FINANCE, INC.
By: /s/
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Title:
PPM AMERICA, INC.
By: /s/
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Title:
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