UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-11805
--------------------------------------------
DONNA KARAN INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3882426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
550 Seventh Avenue, New York, New York 10018
(Address of principal executive offices)
(Zip Code)
(212) 789-1500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Outstanding as
Class of November 7, 1996
----- -------------------
Common Stock, par value $.01* 21,468,034
* Does not include 18 shares of Class A Common Stock, par value $.01 per share,
and two shares of Class B Common Stock, par value $.01 per share, outstanding as
of such date.
<PAGE>
DONNA KARAN INTERNATIONAL INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
----
Statements of income for the three months and nine months ended
October 1, 1995 and September 29, 1996, respectively.................... 3
Balance sheets as of December 31, 1995 and September 29, 1996... ....... 4
Statements of cash flows for the nine months ended
October 1, 1995 and September 29, 1996, respectively.................... 5
Notes to Financial Statements........................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 19
<PAGE>
DONNA KARAN INTERNATIONAL INC.
STATEMENTS OF INCOME (Note 5)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 1, September 29, October 1, September 29,
1995 1996 1995 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Net revenues ................................ $ 152,389 $ 173,415 $ 375,813 $ 450,641
Cost of sales ............................... 96,227 117,909 244,336 305,129
------------ ------------ ------------ ------------
Gross profit ................................ 56,162 55,506 131,477 145,512
Selling, general and administrative expenses 34,288 52,386 98,988 129,829
Reimbursement of certain costs related to
license agreement ........................ -- (6,000) -- (6,000)
------------ ------------ ------------ ------------
Operating income ............................ 21,874 9,120 32,489 21,683
Other income (expense):
Equity in earnings of affiliates ......... 816 1,180 2,207 2,789
Interest expense, net .................... (1,933) (2,518) (5,851) (6,814)
Interest expense on distribution notes ... -- (75) -- (1,957)
Gain on sale of interest in affiliates ... -- -- 18,673 --
------------ ------------ ------------ ------------
Income before income taxes .................. 20,757 7,707 47,518 15,701
Provision (benefit) for income taxes ........ 735 (12,157) 2,095 (11,712)
------------ ------------ ------------ ------------
Net income .................................. $ 20,022 $ 19,864 $ 45,423 $ 27,413
============ ============ ============ ============
Pro forma
Historical income before income taxes ....... $ 20,757 $ 7,707 $ 47,518 $ 15,701
Pro forma adjustments other than income taxes (1,326) -- (2,109) (1,436)
------------ ------------ ------------ ------------
Pro forma income before income taxes ........ 19,431 7,707 45,409 14,265
Pro forma provision for income taxes ........ 8,257 3,335 19,389 6,181
------------ ------------ ------------ ------------
Pro forma net income ........................ $ 11,174 $ 4,372 $ 26,020 $ 8,084
============ ============ ============ ============
Per share data
Net income per share ........................ $ 0.93 $ 0.93 $ 2.12 $ 1.28
============ ============ ============ ============
Common shares outstanding ................... 21,468,034 21,468,034 21,468,034 21,468,034
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
DONNA KARAN INTERNATIONAL INC.
BALANCE SHEETS
(Predecessor)
December 31, September 29,
1995 1996
---- ----
(Audited) (Unaudited)
(In thousands)
ASSETS
Current assets:
Cash ............................................... $ 12,153 $ 18,012
Accounts receivable, net of allowances of
$22,507 at December 31, 1995 and $29,946 at
September 29, 1996 ............................... 62,231 85,827
Inventories ........................................ 85,655 94,066
Deferred income taxes .............................. 1,400 16,400
Due from license ................................... -- 30,000
Prepaid expenses and other current assets .......... 8,546 11,705
--------- ---------
Total current assets ........................... 169,985 256,010
Property and equipment, at cost - net .............. 22,505 27,885
Due from license ................................... -- 30,000
Deferred income taxes .............................. 300 3,800
Deposits and other noncurrent assets ............... 11,185 16,568
--------- ---------
$ 203,975 $ 334,263
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ................................... $ 53,825 $ 37,456
Accrued expenses and other current liabilities ..... 15,766 35,536
Current portion of long-term debt .................. 7,759 276
Deferred revenue ................................... -- 1,800
--------- ---------
Total current liabilities ...................... 77,350 75,068
Long-term debt...................................... 45,779 109
Deferred revenue ................................... -- 52,200
Stockholders' equity and partners' capital:
Common stock of intermediate entities .......... 1,146 --
Common stock ................................... -- 215
Additional paid in capital ..................... -- 186,899
Retained earnings and partners' capital ........ 79,748 19,864
Cumulative translation adjustment .............. (48) (92)
--------- ---------
Total stockholders' equity and partners'
capital ...................................... 80,846 206,886
--------- ---------
$ 203,975 $ 334,263
========= =========
See Notes to Financial Statements.
4
<PAGE>
DONNA KARAN INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
October 1, September 29,
1995 1996
---- ----
(In thousands)
<S> <C> <C>
Operating Activities
Net income .............................................. $ 45,423 $ 27,413
Adjustments to reconcile net cash provided by
(used in) operating activities, as adjusted for
effect of sale of Donna Karan Japan:
Depreciation and amortization ........................ 4,098 6,072
Provision for bad debts .............................. 408 (97)
Equity in earnings of affiliate ...................... (2,207) (2,789)
Deferred taxes ....................................... -- (18,500)
Stock award grant .................................... -- 2,522
Gain on sale of interests in affiliates .............. (18,673) --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivables ....... 7,761 (23,499)
Increase in inventories .......................... (24,820) (8,455)
Increase in due from licensee ..................... -- (6,000)
Increase in prepaid expenses and other
current assets ................................. (15,681) (3,159)
Increase in deposits and other
noncurrent assets .............................. (261) (4,043)
Increase in accounts payable, accrued
expenses, and other current liabilities ........ 18,811 3,401
-------- ---------
Net cash provided by (used in) operating activities ..... 14,859 (27,134)
-------- ---------
Investing Activities
Purchase of property and equipment ...................... (3,944) (10,003)
Net cash from sale of interests in affiliates ........... 23,526 --
-------- ---------
Net cash provided by (used in ) investing activities .... 19,582 (10,003)
-------- ---------
Financing Activities
Net increase (decrease) in borrowing under revolving
credit facility ....................................... 6,683 (7,961)
Payments under capital lease ............................ (239) (192)
Repayment of distribution notes ......................... -- (114,484)
Repayments of long-term debt ............................ (12,675) (45,000)
Distributions to partners ............................... (22,536) (25,387)
Issuance of common stock ................................ -- 236,020
-------- ---------
Net cash (used in) provided by financing activities .... (28,767) 42,996
-------- ---------
Increase in cash ........................................ 5,674 5,859
Cash at beginning of period ............................. 3,728 12,153
-------- ---------
Cash at end of period ................................... $ 9,402 $ 18,012
======== =========
Supplemental Cash Flow Information
Interest paid ........................................... $ 4,984 $ 6,145
======== =========
Taxes paid .............................................. $ 2,062 $ 474
======== =========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
DONNA KARAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
September 29, 1996
(Unaudited)
1. Unaudited Financial Statements
The unaudited financial statements do not include all information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. For further
information, such as significant accounting policies followed by the Company,
refer to the notes to the Company's audited predecessor combined financial
statements.
In the opinion of management, the unaudited financial statements include
all necessary adjustments (consisting of normal, recurring accruals) for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. On a quarter to quarter basis, the Company's
operations may vary as a result of, among other things, production and shipping
schedules, the introduction of new products, and variation in the timing of
certain holidays from year to year. The results of operations for the
three-month and nine-month periods ended October 1, 1995 and September 29, 1996,
respectively, are not necessarily indicative of the operating results to be
expected for a full year.
2. Basis of Presentation
Donna Karan International Inc. ("DKI") was incorporated in Delaware in
April 1996. In connection with DKI's initial public offering of stock (the
"Offering") on July 3, 1996, the former principals of the predecessor group of
companies and certain of their affiliates simultaneously contributed to DKI all
of the outstanding stock and partnership interests in the entities that
comprised the predecessor group of companies, in exchange for common stock (the
"Reorganization"). The accompanying financial statements include the results of
operations for the period from January 2, 1995 to October 1, 1995, and from
January 1, 1996 to July 2, 1996 of The Donna Karan Company, Donna Karan Studio,
The Donna Karan Company Store G.P., DK Footwear Partners, Takihyo Fashion
Company, L.P., Takihyo Design Company, L.P., TFT Store Company, L.P., TFT Shoe
Company, L.P., TFT Japan Company, L.P., and DSTF Japan Company, which are
affiliated general and limited partnerships; Gabby Apparel, Inc., Tolara
Tetragon Inc., Full Requirements Merchandising, Inc., The Donna Karan Store
Corporation, Tomio Tangents, Inc., Formal Reserve Management, Inc., DK Shoe
Corp., Tangents Two, Inc., First Run Management, Inc., Gabrielle Japan, Inc., TT
DK Japan, Inc., and FM DK Japan, Inc., which are affiliated United States
corporations; Donna Karan Canada Inc., Donna Karan (H.K.) Limited and Donna
Karan Italy, S.R.L., Donna Karan Italy Shoe Company, S.R.L., which are foreign
corporations; and, for the period it was a wholly-owned subsidiary (see Note
11), Donna Karan Japan, K.K. ("Donna Karan Japan"), a Japanese joint stock
company (together, the " Predecessor Company").
For the period from July 3, 1996 through September 29, 1996, the
accompanying financial statements include the results of operations of Donna
Karan International Inc., as well as all entities that were included in the
Predecessor Company, except for Takihyo Fashion Company, L.P., Takhiyo Design
Company, L.P., TFT Store Company, L.P., TFT Shoe Company, L.P. and TFT Japan
Company, L.P., all of which were dissolved in connection with the Reorganization
(the "Company"). All companies other than The Donna Karan Company, Donna Karan
Studio, The Donna Karan Company Store, G.P., DK Footwear Partners, Donna Karan
Canada Inc., Donna Karan (H.K.) Limited, Donna Karan Italy, S.R.L., Donna Karan
Italy Shoe Company, S.R.L., and Donna Karan Japan are intermediate United States
holding companies.
The financial statements of the Predecessor Company are being presented on
a combined basis because of their common ownership. The combined financial
statements have been prepared as if the entities had operated as a single
consolidated group since their respective dates of organization. Because DKI
conducted no business prior to the Reorganization, it was not included in the
results of operations of the Predecessor Company.
For comparative purposes, certain prior period amounts have been
reclassified to conform to current period presentation.
All significant intercompany balances and transactions have been
eliminated. The equity method of accounting is used for Donna Karan Japan during
the period when it is 70% owned by a nonaffiliated partner (see Note 11).
3. Distribution Notes
On April 16, 1996, the Company issued to its former principals and certain
of their affiliates distribution notes totaling $114,484,000, which represented
an estimate of the cumulative undistributed taxable income (on which taxes
previously have been paid) of the Predecessor Company since its inception
through the anticipated closing date of the initial public offering. The notes
bore interest at a rate of 8% per annum, and were repaid with the proceeds from
the Offering (see Note 4).
6
<PAGE>
DONNA KARAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
4. Initial Public Offering
Effective July 3, 1996, the Company sold 10,750,000 shares of its common
stock in an initial public offering. Net proceeds of the Offering, after
deducting underwriting discounts and commissions, and professional fees
aggregated $236.0 million. Proceeds of the Offering were used to retire the
distribution notes and accrued interest thereon totaling approximately $116.4
million, to repay the Predecessor Company's term loans and the revolving line of
credit which totaled approximately $76.8 million, to pay a certain one-time
bonus under an employment agreement which amounted to approximately $5.0 million
(which is included in selling, general and administrative expenses) and to pay a
one-time fee under a license agreement which amounted to $4.6 million (which is
included in cost of sales). The remaining $33.2 million was used for other
general corporate purposes.
5. Statement of Income Presentation
The statement of income of the Company for the nine month period ended
September 29, 1996 reflects the results of operations of the Predecessor Company
for the period January 1, 1996 through July 2, 1996 and the results of the
Company from July 3, 1996 (the date of the consummation of the Offering) through
September 29, 1996.
Selected statement of income data for the nine months ended September 29,
1996 are as follows (the date of the Offering has been deemed to be July 1,
1996):
Nine Months Ended September 29, 1996
------------------------------------------------
July 1 to Nine Months
January 1 to September 29, Ended
June 30, 1996 1996 September 29, 1996
(Predecessor) (Company) Consolidated
------------- --------- ------------
(In thousands)
Net revenues $ 277,226 $ 173,415 $ 450,641
Gross profit 90,006 55,506 145,512
Operating income 12,563 9,120 21,683
Other income (expense) (4,569) (1,413) (5,982)
--------- --------- ---------
Income before income taxes 7,994 7,707 15,701
Provision (benefit) for
income taxes 445 (12,157) (11,712)
--------- --------- ---------
Net income $ 7,549 $ 19,864 $ 27,413
========= ========= =========
6. Pro Forma Information
The pro forma financial information on the income statement presents the
effects on the historical financial statements of certain transactions as if
they had occurred in 1995. The impact of these adjustments are: (i) increased
royalty expense to be paid to a corporation owned by two of the Company's
stockholders and their affiliated trusts pursuant to a licensing agreement, (ii)
reduced levels of compensation for two of the Company's executives pursuant to
their employment agreements, (iii) reduction in interest costs assuming the
application of the proceeds from the Offering to reduce the actual outstanding
indebtedness under the Company's credit agreement, (iv) reduction in
amortization of deferred financing costs which would have been written off in
connection with repayment of outstanding indebtedness under the Company's credit
agreement, and (v) increase in income taxes as if the Company had been subject
to Federal and additional state income taxes for the entire period (see Note
15).
7. Pro Forma Per Share Information
The computation of net income per share as reflected on the Company's
statements of income was based on the weighted average number of common shares
outstanding, assuming that the Offering had taken place as of the beginning of
1995.
Pro forma earnings per share for the nine months ended September 29, 1996
and October 1, 1995 were $0.26 and $1.43, respectively, and for the quarters
ended September 29, 1996 and October 1, 1995 were $0.20 and $0.63, respectively.
Pro forma per share information prior to the Offering is based upon (a)
10,612,934 shares of common stock outstanding during the period,
7
<PAGE>
DONNA KARAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
7. Per Share Information (Continued)
(b) the number of shares of common stock (5,298,998) sold by the Company, at an
offering price of $24.00 per share ($21.96, net of expenses), the proceeds of
which would be necessary to pay approximately $116.4 million to the former
principals of the Company and certain of their affiliates in satisfaction of the
distribution notes previously issued (includes accrued interest thereon),
representing cumulative undistributed taxable income on which taxes previously
have been paid, and (c) 105,100 shares of common stock which the Company awarded
to certain employees pursuant to the Company's stock incentive plan. Pro forma
per share information for the quarter ended September 29, 1996 is based upon
21,468,034 shares outstanding subsequent to the Offering. Pro forma per share
information for the nine months ended September 29, 1996 is based upon the
weighted average number of shares outstanding during the period. The net income
used in the calculation of pro forma per share information for the nine months
ended September 29, 1996 and October 1, 1995 excludes the reduction of interest
costs of $3.5 million and $4.9 million in 1996 and 1995, respectively, and the
reduction in amortization of deferred financing costs of $0.8 million and $0.4
million in 1996 and 1995, respectively, and the related tax effect of $1.8
million and $2.3 million in 1996 and 1995, respectively. The net income used in
the calculation of pro forma per share information for the quarter ended October
1, 1995 excludes the reduction of interest costs of $1.7 million, the reduction
in amortization of deferred financing costs of $0.1 million, and the related tax
effect of $0.8 million.
Supplementary pro forma earnings per share for the nine months ended
September 29, 1996 and October 1, 1995 were $0.38 and $1.35, respectively, and
for the quarters ended September 29, 1996 and October 1, 1995 were $0.20 and
$0.58, respectively. Supplementary pro forma per share information prior to the
Offering is based upon 10,612,934 shares of common stock outstanding during the
period increased by (a) the sale of 5,298,998 shares of common stock at an
offering price of $24.00 per share ($21.96, net of expenses), the proceeds of
which would be necessary to pay approximately $116.4 in satisfaction of the
distribution notes, (b) the sale of 3,279,827 shares of common stock, at an
offering price of $24.00 per share, ($21.96, net of expenses), the proceeds of
which would be necessary to repay approximately $72.0 million to the Company's
lenders for the term loans under the Company's credit facility and to reduce the
amount outstanding under the Company's revolving line of credit, and (c) 105,100
shares of common stock which the Company awarded to certain employees pursuant
to the Company's stock incentive plan. Supplementary pro forma per share
information for the quarter ended September 29, 1996 is based upon 21,468,034
shares outstanding subsequent to the Offering. Supplementary pro forma per share
information for the nine months ended September 29, 1996 is based upon the
weighted average number of shares outstanding during the period.
8. Inventories
Inventories consist of the following (in thousands):
December 31, September 29,
1995 1996
---- ----
Raw materials................................ $16,369 $21,325
Work in process ............................. 11,697 11,055
Finished goods .............................. 57,589 61,686
-------- -------
$ 85,655 $94,066
======== =======
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the
following (in thousands):
December 31, September 29,
1995 1996
---- ----
Accrued operating expenses................... $8,590 $11,152
Accrued income taxes ........................ 2,351 7,906
Accrued compensation......................... 885 8,636
Accrued taxes other than income taxes........ 2,244 2,412
Accrued royalties............................ -- 4,614
Other ....................................... 1,696 816
-------- -------
$ 15,766 $35,536
======== =======
8
<PAGE>
DONNA KARAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
10. 1996 Stock Incentive Program
In connection with the Offering, the Board of Directors of the Company
granted options to purchase an aggregate of 1,389,500 shares of DKI Inc. common
stock under the 1996 Stock Incentive Plan adopted on June 19, 1996 to certain
employees of and consultants to the Company. The options vest in 25%
installments commencing on the first anniversary of the date of the grant and
have an exercise price of $24 per share. The options expire 10 years after the
date of grant.
In addition, in connection with the Offering, the Board of Directors of
the Company granted awards of an aggregate of 105,100 shares of DKI common stock
under the 1996 Stock Incentive Plan to certain employees of the Company and
Donna Karan Japan. This award, which was treated as compensation expense,
amounted to approximately $2.5 million.
11. Sale of Interests in Affiliates
The Company conducts operations in Japan through Donna Karan Japan. DSTF
Japan Company has a profit sharing agreement (the "DSTF Agreement") with Donna
Karan Japan whereby 90% of the income before taxes of Donna Karan Japan is
allocated to DSTF Japan Company. On March 31, 1995, the Company sold 70% of its
interest in the DSTF Agreement and 70% of the stock of Donna Karan Japan to a
nonaffiliated party. The Company recognized a gain on this transaction, net of
transaction costs, of $18.7 million. Subsequent to the sale, the Company records
a 27% interest in the operations of Donna Karan Japan through its 30% interest
in the DSTF Agreement and a 3% interest in the operations of Donna Karan Japan
through its remaining interest in Donna Karan Japan. As a result, the Company
has accounted for its combined 30% interest in the operations of Donna Karan
Japan using the equity method of accounting. Simultaneously with the sales
transaction, the Company entered into an agreement with Donna Karan Japan which
provides for a fee based upon net sales of Donna Karan Japan. Management fee
income, which is included in selling, general and administrative expenses,
amounted to $0.5 million and $1.4 million during the three-and nine-month
periods ended September 29, 1996, respectively. The equity investment in Donna
Karan Japan of $2,535,000 and $5,308,000 as of December 31, 1995 and September
29, 1996, respectively, is included in "Deposits and other noncurrent assets" in
the accompanying balance sheet.
12. Revolving Credit Facility
In September 1996, the Company entered into a new $150 million, three-year
revolving Credit Facility (the "Facility"). Direct borrowings under the Facility
bear interest at the lead bank's prime rate or, at the option of the Company, at
a fixed spread over the London Interbank Offered Rate (LIBOR). The Facility is
secured by accounts receivable, inventory and certain intangibles of the
Company, as well as a pledge of all equity interests of the subsidiaries of The
Company. The Facility also contains certain restrictive covenants which, among
other things, require the Company to maintain certain financial ratios and
restrict investments, additional indebtedness, and payment of dividends. No
amounts were outstanding under the Facility at September 29, 1996. Unamortized
deferred financing costs of $2.4 million related to the prior bank credit
facility have been expensed and are included in interest expense for the third
quarter of 1996.
13. DKNY Jeans(R) Licensing Agreement
On September 27, 1996, the Company entered into a 30-year licensing
agreement with subsidiaries of Designer Holdings Ltd. for the exclusive
production, sale and distribution of men's, women's, and, with certain
exceptions, children's jeanswear under the DKNY Jeans(R) label (the "Jeans
License"). Under the terms of the agreement, the Company received an initial
payment of $6.0 million from Designer Holdings Ltd. to reimburse the Company for
certain costs related to the start-up and development of the DKNY Jeans(R)
label. The Company will receive additional payments aggregating $54.0 million
over a four-year period, through the year 2000, which is included in due from
licensee and deferred revenue in the accompanying financial statements. Of the
$54.0 million, $24.0 million will be received in 1997, and $10.0 million will be
received each year in 1998,1999, and 2000. This $54.0 million will be amortized
into income over the 30-year life of the agreement. Following the transition of
production, inventory and distribution on June 1, 1997, the Company will receive
annual royalties of 7% on worldwide net sales of DKNY Jeans(R) label products,
as well as an additional administrative fee of 2% on international net sales.
14. Related Party Transactions
As of July 3, 1996, the Company entered into a licensing agreement (the
"Gabrielle License") with Gabrielle Studio, Inc. ("Gabrielle Studio"), a
corporation owned by two of the Company's stockholders and their affiliated
trusts, which grants the Company the exclusive rights to use the trademarks
"Donna Karan", "Donna Karan New York", "DKNY", "DK", and all variations thereof.
Under the Gabrielle License, the Company pays Gabrielle Studio a royalty on net
sales of product bearing the licensed mark. During the three month period ended
September 29, 1996, the Company incurred $4.6 million in royalty expense, which
is included in cost of sales. In addition, the
9
<PAGE>
DONNA KARAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
14. Related Party Transactions (Continued)
Company made a one-time payment of $4.6 million to Gabrielle Studio in
connection with entering into the Gabrielle License, which is also included in
cost of sales.
15. Pro Forma Income Taxes
The entities in the Predecessor Company were partnerships, or corporations
that had elected to be taxed as S corporations pursuant to the Internal Revenue
Code. In connection with the Offering, the Company became subject to Federal and
additional state income tax. The pro forma provision for income taxes represents
the income tax provisions that would have been reported if the Company had been
subject to Federal and additional state income taxes.
The Company has adopted the provisions of SFAS No. 109. This adoption had
no material effect on the provision for income taxes. SFAS No. 109 requires the
asset and liability method of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial carrying amounts and the tax
bases of existing assets and liabilities. The pro forma income tax provision has
been prepared according to SFAS No. 109.
Concurrent with becoming subject to Federal and additional state income
taxes, the Company recorded a deferred tax asset and a corresponding tax benefit
in the statement of income in accordance with the provisions of SFAS No. 109.
This was approximately $15.5 million, and, as of the date of the Offering,
resulted in a total deferred tax asset of approximately $17.2 million which
includes certain state and local tax assets recorded on a historical basis.
Income tax expense for the three- and nine-month periods ended September
29, 1996 includes a provision for Federal, state and local taxes of
approximately $3.3 million at an effective rate of approximately 43%. This
amount is comprised of current expense of $6.3 million and a deferred benefit of
$3.0 million.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
Donna Karan International Inc. is one of the world's leading international
fashion design houses. The Company designs, contracts for the production of,
markets, and distributes "designer" and "bridge" collections of men's and
women's clothing, sportswear, accessories, and shoes under the Donna Karan New
York(R) and DKNY(R) brand names, respectively. The Company also develops,
contracts for the production of, markets, and distributes collections of men's
and women's fragrance, bath and body, and treatment products under the DK
Men(TM) and Donna Karan New York(TM) brand names, respectively. In addition, the
Company selectively has granted licenses for the manufacture and distribution of
certain other products under the Donna Karan New York(R) and DKNY(R) brand
names, including hosiery, intimate apparel, eyewear, children's apparel under
the DKNY(R) brand name in Europe and the Middle East, and most recently a
license for jeanswear under the DKNY Jeans(R) label.
The following discussion provides information and analysis of the
Company's results of operations for the three months ended October 1, 1995 and
September 29, 1996 and for the nine months ended October 1, 1995 and September
29, 1996 . The Company utilizes a 52- or 53-week fiscal year ending on the
Sunday nearest December 31. (Accordingly, the third quarters and nine months of
1995 and 1996 ended October 1, 1995 and September 29, 1996, respectively.) The
third quarters in 1995 and 1996 contained 13 weeks and the nine months in 1995
and 1996 contained 39 weeks. As used in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Donna Karan New York(R)
collections and the DKNY(R) collections each include apparel, accessories, and
shoes.
Certain statements contained herein are forward looking statements that
have been made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company's actual results in
future periods or plans for future periods to differ materially from what was
anticipated. Those risks include, among others, risks associated with the
receipt, pricing and timing of customer orders, timing, terms and consummation
of a joint venture, sale or licensing of the Company's beauty division, timing
of and costs associated with new store openings, general competitive factors and
a change in retailer or consumer acceptance of the Company's products.
On September 27, 1996, the Company entered into a 30-year licensing
agreement with subsidiaries of Designer Holdings Ltd. for the exclusive
production, sale and distribution of men's, women's, and, with certain
exceptions, children's jeanswear under the DKNY Jeans(R) label (the "Jeans
License"). Under the terms of the agreement, the Company received an initial
payment of $6.0 million from Designer Holdings Ltd. to reimburse the Company for
certain costs related to the start-up and development of the DKNY Jeans(R)
label. The Company will receive additional payments aggregating $54.0 million
over a four-year period, through the year 2000. Of the $54.0 million, $24.0
million will be received in 1997, and $10.0 million will be received each year
in 1998,1999, and 2000. This $54.0 million will be amortized into income over
the 30-year life of the agreement. Following the transition of production,
inventory and distribution on June 1, 1997, the Company will receive annual
royalties of 7% on worldwide net sales of DKNY Jeans(R) label products, as well
as an additional administrative fee on 2% on international net sales.
On October 28, 1996, the Company announced that the Board of Directors had
authorized management to explore strategic alternatives for the beauty division,
including a joint venture, license or possible sale of the business. While
revenues for the beauty division grew 74% in the third quarter of 1996 compared
to the third quarter of 1995, revenues were approximately $5.0 million below the
anticipated level. Management has concluded that the potential of the business
would be better realized through a strategic alliance that would devote greater
resources to the beauty business. Management's current projections are for the
beauty division's revenues to continue to be below plan in the fourth quarter of
1996. As a result of the shortfall in the beauty business and incremental
advertising expense related to the Company's Donna Karan New York(R) advertising
campaign featuring Burce Willis and Demi Moore which will be incurred in the
fourth quarter, the Company expects to report approximately break-even results
for the fourth quarter of 1996.
11
<PAGE>
Pro forma statements of income for the three months ended September 29, 1996 and
October 1, 1995 -(Unaudited)
The following table sets forth for the three-month periods ended October
1, 1995 and September 29, 1996 : (a) historical combined and consolidated
statements of income data; (b) pro forma adjustments to reflect the
Reorganization, the Offering, and certain other adjustments as if they had
occurred on January 1, 1996 and January 2, 1995; and (c) pro forma combined and
consolidated statements of income data.
Three Months Ended September 29, 1996
-------------------------------------------
Historical Pro Forma Pro Forma
Consolidated Adjustments Consolidated
------------ ----------- ------------
(In thousands)
Net revenues ......................... $ 173,415 $ 173,415
--------- ---------
Gross profit ......................... 55,506 4,635(i) 60,141
Selling, general and
administrative expenses ............ 52,386 (5,347)(ii) 44,517
(2,522)(iii)
Reimbursement of certain
costs related to license agreement . (6,000) (6,000)
--------- ---------
Operating income ..................... 9,120 21,624
Equity in earnings of affiliate ...... 1,180 1,180
Interest (expense) income, net ....... (2,518) 197(iv) 99
2,420(v)
Interest expense on distribution notes (75) 75(vi) 0
--------- ---------
Income before income taxes ........... 7,707 22,903
Provision (benefit) for income taxes . (12,157) 22,069(vii) 9,912
--------- ---------
Net income ........................... $ 19,864 $ 12,991
========= =========
Pro forma earnings per share ......... $ 0.61(xi)
=========
Three Months Ended October 1, 1995
-------------------------------------------
Historical Pro Forma Pro Forma
Combined Adjustments Combined
------------ ----------- ------------
(In thousands)
Net revenues $ 152,389 $ 152,389
-------- --------
Gross profit 56,162 (3,748)(viii) 52,414
Selling, general and
administrative expenses 34,288 (579)(ix) 33,709
-------- --------
Operating income 21,874 18,705
Equity in earnings of affiliate 816 816
Interest expense, net (1,933) 1,694(x) (90)
-------- 149(iv) --------
Income before income taxes 20,757 19,431
Provision for income taxes 735 7,522(vii) 8,257
-------- --------
Net income $ 20,022 $ 11,174
======== ========
Pro forma earnings per share $0.52(xi)
========
(i) One-time fee of $4.6 million paid to a corporation owned by two of the
Company's stockholders and their affiliated trusts pursuant to a licensing
agreement.
12
<PAGE>
(ii) One-time bonus under an employment agreement which amounted to $5.0
million, and additional one-time bonuses of $0.3 million paid to key executives
relating to the Offering.
(iii) One-time charge of $2.5 million representing the award of 105,100 shares
of common stock to certain employees pursuant to the Company's 1996 Stock
Incentive Plan.
(iv) Reduction of $0.1 million and $0.2 million in 1995 and 1996, respectively,
in amortization of deferred financing costs, which would have been written off
in connection with repayment of outstanding indebtedness under the Company's
credit agreement.
(v) Reduction in expense of $2.4 million related to the write-off of deferred
financing costs in connection with repayment of outstanding indebtedness under
the Company's credit agreement.
(vi) Reduction in interest expense on distribution notes of $0.1 million in
1996, assuming the distribution notes would not have been outstanding during the
period.
(vii) Increase of $7.5 million and $22.1 million (including $15.5 million of
deferred income tax assets recognized) in 1995 and 1996, respectively, for
income tax expense based upon pro forma pre-tax income as if the Company had
been subject to Federal and additional state income taxes.
(viii) Royalty of $3.7 million in 1995 to be paid to a corporation owned by two
of the Company's stockholders and their affiliated trusts pursuant to a
licensing agreement.
(ix) Decrease in aggregate compensation from $1.1 million to $0.5 million in
1995 for two of the Company's executives pursuant to their employment
agreements.
(x) Reduction in interest costs of $1.7 million in 1995, assuming the
application of up to $82.9 million (which amount represents the maximum amount
outstanding during the period) of the proceeds from the Offering to reduce the
actual outstanding indebtedness under the Company's credit agreement.
(xi) Pro forma earnings per share have been calculated using 21,468,034 shares,
which assumes the number of shares outstanding after the Offering were
outstanding for the entire period.
Comparison of the three months ended September 29, 1996 to the three months
October 1, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------ ------------------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues .................. $ 152.4 100.0% $ 173.4 100.0% $ 152.4 100.0% $ 173.4 100.0%
Gross profit .................. 56.2 36.8 55.5 32.0 52.4 34.4 60.1 34.7
Selling, general and
administrative expenses ..... 34.3 22.5 52.4 30.2 33.7 22.1 44.5 25.7
Reimbursement of certain costs
related to license agreement -- -- 6.0 3.5 -- -- 6.0 3.5
Operating income .............. 21.9 14.4 9.1 5.3 18.7 12.3 21.6 12.5
Equity in earnings of affiliate .8 .5 1.2 .7 .8 .5 1.2 .7
Net income .................... 20.0 13.1 19.9 11.5 11.2 7.3 13.0 7.5
</TABLE>
Net revenues were $173.4 million in the third quarter of 1996, an increase
of 13.8% from the net revenues of $ 152.4 million recorded in the third quarter
of 1995. This increase was due primarily to: a $7.8 million, or 63.4%, increase
in the DKNY(R) men's collections; a $4.2 million, or 28.7%, increase in outlet
stores and licensing; a $4.8 million, or 74.0%, increase in beauty products; a
$3.2 million, or 3.8%, increase in DKNY(R) women's collections; and a $2.0
million, or 15.9%, increase in Donna Karan New York(R) collections for men. The
increase was somewhat offset by a decrease of $1.0 million, or 4.1%, in the
Donna Karan New York(R) collections for women.
The increase in the DKNY(R) men's collections resulted from continued
growth in international sales, as well as domestic growth. The increase in
outlet store and licensing was due to an increase in the number of outlet stores
and an increase in same store sales. The increase in the Beauty Division was
primarily due to expanded distribution and the expanded product offerings in
1996 compared to 1995, including the launch of Chaos(TM) in the third quarter of
1996. The increase in the DKNY(R) women's collections resulted primarily from
international and domestic growth in its DKNY(R) accessories business. The
increase in Donna Karan New York(R) collections for men primarily resulted from
international growth, as well as domestic growth. The decrease in net revenue in
the Donna Karan New York(R) collections for women resulted primarily from the
reduction of the accessories business as it is refocused from a
collection-coordinated line to a "main floor" line.
Gross profit as a percent of sales was 32.0% and 36.8% (34.7% and 34.4% on
a pro forma basis) in the third quarter of 1996 and 1995, respectively. The
decrease in the historical gross margin was primarily attributable to $9.2 in
royalty fees expensed in 1996, as cost of sales, in connection with the license
agreement (the "Gabrielle License") between Donna Karan Studio and Gabrielle
Studio, Inc., a corporation owned by two of the Company's stockholders and their
affiliated trusts. (See Note 14 to Financial Statements). Included in this
royalty fee was a $4.6 million one-time payment made by the Company in
connection with entering into the Gabrielle License. The slight improvement in
the gross margin percentage, on a pro forma basis, was primarily attributable to
leveraging relatively fixed production costs as a result of increased sales
volume.
13
<PAGE>
Selling, general and administrative expenses increased to 30.2% (25.7% on
a pro forma basis) of net revenues in the third quarter of 1996 from 22.5%
(22.1% on a pro forma basis) of net revenues for the same period of 1995. The
increase in the pro forma selling, general and administrative expense primarily
was due to the expansion of the Company's international division to service its
increasing international business; costs for infrastructure spending and costs
associated with being a public company; and advertising expense related to the
Company's Donna Karan New York(R) advertising campaign featuring Bruce Willis
and Demi Moore. The increase in the historical selling, general and
administrative expense, additionally reflected the one-time charges incurred in
connection with the Offering (see Notes (ii), (iii) and (ix), above in the Pro
Forma Statements of Income).
Reimbursement of certain costs for license consisted of a $6.0 million
one-time reimbursement of certain costs related to the start-up and development
of the DKNY Jeans(R) label in connection with the Jeans License.
Operating income decreased to $9.1 million in the third quarter of 1996
from $21.9 million in the same period in 1995. On a pro forma basis, operating
income increased to $21.6 million in the third quarter of 1996 from $18.7
million in the same period in 1995.
Interest expense increased to $2.5 million in the third quarter of 1996,
or 30.3%, from $1.9 million in the same period in 1995 primarily due to the
write-off of $2.4 million of deferred financing charges in 1996, offset by a
reduction in outstanding borrowings during the third quarter of 1996.
Provision for income taxes on a historical basis reflected the recognition
in the third quarter of 1996 of a $15.5 million deferred tax asset in connection
with the Company becoming subject to Federal and additional state income taxes,
which amount was offset by a provision for income taxes of $3.3 million. During
the same period in 1995, the Company was not subject to Federal and certain
state income taxes. On a pro forma basis, income taxes were recorded as if the
Company had been subject to Federal and additional state income taxes for the
entire 1996 and 1995 periods.
Net income for the third quarter was $19.9 million ($13.0 million on a pro
forma basis) in 1996 and $ 20.0 million ($11.2 million on a pro forma basis) in
1995.
14
<PAGE>
Pro forma statements of income for the nine months ended September 29, 1996 and
October 1, 1995 -(Unaudited)
The following table sets forth for the nine-month periods ended October 1,
1995 and September 29, 1996: (a) historical combined and consolidated statements
of income data; (b) pro forma adjustments to reflect the Reorganization, the
Offering, certain other adjustments as if they had occurred on January 1, 1996
and January 2, 1995, and adjustments arising from the sale of the Company's 70%
interest in the operations of Donna Karan Japan as if it had occurred on January
2, 1995; and (c) pro forma combined and consolidated statements of income data.
Nine Months Ended September 29, 1996
-------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
Net revenues $ 450,641 $ 450,641
--------- ---------
Gross profit 145,512 (7,248)(i) 142,899
4,635(ii)
Selling, general and
administrative expenses 129,829 (1,500)(iii) 120,460
(5,347)(iv)
(2,522)(v)
Reimbursement of certain costs
related to license agreement (6,000) (6,000)
--------- ---------
Operating income 21,683 28,439
Equity in earnings of affiliate 2,789 2,789
Interest expense, net (6,814) 3,475(vi) (82)
837(vii)
Interest expense on distribution notes (1,957) 1,957(viii) 0
--------- 2,420(ix) ---------
Income before income taxes 15,701 31,146
Provision (benefit) for income taxes (11,712) 25,202(x) 13,490
--------- ---------
Net income $ 27,413 $ 17,656
========= =========
Pro forma earnings per share $0.82(xii)
=========
Nine Months Ended October 1, 1995
-------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
Net revenues $ 375,813 (5,521)(xi) $ 370,292
--------- ---------
Gross profit 131,477 (6,814)(xi) 115,456
(9,207)(i)
Selling, general and
administrative expenses 98,988 (4,828)(xi) 92,423
--------- (1,737)(iii) ---------
Operating income 32,489 23,033
Equity in earnings of affiliate 2,207 394(xi) 2,601
Interest expense, net (5,851) 4,929(vi) (490)
432(vii)
Gain on sale of interest in affiliates 18,673 (18,673)(xi) 0
--------- ---------
Income before income taxes 47,518 25,144
Provision for income taxes 2,095 8,640(x) 10,735
--------- ---------
Net income $ 45,423 $ 14,409
========= =========
Pro forma earnings per share $0.67(xii)
=========
15
<PAGE>
(i) Royalties of $9.2 million and $7.2 million in 1995 and 1996, respectively,
to be paid to a corporation owned by two of the Company's stockholders and their
affiliated trusts pursuant to a licensing agreement.
(ii) One-time fee of $4.6 million paid to a corporation owned by two of the
Company's stockholders and their affiliated trusts pursuant to a licensing
agreement.
(iii) Decrease in aggregate compensation from $3.2 million to $1.5 million in
1995, and from $2.5 million to $1.0 million in 1996 for two of the Company's
executives pursuant to their employment agreements.
(iv) One-time bonus under an employment agreement which amounted to $5.0 million
and additional one-time bonuses of $0.3 million paid to key executives relating
to the Offering.
(v) One-time charge of $2.5 million representing the award of 105,100 shares of
common stock to certain employees pursuant to the Company's 1996 Stock Incentive
Plan.
(vi) Reduction in interest costs of $4.9 million and $3.5 million in 1995 and
1996, respectively, assuming the application of up to $82.9 million and $90.4
million in 1995 and 1996, respectively (which amounts represent the maximum
amount outstanding during the periods) of the proceeds from the Offering to
reduce the actual outstanding indebtedness under the Company's credit agreement.
(vii) Reduction of $0.4 million and $0.8 million in 1995 and 1996, respectively,
in amortization of deferred financing costs, which would have been written off
in connection with repayment of outstanding indebtedness under the Company's
credit agreement.
(viii)Reduction in interest expense on distribution notes of $2.0 million in
1996, assuming the distribution notes would not have been outstanding during the
period.
(ix) Reduction in expense of $2.4 million related to the write-off of deferred
financing costs in connection with the refinancing of outstanding indebtedness
under the Company's credit agreement.
(x) Increase of $8.6 million and $25.2 million (including $15.5 million of
deferred income tax assets recognized) in 1995 and 1996, respectively, for
income taxes based upon pro forma pre-tax income as if the Company had been
subject to Federal and additional state income taxes for the entire period.
(xi) Adjustments to reflect the Company's sale of its 70% interest in the
operations of Donna Karan Japan, as if it had occurred on January 2, 1995. The
gain of $18.7 million has been excluded, and as a result of this sale, the
Company's combined statement of income has been adjusted to reflect the
accounting for the Company's interest in Donna Karan Japan using the equity
method of accounting for the period from January 2, 1995 until March 31, 1995,
the date of the sale. Accordingly, net revenues have been decreased by $5.5
million, which reflects the difference between net revenues generated by sales
from Donna Karan Japan to its customers and those net revenues of the Company
derived from sales to Donna Karan Japan (as if Donna Karan Japan were a customer
of the Company); gross profit has been decreased by $6.8 million; and selling,
general and administrative expenses have been decreased by $4.8 million, which
included management fee income of $0.3 million from an agreement with Donna
Karan Japan. In addition, under the equity method of accounting, $0.4 million of
equity in earnings of affiliate has been recorded to reflect the Company's
portion of Donna Karan Japan's net income (See Note 11).
(xii) Pro forma earnings per share have been calculated using 21,468,034 shares,
which assumes the number of shares outstanding after the Offering were
outstanding for the entire period.
Comparison of the nine months ended September 29, 1996 to the nine months ended
October 1, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------ ------------------------
1995 1996 1995 1996
---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues .................. $ 375.8 100.0% $ 450.6 100.0% $ 370.3 100.0% $ 450.6 100.0%
Gross profit .................. 131.5 35.0 145.5 32.3 115.5 31.2 142.9 31.7
Selling, general and
administrative expenses ..... 99.0 26.3 129.8 28.8 92.4 24.9 120.5 26.7
Reimbursement of certain costs
related to license agreement -- -- 6.0 1.3 -- -- 6.0 1.3
Operating income .............. 32.5 8.6 21.7 4.8 23.0 6.2 28.4 6.3
Equity in earnings of affiliate 2.2 .6 2.8 .6 2.6 .7 2.8 .6
Net income .................... 45.4 12.1 27.4 6.1 14.4 3.9 17.7 3.9
</TABLE>
Net revenues were $450.6 million in the nine months ended September 29,
1996, an increase of 19.9% (21.7% on a pro forma basis) from the net revenues of
$375.8 million ($370.3 million on a pro forma basis) recorded in the nine months
ended October 1, 1995. The increase was due primarily to: a $27.2 million, or
12.9%, increase in the DKNY(R) women's collections; a $26.5 million, or 109.3%,
increase in the DKNY(R) men's collections; a $9.9 million, or 25.4%, increase in
outlet stores and licensing; a $8.4 million, or 29.4%, increase in Donna Karan
New York(R) collections for men and a $7.3 million, or 44.8%, increase in beauty
products. The increase was somewhat offset in the nine months ended September
29, 1996 by a decrease of $4.4 million, or 7.7%, in the Donna Karan New York(R)
Collections for women from the same period in 1995. Revenues on a pro forma
basis were impacted by the sale of Donna Karan Japan (see Note 11 to Financial
Statements).
The increase in DKNY(R) women's collections was the result of growth in
DKNY(R) apparel combined with strong growth in DKNY(R) accessories. Both apparel
and accessories experienced more rapid growth internationally. The increase in
net revenue in the DKNY(R) men's collections resulted from significant growth in
international sales, as well as domestic growth. The increase in outlet store
and licensing was primarily due to an increase in the number of outlet stores
and an increase in same store sales. The increase in Donna Karan New York(R)
collections for men primarily resulted from growth internationally, as well as
domestically. The increase in the Beauty Division was due to expanded
distribution and to
16
<PAGE>
expanded product offerings in 1996 compared to 1995, including the launch of
Chaos(TM), in the third quarter of 1996. The decrease in net revenue in the
Donna Karan New York(R) collections for women resulted primarily from a planned
reduction in the number of doors carrying the women's collections in
anticipation of the introduction of the new Signature collection for Spring 1997
and the reduction of the accessories business as it is refocused from a
collection-coordinated line to a "main floor" line.
Gross profit as a percent of sales was 32.3% and 35.0% (31.7% and 31.2% on
a pro forma basis) during the first nine months of 1996 and 1995, respectively.
The decrease in the historical gross margin was primarily attributable to $9.2
in royalty fees expensed in connection with the Gabrielle License (see Note 14
to Financial Statements) as well as the impact of the sale of 70% of the
operations of Donna Karan Japan as described in footnote (xi) above. These
royalty fees are included in cost of sales. Included in the royalty fees was a
$4.6 million one-time payment made by the Company in connection with entering
into the Gabrielle License The slight improvement in the gross margin
percentage, on a pro forma basis, was primarily attributable to leveraging
relatively fixed production costs as a result of increased sales volume.
Selling, general and administrative expenses increased to 28.8% (26.7% on
a pro forma basis) of net revenues in the nine months ended September 29, 1996
from 26.3% (24.9% on a pro forma basis) of net revenues for the same period of
1995. The increase in the pro forma selling, general and administrative expense
primarily was due to the expansion of the Company's international division to
service its increasing international business; costs for infrastructure spending
and costs associated with being a public company. The increase in the historical
selling, general and administrative expense additionally reflected the one-time
charges incurred in connection with the Offering which was somewhat offset by
the effect of the sale of the Company's 70% interest in Donna Karan Japan. (See
Notes (iii), (iv), (v) and (xi) in the above Pro Forma Statements of Income)
Reimbursement of certain costs for license consisted of a $6.0 million
one-time reimbursement of certain costs related to the start-up and development
of the DKNY Jeans(R) label in connection with the Jeans License.
Operating income decreased to $21.7 million in the nine months ended
September 29, 1996 from $32.5 million in the same period in 1995. On a pro forma
basis, operating income increased to $28.4 million in the third quarter of 1996
from $23.0 million in the same period in 1995.
Interest expense increased to $6.8 million in the nine months ended
September 29, 1996, or 16.5%, from $5.9 million in the same period in 1995
primarily due to the write-off of $2.4 million of deferred financing charges in
1996, offset by a reduction in outstanding borrowings in 1996.
Interest expense on distribution notes was incurred on the distribution
notes that were issued to the former principals of the Company and their
affiliates, which were paid on July 3, 1996 with the proceeds from the Offering.
Provision for income taxes on a historical basis reflected the recognition
in the third quarter of 1996 of a $15.5 million deferred tax asset in connection
with the Company becoming subject to Federal and additional state income taxes,
which amount was offset by a provision for income taxes in such quarter of $3.3
million. During the same period in 1995 and for the first half of 1996, the
Company was not subject to Federal and certain state income taxes. On a pro
forma basis, income taxes were recorded as if the Company had been subject to
Federal and additional state income taxes for the entire 1996 and 1995 periods.
Net income decreased, on an historical basis, to $27.4 million in the
first nine months of 1996 from $45.4 million in the first nine months of 1995.
This decrease was primarily due to the factors described above and the gain on
the sale of Donna Karan Japan in March of 1995 of $18.7 million. On a pro forma
basis, net income increased to $17.7 million for the first nine months of 1996
from $14.4 million for the first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's principal need for funds was to finance
working capital (principally inventory and receivables), capital expenditures,
and investments in the start up of new collections and the extension of existing
collections. The Company has relied on cash flow from operations, bank lines of
credit, and term loans for its capital requirements.
17
<PAGE>
Subsequent to the consummation of the Offering, the Company's cash flow
needs have changed as a result of (i) reduced interest costs associated with the
application of the net proceeds of the Offering to reduce outstanding
indebtedness under the Company's credit agreement, (ii) decreased compensation
for two of the Company's executives pursuant to their new employment agreements,
and (iii) the absence of distributions, primarily for payment of taxes, paid by
the Company to the principals and stockholders of the intermediate holding
companies. Offsetting such changes will be the need to apply funds to the
payment of Federal and additional state and local income taxes and royalties
pursuant to the Gabrielle License . Any net use of cash for such changes is
expected to be funded through operations.
At September 29, 1996, the Company had working capital of $180.9 million,
compared to working capital of $92.6 million at December 31, 1995. Changes in
working capital included an increase in accounts receivable of $23.6 million, an
increase in inventories of $8.4 million, and a decrease in accounts payable of
$16.4 million, in each case due to revenue growth and the effects of
seasonality; an increase of $15.0 million of deferred income taxes recorded in
part as a result of the Company becoming subject to Federal and additional state
income taxes; an increase of $30.0 million for amounts due under the Jeans
License; an increase in accrued expenses of $19.8 million primarily due to
accruals for income taxes, royalties due under the Gabrielle License and other
operating expense accruals, and a decrease in the current portion of long-term
debt of $7.5 million in connection with the repayment of debt with the proceeds
from the Offering.
On September 18, 1996, the Company closed a new $150.0 million, three-year
revolving credit facility (the "New Credit Facility"), which includes a $60.0
million subfacility for letters of credit and a $30.0 million subfacility for
loans in certain foreign currencies. Borrowings under the New Credit Facility
will bear interest at the lead bank's prime rate or, at the option of the
Company, at a fixed margin (ranging from 0.5% to 0.75%) over LIBOR. The
outstanding balance under the New Credit Facility will be required to be paid
down below a specified level for 45 days each year. The New Credit Facility is
secured by accounts receivable, inventory, and certain intangibles of the
Company and a pledge of all the equity interests of the subsidiaries of the
Company. The New Credit Facility includes financial and other restrictive
covenants, including a limitation on additional debt which can be incurred and
on the amount of dividends which the Company can pay. The New Credit Facility
will be used for working capital needs and general corporate purposes.
Capital expenditures, primarily for equipment, machinery, computers,
office furniture, leasehold improvements, and outlet stores, were approximately
$3.2 million and $0.7 million for the quarters ended September 29, 1996 and
October 2, 1995, respectively. Capital expenditures for the nine months ended
September 29, 1996 and October 2, 1995 were $10.0 million and $3.9 million,
respectively. The Company is continuing to evaluate its alternatives with
respect to the proposed consolidation of its New Jersey warehouse facilities. As
a result, the Company has not at this time accrued the charge with respect to
such consolidation that it had previously anticipated to incur.
The Company anticipates that it will be able to satisfy its ongoing cash
requirements for the foreseeable future, primarily with cash flow from
operations, supplemented by borrowings under the New Credit Facility.
Seasonality of Business
As previously disclosed, the Company's business varies with general
seasonal trends that are characteristic of the apparel and beauty industries,
and it generally experiences lower net revenues and net income in the first half
of each fiscal year as compared to the second half of its fiscal year.
Accordingly, the Company's outstanding borrowings under its credit agreement,
historically, have been lower on or about its fiscal year end. On a quarter to
quarter basis, the Company's operations may vary with production and shipping
schedules, the introduction of new products, and variation in the timing of
certain holidays from year to year. To the extent the Company continues to
expand its business, the Company's operating performance may not reflect the
typical seasonality of the apparel and beauty industries.
The Company historically has experienced lower net revenues in the second
quarter than in other quarters due to (i) lower demand among retail customers
typical of the apparel industry, and (ii) certain expenses that are constant
throughout the year being relatively higher as a percentage of net revenues. To
the extent sales of the Company's beauty products increase relative to sales of
its other products, the Company's net revenues and operating income will be
increasingly influenced by the seasonality of the beauty industry. In general,
the fragrance portion of the beauty industry experiences lower net revenues and
operating income in the first three quarters and has substantially higher net
revenues and operating income in the fourth quarter. Fragrance products are the
primary component of the Company's beauty business.
18
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Credit Agreement, dated as of September 18, 1996, among
The Donna Karan Company, The Donna Karan Company Store,
G.P., Donna Karan Studio, DK Footwear Partners, the
institutions from time to time parties thereto, and Citibank
N.A. as administrative agent.
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
September 29, 1996.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DONNA KARAN INTERNATIONAL INC.
(Registrant)
Date: November 13, 1996 By:/s/ Stephen L. Ruzow
----------------------------
Stephen L. Ruzow, President &
Chief Operating Officer
Date: November 13, 1996 By: /s/ Joseph B. Parsons
----------------------------
Joseph B. Parsons, Executive
Vice President &
Chief Financial Officer
________________________________________________________________________________
CREDIT AGREEMENT
Dated as of September 18, 1996
among
THE DONNA KARAN COMPANY
THE DONNA KARAN COMPANY STORE, G.P.
DONNA KARAN STUDIO
DK FOOTWEAR PARTNERS
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
and
CITIBANK, N.A.,
as the Agent
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............... ......... 1
1.01. Certain Defined Terms.......................................... 1
1.02. Computation of Time Periods.................................... 39
1.03. Accounting Terms............................................... 40
1.04. Other Definitional Provisions.................................. 40
1.05. Other Terms.................................................... 40
1.06. Payments by the Borrowers...................................... 40
ARTICLE II
TERMS OF LOANS AND...................... 40
2.01. The Revolving Credit Facility.................................. 40
2.02. Swing Loans.................................................... 43
2.03. Letters of Credit.............................................. 45
2.04. Acceptances.................................................... 52
2.05. Authorized Officers and Administrative Agents.................. 58
2.06. Promise to Pay; Evidence of Debt............................... 59
2.07. Use of Proceeds of Loans....................................... 60
ARTICLE III
PAYMENTS AND PREPAYMENTS................... 60
3.01. Prepayments; Reductions in and Reallocations
of Commitments................................................ 60
3.02. Payments....................................................... 63
3.03. Taxes.......................................................... 68
3.04. Increased Capital.............................................. 70
3.05. Cash Management and Cash Collateral Accounts................... 71
3.06. Replacement of Lender in Event of Adverse
Condition..................................................... 72
ARTICLE IV
INTEREST AND FEES...................... 73
4.01. Interest on the Loans and Other Obligations.................... 73
4.02. Special Provisions Governing Fixed Rate Loans.................. 76
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4.03. Fees........................................................... 80
ARTICLE V
ONDITIONS TO LOANS, LETTERS OF CREDIT
AND ACCEPTANCES....................... 81
5.01. Conditions Precedent to the Initial
Loans, Letters of Credit and Acceptances...................... 81
5.02. Conditions Precedent to All Loans,
Letters of Credit and Acceptances............................. 83
ARTICLE VI
REPRESENTATIONS AND WARRANTIES................ 84
6.01. Representations and Warranties of the Borrowers................ 84
ARTICLE VII
REPORTING COVENANTS..................... 93
7.01. Financial Statements........................................... 93
7.02. Borrowing Base Certificate..................................... 95
7.03. Other Financial Information.................................... 96
7.04. Events of Default.............................................. 97
7.05. Lawsuits....................................................... 97
7.06. Insurance...................................................... 98
7.07. ERISA Notices.................................................. 98
7.08. Environmental Notices.......................................... 100
7.09. Labor Matters.................................................. 101
7.10. Other Information.............................................. 101
ARTICLE VIII
AFFIRMATIVE COVENANTS.................... 101
8.01. Existence, etc................................................. 101
8.02. Powers; Conduct of Business.................................... 101
8.03. Compliance with Laws, etc...................................... 102
8.04. Payment of Taxes and Claims.................................... 102
8.05. Insurance...................................................... 102
8.06. Inspection of Property; Books and
Records; Discussions.......................................... 104
8.07. Tax Identification Numbers..................................... 104
8.08. ERISA Compliance............................................... 104
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8.09. Maintenance of Property........................................ 104
8.10. Condemnation................................................... 105
8.11. Maintenance of Licenses, Permits, etc.......................... 105
8.12. Post Closing Matters........................................... 105
ARTICLE IX
NEGATIVE COVENANTS...................... 105
9.01. Indebtedness................................................... 105
9.02. Sales of Assets................................................ 106
9.03. Liens.......................................................... 107
9.04. Investments.................................................... 108
9.05. Accommodation Obligations...................................... 108
9.06. Restricted Junior Payments..................................... 109
9.07. Change in Nature of Business................................... 110
9.08. Transactions with Affiliates................................... 110
9.09. Restriction on Fundamental Changes............................. 111
9.10. Sales and Leasebacks........................................... 111
9.11. Margin Regulations............................................. 111
9.12. ERISA.......................................................... 112
9.13. Operating Leases............................................... 112
9.14. Capital Expenditures........................................... 112
9.15. Amendment of Governing Documents............................... 113
9.16. Environmental Liabilities...................................... 113
9.17. No Activities Leading to Forfeiture............................ 113
ARTICLE X
FINANCIAL COVENANTS..................... 113
10.01. Minimum Adjusted Net Worth..................................... 113
10.02. Minimum Interest Coverage Ratio................................ 114
10.03. Minimum Fixed Charge Coverage Ratio............................ 114
10.04. Minimum Working Capital Ratio.................................. 114
10.05. Maximum Leverage Ratio......................................... 115
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES............ 115
11.01. Events of Default.............................................. 115
11.02. Rights and Remedies............................................ 119
ARTICLE XII
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THE ADMINISTRATIVE AGENT................... 120
12.01. Appointment.................................................... 120
12.02. Nature of Duties............................................... 121
12.03. Rights, Exculpation, etc....................................... 121
12.04. Reliance....................................................... 122
12.05. Indemnification................................................ 123
12.06. The Administrative Agent Individually.......................... 123
12.07. Successor Administrative Agents................................ 123
12.08. Relations Among Lenders........................................ 124
12.09. Concerning the Collateral and the Loan Documents............... 124
ARTICLE XIII
MISCELLANEOUS........................ 127
13.01. Assignments and Participations................................. 127
13.02. Relations Among Lenders........................................ 130
13.03. Replacement of Lender.......................................... 130
13.04. Expenses....................................................... 131
13.05. Indemnity...................................................... 132
13.06. Change in Accounting Principles................................ 133
13.07. Setoff......................................................... 133
13.08. Ratable Sharing................................................ 134
13.09. Amendments and Waivers......................................... 135
13.10. Notices........................................................ 136
13.11. Survival of Warranties and Agreements.......................... 137
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13.12. Failure or Indulgence Not Waiver;
Remedies Cumulative........................................... 137
13.13. Marshalling; Payments Set Aside................................ 137
13.14. Independence of Covenants...................................... 138
13.15. Severability................................................... 138
13.16. Headings....................................................... 138
13.17. Governing Law.................................................. 138
13.18. Limitation of Liability........................................ 138
13.19. Successors and Assigns......................................... 138
13.20. Certain Consents and Waivers of the Borrowers.................. 139
13.21. Counterparts; Effectiveness; Inconsistencies................... 140
13.22. Limitation on Agreements....................................... 140
13.23. Confidentiality................................................ 140
13.24. Entire Agreement............................................... 141
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EXHIBITS
Exhibit A -- Assignment and Acceptance
Exhibit B -- Subordinated Note
Exhibit C -- Borrowing Base Certificate
Exhibit D -- Notice of Borrowing
Exhibit E -- Notice of Continuation/Conversion
Exhibit F -- Acceptance
Exhibit G-1 -- Revolving Loan Note
Exhibit G-2 -- Swing Note
Exhibit H -- List of Closing Documents
Exhibit I -- Officer's Certificate
Exhibit J -- Compliance Certificate
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SCHEDULES
Schedule 1.01(A) -- Permitted Existing Liens
Schedule 1.01(B) -- Permitted Existing Indebtedness
Schedule 1.01(C) -- Borrower's Multicurrency Accounts
Schedule 1.01(D) -- Administrative Agent's London Accounts
Schedule 2.03(H) -- Transitional Provisions
Schedule 3.05(A) -- Lockboxes and Blocked Accounts
Schedule 6.01(C) -- Ownership
Schedule 6.01(G) -- Subsidiaries
Schedule 6.01(J) -- Litigation; Adverse Effects
Schedule 6.01(P) -- Environmental Matters
Schedule 6.01(Q) -- Benefit Plan
Schedule 6.01(R) -- Labor Matters
Schedule 6.01(W) -- Insurance
Schedule 6.01(Y) -- Disbursement Accounts
Schedule 8.12 -- Post-Closing Items
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<PAGE>
EXECUTION COPY
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of September 18, 1996 (as amended,
supplemented or modified from time to time, the "Agreement") is entered into
among THE DONNA KARAN COMPANY, a New York general partnership, THE DONNA KARAN
COMPANY STORE, G.P., a New York general partnership, DONNA KARAN STUDIO, a New
York general partnership, and DK FOOTWEAR PARTNERS, a New York general
partnership (each, individually, a "Borrower" and collectively, the
"Borrowers"), the financial institutions from time to time parties hereto as
lenders, whether by execution of this Agreement or an Assignment and Acceptance
(the "Lenders"), the financial institutions from time to time parties hereto as
issuing banks, whether by execution of this Agreement or an Assignment and
Acceptance (the "Issuing Banks"), CITIBANK, N.A. ("Citibank"), in its capacity
as administrative agent for the Lenders and the Issuing Banks (in such capacity,
the "Administrative Agent"), and THE CHASE MANHATTAN BANK and NATIONSBANK, N.A.,
in their capacity as co-agents (the "Co-Agents").
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings, applicable both to the singular and the
plural forms of the terms defined:
"Acceptable Documentary Letter of Credit" means a Commercial Letter of
Credit having an expiration date no later than 180 days after the date of
issuance thereof.
"Acceptance" has the meaning ascribed to such term in Section 2.04.
"Acceptance Agreements" means, with respect to an Acceptance, such form of
acceptance agreement or continuing agreement for banker's acceptances (whether
in a single document or several documents taken together) as the Issuing Bank
from which the Acceptance is requested may employ in the ordinary course of
business for its own account, with such modifications thereto as may be agreed
upon by the Issuing Bank and a Borrower;
<PAGE>
provided, however, that in the event of any conflict between the terms of any
Acceptance Agreement and this Agreement, the terms of this Agreement shall
control.
"Acceptance Commitment" means, with respect to an Issuing Bank, the
obligation of such Issuing Bank, pursuant to the terms and conditions of this
Agreement, to create Acceptances for the account of the Borrowers.
"Acceptance Obligations" has the meaning ascribed to such term in Section
2.04(d).
"Acceptance Rate" means, for each Acceptance created by an Issuing Bank,
the bid acceptance commission rate (as a percentage per annum) as such Issuing
Bank shall have notified to the Agent prior to 11:00 a.m. (New York City time)
on the Business Day which occurs one Business Day prior to the date of the
creation of such Acceptance as being in effect on the date of such creation.
"Acceptance Termination Date" means the day which is the earliest of (i)
June 18, 1999, (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).
"Accommodation Obligation" means any Contractual Obligation, contingent or
otherwise, of any Person with respect to any Indebtedness, obligation or
liability of another, if the primary purpose or intent thereof by the Person
incurring the Accommodation Obligation is to provide assurance to the obligee of
such Indebtedness, obligation or liability of another Person that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of busi ness), notes
co-made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
dis-
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charge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received.
"Adjusted Net Worth" means, as of any date, the Net Worth of Donna Karan
International and its Subsidiaries on a consolidated basis, adjusted to exclude
(a) any extraordinary gains, (b) noncash gains and losses relating to deferred
taxes, and (c) intangibles (including, without limitation, goodwill and deferred
financing costs).
"Administrative Agent" has the meaning ascribed to such term in the
preamble hereto.
"Administrative Agent's New York Account" means the Administrative Agent's
account number 38858061 (re: The Donna Karan Company) maintained at the office
of Citibank at 399 Park Avenue, New York, New York 10043, or such other deposit
account as the Administrative Agent may from time to time specify in writing to
the Borrowers and the Lenders.
"Administrative Agent's London Accounts" means those certain accounts
listed on Schedule 1.01(D) maintained at the office of Citibank, or such other
deposit account as the Administrative Agent may from time to time specify in
writing to the Borrowers and the Lenders.
"Affiliate" means, as applied to any specified Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any specified Person, means the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the Securities having voting power for the election of directors of such
specified Person or otherwise to direct or cause the direction of the management
and policies of such specified Person, whether through the ownership of voting
Securities or by contract or otherwise.
"Agreement of Contribution" means the Agreement and Plan of Contribution,
dated as of June 10, 1996, among Donna Karan International, Gabrielle Studio,
Inc., Takihyo Inc., Donna
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Karan, Stephan Weiss, Trust under Trust Agreement for the Benefit of Lisa Weiss
Keyes, Corey Weiss and Gabrielle Karan, Trust under Trust Agreement for the
Benefit of Donna Karan, Tomio Taki, Frank Mori, Christopher Mori and Heather
Mori.
"Applicable Fixed Rate Margin" means initially a rate equal to 0.625% per
annum. Such rate will fluctuate quarterly on the first day of the each fiscal
quarter based upon the preceding twelve-month average of outstanding Revolving
Credit Obligations, calculated as of the last day of each such preceding fiscal
month, as set forth below:
If the average Revolving Applicable Fixed
Credit Obligations are: Rate Margin
------------------------ ----------------
Less than $40,000,000 0.500%
Greater than or equal to
$40,000,000 but less than
$80,000,000 0.625%
Greater than or equal to
$80,000,000 0.750%.
"Applicable Lending Office" means, with respect to a particular Lender,
its Fixed Rate Lending Office in respect of provisions relating to Fixed Rate
Loans and Multicurrency Loans and its Domestic Lending Office in respect of
provisions relating to Floating Rate Loans.
"Asset Sale" means any sale, conveyance, transfer, license, lease or other
disposition (other than sales of inventory in the ordinary course of business)
of Donna Karan International or any of its Subsidiaries.
"Assignment and Acceptance" means an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto and made a part hereof
(with blanks appropriately completed) delivered to the Administrative Agent in
connection with an assignment of a Lender's interest under this Agreement in
accordance with the provisions of Section 13.01.
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"Available Currency" means, with respect to any Loan, the currency in
which such Loan is denominated pursuant to the terms hereof.
"Availability" means, at any particular time, the amount by which the
Maximum Revolving Credit Amount at such time exceeds 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 Obligations at such
time attributable to corporate credit cards or cash management functions,
including Automated Clearing House (ACH) functions, performed by Citibank.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C.
ss.ss. 101 et seq.), as amended from time to time, and any successor statute.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) which is subject to Title IV of ERISA or
Section 412 of the Internal Revenue Code in respect of which the Borrower or any
ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Blocked Account Bank" means Citibank, N.A.
"Blocked Accounts" means, collectively, the accounts established by the
Borrowers at the Blocked Account Banks and "Blocked Account" means any one of
the Blocked Accounts.
"Borrowers' Domestic Deposit Account" means the commercial deposit account
at Citibank with respect to the Borrowers, or any other deposit account
established by the Borrowers at a financial institution acceptable to the
Administrative Agent as the Borrowers may from time to time specify in writing
to the Administrative Agent and the Lenders.
"Borrowers' Multicurrency Accounts" means those certain commercial deposit
accounts listed on Schedule 1.01(C), or any other deposit account(s) established
by the Borrowers at a financial institution acceptable to the Administrative
Agent as the Borrowers may from time to time specify in writing to the
Administrative Agent and the Lenders.
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"Borrowing" means a borrowing consisting of Loans of the same Type made on
the same day by the Lenders.
"Borrowing Base" means, as of any date of determina tion, an amount equal
to the sum of (a) up to eighty-five percent (85%) of Eligible Receivables less
such reserves as the Administrative Agent, in its sole discretion, deems
appropriate plus (b) up to fifty percent (50%) of Eligible Inventory under
Acceptable Documentary Letters of Credit less such reserves as the
Administrative Agent, in its sole discretion, deems appropriate, (c) up to sixty
percent (60%) of Eligible Finished Goods Inventory, provided that the amount of
the Borrowing Base allocated to the Eligible Finished Goods Inventory stored in
the warehouses located in Amsterdam shall not exceed $5,000,000 in the
aggregate, less such reserves as the Administrative Agent, in its sole
discretion, deems appropriate, and (d) up to twenty-five percent (25%) of
Eligible Raw Materials less such reserves as the Administrative Agent, in its
sole discretion, deems appropriate.
"Borrowing Base Certificate" means a certificate, substantially in the
form of Exhibit C attached hereto and made a part hereof.
"Borrowing Base Criteria" means, as of any date of determination, the
Revolving Credit Obligations outstanding at such time are less than the
Borrowing Base at such time as reflected on the most recent Borrowing Base
Certificate delivered in accordance with Section 7.02.
"Business Day" means a day, in the applicable local time, which is not a
Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other govern mental action to close (i) in New York, New
York, (ii) in the case of Fixed Rate Loans or Multicurrency Loans, in London,
England and the applicable country, or (iii) in the case of Letter of Credit
transactions for a particular Issuing Bank, in the place where its office for
issuance or administration of the pertinent Letter of Credit is located.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or other assets or accrued as a liability
(but without duplication)) during such period that, in conformity with GAAP, are
required to
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<PAGE>
be included in or reflected by Donna Karan International and its Subsidiaries'
fixed asset accounts as reflected in any of their respective balance sheets;
provided, however, that (i) Capital Expenditures shall include, whether or not
such a designation would be in conformity with GAAP, (A) that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Donna Karan
International and its Subsidiaries and (B) expenditures for Equipment which is
purchased simultaneously with the trade-in of existing Equipment owned by Donna
Karan International or any of its Subsidiaries to the extent that the gross
purchase price of the purchased Equipment exceeds the book value of the
Equipment being traded in at such time, and (ii) Capital Expenditures shall
exclude, whether or not such a designation would be in conformity with GAAP, (A)
expenditures made in connection with the replacement or restoration of assets to
the extent that such expenditures are reimbursed or financed with insurance or
condemnation proceeds, (B) expenditures made in connection with molds used in
the operations of the beauty business to the extent such expenditures are
amortized through cost of goods sold and (C) expenditures made in connection
with the acquisition of and/or improvements to a warehouse located in New Jersey
including, but not limited to, Capital Leases, leasehold improvements and a rack
and rail system.
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Capital Stock", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or ex change rights, voting rights, calls or claims
of any character with respect thereto.
"Cash Capital Expenditures" means, for any period, that portion of Capital
Expenditures which is paid in cash.
"Cash Collateral" means cash or Cash Equivalents held by the
Administrative Agent, any of the Issuing Banks or any of the Lenders as security
for any or all of the Obligations.
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"Cash Collateral Accounts" means, collectively, the accounts opened and
maintained at Citibank for Dollars and each Optional Currency which accounts
shall be governed by the terms of the Cash Collateral Pledge Agreement and shall
be under the sole dominion and control of the Administrative Agent.
"Cash Collateral Pledge Agreement" means the Cash Collateral Pledge and
Assignment Agreement dated as of September 18, 1996, made by the Borrowers in
favor of the Administrative Agent for the benefit of the Administrative Agent,
the Lenders, the Issuing Banks and the other Holders, as such Pledge Agreement
may be amended, supplemented or otherwise modified from time to time.
"Cash Equivalents" shall mean (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within ninety (90) days after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation or Moody's
Investors Services, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investors Services, Inc. shall be rating such
obligations, then from such other nationally recognized rating services
acceptable to the Administrative Agent) and not listed in Credit Watch published
by Standard & Poor's Corporation; (iii) commercial paper, other than commercial
paper issued by any Borrower or any of their respective Affiliates, maturing no
more than ninety (90) days after the date of creation thereof and, at the time
of acquisition, having a rating of at least A-1 or P-1 from either Standard &
Poor's Corporation or Moody's Investor's Service, Inc. (or, if at any time
neither Standard & Poor's Corporation nor Moody's Investors Service, Inc. shall
be rating such obligations, then the highest rating from such other nationally
recognized rating services acceptable to the Administrative Agent); (iv)
domestic and Eurodollar certificates of deposit or time deposits or bankers'
acceptances maturing within ninety (90) days after the date of acquisition
thereof issued by any commercial
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bank organized under the laws of the United States of America or any state
thereof or the District of Columbia or Canada having combined capital and
surplus of not less than $500,000,000; and (v) marketable direct debt issued by
any corporation (other than debt issued by any Borrower or any of its
Affiliates), which at the time of acquisition, has one of the three highest
ratings obtainable from either Standard & Poor's Corporation or Moody's
Investors Services, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investors Services, Inc. shall be rating such
obligations, then from such other nationally recognized rating services
acceptable to the Administrative Agent) maturing within one (1) year after the
date of acquisition thereof.
"Cash Interest Expense" means, for any Financial Covenant Period, total
interest expense, whether paid or accrued (including the interest component of
Capital Leases) of Donna Karan International and its Subsidiaries on a
consolidated basis, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and net costs
under Interest Rate Contracts, but excluding, amortization of financing fees,
interest paid in property other than cash or any other interest expense not
payable in cash, all as determined in conformity with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., any amendments thereto,
any successor statutes, and any regulations promulgated thereunder.
"Change of Control" means (i) the acquisition by any "person" (as such
term is used in Section 13(d) and 14(d) of the Securities Exchange Act) other
than a person who is a shareholder of Donna Karan International on the effective
date of the registration statement filed under the Securities Act relating to
the Public Equity Offering (an "Initial DKI Shareholder") of 30% or more of the
voting power of Securities of Donna Karan International, or the acquisition by
an Initial DKI Shareholder other than an affiliate of Donna Karan International
of an additional 5% of the voting power of Securities of Donna Karan
International over and above that owned immediately after the closing of the
Public Equity Offering; (ii) the acquisition of any "person" (as such term is
used in Section 13(d) and 14(d) of
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<PAGE>
the Securities Exchange Act) other than a person who, on the effective date of
the registration statement filed under the Securities Act relating to the Public
Equity Offering, is a holder of any ownership interest in Donna Karan Studio (an
"Initial Licensee Interest Holder") of 30% or more of the voting power of Donna
Karan Studio, or the acquisition by an Initial Licensee Interest Holder other
than an affiliate of Gabrielle Studio, Inc. (and excluding any such acquisition
resulting from a purchase, sale or transfer of Takihyo Inc. stock by and between
any of the current stockholders of Takihyo Inc.) of an additional 5% of the
voting power of Donna Karan Studio over and above that owned immediately after
the closing of the Public Equity Offering; (iii) any merger or sale of
substantially all of the assets of Donna Karan International under circumstances
where the holders of 20% or more of the equity securities of the surviving
entity of such transaction were not holders of the Common Stock of Donna Karan
International immediately prior to consummation of such transaction; (iv) any
merger or sale of substantially all of the assets of Donna Karan Studio under
circumstances where the holders of 20% or more of the ownership interests of
Donna Karan Studio immediately prior to consummation of such transaction were
not holders of an ownership interest in Donna Karan Studio immediately after
consummating such transaction; or (v) any change in the composition of the Board
of Directors of Donna Karan International not approved by (a) a majority of the
Board of Directors of Donna Karan International prior to such change and (b) not
less than two directors of Donna Karan International who were directors prior to
the time any "person" who was not an Initial DKI Shareholder acquired 30% or
more of the voting power of Securities of Donna Karan International.
"Citibank" means Citibank, N.A., a national banking association.
"Claim" means any claim or demand, by any Person, of whatsoever kind or
nature for any alleged Liabilities and Costs, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Clean-Down Amount" means, for any Clean-Down Period,
$15,000,000, subject to any reduction set forth in Section
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3.01(b)(ii), 3.01(b)(iii) or 9.06(vi)(b) applicable to such Clean-Down Period.
"Clean-Down Forecast" means, at any particular time, a forecast of Donna
Karan International and its Subsidiaries, giving effect to the Net Cash Proceeds
being received in connection with an Asset Sale pursuant to Section 3.01(b)(ii),
or the Net Cash Proceeds being received in connection with the issuance of
Common Stock pursuant to Section 3.01(b)(iii), or the dividends or repurchases
being made pursuant to Section 9.06(vi) and showing each succeeding fiscal month
through the end of the Clean-Down Period immediately following such time,
demonstrating their ability to make or cause to be made a mandatory prepayment
of all outstanding Loans (and not borrow any other Loan) in excess of the
Clean-Down Amount for a period of forty-five (45) consecutive days during such
Clean-Down Period, certified by the chief financial officer of Donna Karan
International and in form and substance satisfactory to the Requisite Lenders.
"Clean-Down Period" has the meaning ascribed to such term in Section
3.01(b)(iv).
"Closing Date" means the initial Funding Date of the Loans.
"Co-Agents" has the meaning ascribed to such term in the preamble hereto.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and any regulations or guidance promulgated
thereunder.
"Collateral" means all property and interests in prop erty now owned or
hereafter acquired by any Borrower or any other Loan Party in or upon which a
Lien is granted under any of the Loan Documents.
"Commercial Letter of Credit" means any documentary letter of credit
issued by an Issuing Bank pursuant to Section 2.03 for the account of any
Borrower which is drawable upon presentation of documents evidencing the sale or
shipment of goods purchased by such Borrower in the ordinary course of its
business.
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"Commission" means the Securities and Exchange Commis sion and any Person
succeeding to the functions thereof.
"Commitment" means, with respect to any Lender, such Lender's Commitment,
as such may be modified from time to time pursuant to the terms of this
Agreement or to give effect to any applicable Assignment and Acceptance, and
"Commitments" means the aggregate principal amount of the Commitments of all the
Lenders (it being understood and agreed that the maximum aggregate principal
amount of the Commitments shall not exceed $150,000,000, as reduced from time to
time pursuant to the terms hereof).
"Commitment Termination Date" means the day which is the earliest of (A)
September 18, 1999, (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).
"Common Stock" means the common stock of Donna Karan International.
"Compliance Certificate" has the meaning ascribed to such term in Section
7.01(d).
"Contaminant" means any waste, pollutant (as that term is defined in 42
U.S.C. 9601(33) or in 33 U.S.C. 1362(13)), hazardous substance (as that term is
defined in 42 U.S.C. 9601(14)), hazardous chemical (as that term is defined by
29 CFR Section 1910.1200(c)), toxic substance, hazardous waste (as that term is
defined in 42 U.S.C. 6901), radioactive material, special waste, petroleum,
including crude oil or any petroleum-derived substance, waste, or breakdown or
decomposition product thereof, or any constituent of any such substance or
waste, including, but not limited to polychlorinated biphenyls, and asbestos.
"Contractual Obligation" means, as applied to any Person, any provision of
any Securities issued by that Person or any indenture, mortgage, deed of trust,
security agreement, pledge agreement, guaranty, contract, undertaking, agreement
or instrument to which that Person is a party or by which it or any of its
properties is bound, or to which it or any of its properties is subject.
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"Cost" means the aggregate purchase price paid or to be paid by any
Borrower to the supplier for such goods, including transportation costs, if any,
as reflected in the invoices attached to the Request for Acceptance relating
thereto.
"Credit Insured Receivable" shall mean an account receivable of a Borrower
with respect to which the following statements are true: (i) such Borrower has
obtained credit insurance or other form of credit protection covering such
account receivable on terms and conditions and from a financial institution
satisfactory to the Administrative Agent and (ii) such credit insurance or other
form of credit protection is in full force and effect and not in dispute.
"Current Assets" means, as at any date of determina tion, the total assets
of Donna Karan International and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP.
"Current Liabilities" means, as at any date of determination, the current
liabilities of Donna Karan International and its Subsidiaries on a consolidated
basis which may properly be classified as current liabilities in conformity with
GAAP, including for purposes of this definition, the Loans.
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in favor of the PBGC)
with respect to the payment of taxes, assessments or governmental charges or
claims in all cases which are not yet due or are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other Liens imposed by law
created in the ordinary course of business for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
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(iii) Liens (other than any Lien in favor of the PBGC) incurred or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security
benefits or to secure the performance of bids, tenders, sales, leases,
contracts (other than for the repayment of borrowed money), surety, appeal
and performance bonds;
(iv) Liens arising as a result of progress payments or otherwise under
government contracts; and
(v) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements, building
restrictions and other similar charges or encumbrances on the use of Real
Property which do not materially interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries and which do not
materially adversely affect the value of the Real Property.
"Debt" means, as applied to any Person at any time, 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) reimbursement obligations 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, or (v) in respect of Capital Leases.
"Default" means an event which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default.
"Disbursement Accounts" means, collectively, the bank accounts of the
Borrowers indicated as disbursement accounts on the Schedule 6.01(Y).
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"Discount Rate" of any Issuing Bank means, with respect to an Acceptance
created by such Issuing Bank at any time, the bid rate in effect at such Issuing
Bank at such time for discount by such Issuing Bank of commercial drafts or
bills eligible for discount by Federal Reserve Banks in the same face amount,
with the same maturity, and of the same type, as such Acceptance.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United States.
"Dollar Equivalent" means, with respect to any amount denominated in an
Available Currency (other than Dollars) on the date of determination thereof,
the equivalent of such amount in Dollars determined at the rate of exchange
equal to the Spot Rate on such date of determination.
"Domestic Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New York, New
York, from time to time (but at least annually), as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2
of one percent per annum, plus (ii) the rate per annum obtained by dividing
(A) the latest three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of deposit of major
United States money market banks, such three-week moving average being
determined weekly on each Monday (or, if any such date is not a Business Day,
on the next succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, on the
basis of quotations for such rates
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received by Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to 100%
minus the average of the daily percentages specified during such three-week
period by the Federal Reserve Board (or any successor) for determining the
maximum reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for Citibank in respect
of liabilities consisting of or including (among other liabilities)
three-month U.S. dollar nonpersonal time deposits in the United States, plus
(iii) the average during such three-week period of the annual assessment
rates estimated by Citibank for determining the then current annual
assessment payable by Citibank to the Federal Deposit Insurance Corporation
(or any successor) for insuring U.S. dollar deposits of Citibank in the
United States; and
(c) for any day, 1/2 of one percent per annum above the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any quotations for such day on such transactions
received by Citibank from three Federal funds brokers of recognized standing
selected by it.
"Domestic Concentration Account" means Account No. ____________ at
Citibank, N.A. in New York, New York, or such other account as is acceptable to
the Administrative Agent as a concentration account.
"Domestic Lending Office" means, with respect to any Lender, such Lender's
office, located in the United States, specified as the "Domestic Lending Office"
under its name on the signature pages hereof or on the Assignment and Acceptance
by which it became a Lender or such other United States office of such Lender as
it may from time to time specify by written notice to the Borrowers and the
Administrative Agent.
"Domestic LIBO Rate" means, with respect to any Interest
Period applicable to a Borrowing of Fixed Rate Loans
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denominated in Dollars, the interest rate per annum obtained by dividing (i) an
interest rate per annum determined by the Administrative Agent to be the average
(rounded upward to the nearest whole multiple of one-sixteenth of one percent
(0.0625%) per annum if such average is not such a multiple) of the rates per
annum at which deposits in Dollars are offered by the principal office of
Citibank in London, England to major banks in the London interbank market at
approximately 11:00 a.m. (London time) on the Fixed Rate Determination Date for
such Interest Period for a period equal to such Interest Period and in an amount
substantially equal to the amount of the Fixed Rate Loan to be made by Citibank
for such Interest Period, by (ii) a percentage equal to 100% minus the Domestic
Reserve Percentage in effect on the relevant Fixed Rate Determination Date. The
Domestic LIBO Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Domestic Loan" means a Loan denominated in Dollars.
"Domestic Reserve Percentage" means, for any day, that percentage which is
in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York, New York with deposits exceeding five
billion Dollars in respect of "Eurocurrency Liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Fixed Rate Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any
bank to United States residents).
"Donna Karan Group" means, collectively, Donna Karan International and its
Subsidiaries.
"Donna Karan International" means Donna Karan International Inc., a
Delaware corporation.
"Drafts" has the meaning ascribed to such term in Section 2.04(b).
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"EBITDA" means, for any Financial Covenant Period, for Donna 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, each item in clauses (i) through
(vii) calculated pursuant to GAAP for such period.
"Eligible Acceptance" means any Acceptance (i) against the liability for
which the Issuing Bank which created such Acceptance is not required to maintain
reserves under Regulation D of the Board of Governors of the Federal Reserve
System in effect from time to time, or under any other law or regulation, and
(ii) which is eligible for discount by Federal Reserve Banks.
"Eligible Assignee" means (i) a Lender or (ii) a commercial bank, lending
institution, finance company, insurance company, other financial institution or
fund reasonably acceptable to the Administrative Agent and the Borrowers.
"Eligible Finished Goods Inventory" means Inventory consisting of finished
goods completed in accordance with style or customer order specifications which
is stored in one of the Borrowers' finished good warehouses permitted under this
Agreement and listed on Schedule 1 to the Security Agreement (or otherwise
disclosed to the Administrative Agent pursuant to the terms of this Agreement),
for which a customer has not been billed, and which is otherwise Eligible
Inventory; provided, however, that with respect to the Inventory stored in the
warehouses located in Amsterdam and Hong Kong such Inventory shall not be
Eligible Finished Goods Inventory unless and until such Inventory has been fully
paid for and no amount is owing by any Borrower with respect thereto. Eligible
Finished Goods Inventory shall be valued at the lower of cost on a FIFO basis or
market.
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"Eligible Inventory" means Inventory with respect to which, when scheduled
on a Borrowing Base Certificate and at all times thereafter, the Administrative
Agent has a valid and perfected first priority security interest, there is no
violation of the negative or affirmative covenants or other provisions of this
Agreement or any other Loan Document, and which is not, in the reasonable
opinion of the Administrative Agent, obsolete or unmerchantable and which the
Administrative Agent, in its reasonable credit judgment deems to be Eligible
Inventory, based on such credit and collateral considerations as the
Administrative Agent may deem appropriate. Eligible Inventory shall be valued at
the lower of cost on a FIFO basis or market. Other than Inventory that consists
of Eligible Finished Goods Inventory that is stored at a finished goods
warehouse as described in the definition of "Eligible Finished Goods Inventory",
no Inventory of a Borrower shall be Eligible Inventory if such Inventory is
located, stored, used or held at the premises of a third party unless either (i)
(A) the Administrative Agent shall have received a bailee's or similar letter
from such third party in form and substance satisfactory to the Administrative
Agent and (B) an appropriate UCC-1 financing statement shall have been executed
with respect to such location or (ii) the Administrative Agent shall have
otherwise consented in writing. The Administrative Agent reserves the right, in
its reasonable discretion, to create, from time to time, additional categories
of ineligible Inventory.
"Eligible Raw Materials" means Inventory which is classified, consistent
with past practice, on the Borrowers' accounting system as raw materials, which
is otherwise Eligible Inventory.
"Eligible Receivables" means those Receivables with respect to which, when
scheduled on a Borrowing Base Certificate and at all times thereafter, the
Administrative Agent has a valid and perfected first priority security interest,
there is no violation of the negative or affirmative covenants or other
provisions of this Agreement or any other Loan Document and which the
Administrative Agent, in its reasonable credit judgment, deems to be Eligible
Receivables, based on such credit and collateral considerations as the
Administrative Agent may deem appropriate. No Receivable of a Borrower shall be
an Eligible Receivable if:
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(i) the Receivable is a non-dated Receivable which remains due or unpaid
more than ninety (90) days after the date of original invoice issued by such
Borrower with respect to the sale giving rise thereto; or the Receivable is a
dated Receivable which remains due or unpaid more than ninety (90) days after
the date of the original invoice issued by such Borrower with respect to the
sale giving rise thereto; or
(ii) the Receivable arises out of a sale not made in the ordinary course
of such Borrower's business or is to a Person which is an Affiliate or
Subsidiary of such Borrower or controlled by an Affiliate or Subsidiary of
such Borrower unless such sale is to Donna Karan Japan K.K. or other
Affiliate of Donna Karan International and gives rise to a Credit Insured
Receivable; or
(iii) any portion of the Receivable is in dispute, but only that portion
in dispute (if such disputed portion is less than 50% of such Receivable)
shall be ineligible ; or
(iv) any warranty contained in this Agreement or any Loan Document with
respect to Eligible Receivables or such Receivable has been breached; or
(v) the Receivable is, or in the Administrative Agent's reasonable
judgment may become, subject to any claim of setoff which is formally or
informally asserted by the account debtor, and such account debtor has not
entered into an agreement which is acceptable to the Administrative Agent
with respect the waiver of rights of setoff; or
(vi) the account debtor has filed a petition for bankruptcy or any other
petition for relief under the Bankruptcy Code, made an assignment for the
benefit of creditors, or if any petition or other application for relief
under the Bankruptcy Code has been filed against the account debtor, or if
the account debtor has failed, suspended its business operations, become
insolvent, or suffered a receiver or a trustee to be appointed for all or a
material portion of its assets or affairs; or
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(vii) the account debtor is also such Borrower's supplier or creditor, and
that account debtor has not entered into an agreement with the Administrative
Agent with respect to waiver of rights or setoff; or
(viii) the sale is to an account debtor located outside the continental
United States, unless such sale is on letter of credit or acceptance terms
acceptable to the Administrative Agent (which letter of credit or acceptance
has been assigned to the Administrative Agent in a manner satisfactory to the
Administrative Agent) or such sale gives rise to a Credit Insured Receivable;
or
(ix) the sale to such customer is on guaranteed sale, sale and return,
sale on approval, consignment or any other repurchase or return basis; or
(x) in the Administrative Agent's reasonable judgment that collection of
such Receivable is insecure or that such Receivable may not be paid by reason
of the account debtor's financial inability to pay; or
(xi) the goods giving rise to such Receivable have not been shipped and
delivered to and received by the account debtor or the services giving rise
to such Receivable have not been performed by such Borrower and accepted by
the account debtor; or
(xii) at the time of determination, the Receivable(s) of the respective
account debtor exceed twenty percent (20%) (or thirty percent (30%), in the
case of Federated Department Stores, Inc. or Receivables of Donna Karan Japan
K.K. or other Affiliate of Donna Karan International, which are Credit
Insured Receivables) of the aggregate amount of such Borrower's Eligible
Receivables, but only to the extent of such excess; or
(xiii) except as otherwise agreed by the Administrative Agent, the account
debtor is the United States of America or any department, agency or
instrumentality thereof, unless the Borrower has assigned its right to
payment of such Receivable to Administrative Agent pursuant to the Assignment
of Claims Act of 1940, as amended, and such
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assignment has been accepted and acknowledged by the appropriate government
officers; or
(xiv) the Receivable is subject to any deduction, counterclaim or other
condition which the Administrative Agent determines, in its reasonable
discretion, has a material adverse effect on the collectability thereof; or
(xv) any document or agreement executed or delivered in connection with
any Receivable, or any procedure used in connection with any such document or
agreement, fails in any respect to comply with any requirements of applicable
law, and such failure would, in the reasonable determination of the
Administrative Agent, (a) have a material adverse effect upon the
collectability of such Receivable or (b) subject payments with respect to
such Receivable to any claim for recovery thereof after receipt by the
Administrative Agent or the Lenders.
In addition to the foregoing, no Receivables owing by a particular account
debtor shall be Eligible Receivables if fifty percent (50%) or more of the
Receivables owing from such account debtor are ineligible for any reason. The
Administrative Agent reserves the right, in its reasonable discretion, to
create, from time to time, additional categories of ineligible Receivables.
"Environmental, Health or Safety Requirements of Law" means all valid and
enforceable Requirements of Law derived from or relating to federal, state,
local and foreign laws, regulations, orders, ordinances, rules, permits,
licenses or other binding determination of any Governmental Authority relating
to or addressing the environment, health or safety, including but not limited to
any law, regulation, or order relating to the use, handling, or disposal of any
Contaminant, any law, regulation, or order relating to Remedial Action and any
law, regulation, or order relating to workplace or worker safety and health, and
such Requirements of Law as are promulgated by the specifically authorized agent
or agents responsible for administering such Requirements of Law.
"Environmental Lien" means a Lien in favor of any Governmental Authority
for (i) any liabilities under any Environmental, Health or Safety Requirement of
Law, or
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(ii) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"Environmental Property Transfer Acts" means any applicable Requirement of
Law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any Property or the transfer, sale or
lease of any Property or deed or title for any Property for environmental
reasons, including, but not limited to, any so-called "Environmental Cleanup
Responsibility Act", "Responsible Transfer Act", or "Industrial Site Recovery
Act".
"Equipment" means all of each Borrower's present and future (i) equipment
and fixtures, including, without limitation, machinery, manufacturing,
distribution, selling, computer system, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, vessels, aircraft, aircraft engines, and trade fixtures,
(ii) other tangible personal property (other than such Borrower's Inventory),
and (iii) any and all accessions, parts and appurtenances attached to any of the
foregoing or used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means (i) any corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as a Borrower; (ii) a partnership, or other trade or business (whether or
not incorporated) which is under common control (within the meaning of Section
414(c) of the Code) with a Borrower; (iii) a member of the same affiliated
service group (within the meaning of Section 414(m) of the Code) as a Borrower,
any corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above; and (iv) any other Person which is
required to be aggregated with a Borrower pursuant to regulations promulgated
under Section 414(o) of the Code.
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"Event of Default" means any of the occurrences set forth in Section 11.01
after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in Section 11.01.
"Federal Funds Rate" means, for any period, a fluctu ating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day in New York, New York, for the next preceding
Business Day) in New York, New York by the Federal Reserve Bank of New York, or
if such rate is not so published for any day which is a Business Day in New
York, New York, the average of the quotations for such day on such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by the Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeed ing to its functions.
"Financial Covenant Period" means: (i) with respect to the fourth fiscal
quarter of 1996, the period commencing on the first day of such fiscal quarter
and ending on the last day of such fiscal quarter; (ii) with respect to the
first fiscal quarter of 1997, the period commencing on the first day of the
fourth fiscal quarter of 1996 and ending on the last day of the first fiscal
quarter of 1997; (iii) with respect to the second fiscal quarter of 1997, the
period commencing on the first day of the fourth fiscal quarter of 1996 and
ending on the last day of the second fiscal quarter of 1997; (iv) with respect
to the third fiscal quarter of 1997, the period commencing on the first day of
the fourth fiscal quarter of 1996 and ending on the last day of the third fiscal
quarter of 1997; and (v) with respect to each fiscal quarter thereafter, the
immediately preceding twelve month period.
"Financial Officer" means, with respect to Donna Karan International or
any Borrower, the chief financial officer, treasurer or controller with
significant responsibility for the financial affairs of Donna Karan
International or such Borrower.
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"Fiscal Year" means the fiscal year of the Borrowers, which shall be the
52- or 53-week period ending on the Sunday nearest to December 31 of each
calendar year.
"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 minus the
Investments made pursuant to Section 9.04(iii) 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.
"Fixed Rate" means, with respect to any Interest Period applicable to a
Borrowing of Fixed Rate Loans denominated in any Available Currency, an interest
rate per annum equal to (i) the Domestic LIBO Rate with respect to Fixed Rate
Loans denominated in Dollars and (ii) the Multicurrency LIBO Rate with respect
to Fixed Rate Loans denominated in an Optional Currency, in each case in effect
on the relevant Fixed Rate Determination Date.
"Fixed Rate Affiliate" means, with respect to each Lender, the Affiliate
of such Lender (if any) set forth below such Lender's name under the heading
"Fixed Rate Affiliate" on the signature pages hereof or on the Assignment and
Acceptance by which it became a Lender or such Affiliate of a Lender as it may
from time to time specify by written notice to the Borrowers and the
Administrative Agent.
"Fixed Rate Determination Date" means, with respect to a Borrowing of
Fixed Rate Loans, the second Business Day prior to the first day of the Interest
Period for any Borrowing.
"Fixed Rate Interest Payment Date" means (i) with respect to any Fixed
Rate Loan, the last day of each Interest Period applicable to such Loan and (ii)
with respect to any Fixed Rate Loan having a Interest Period in excess of three
(3) calendar months, the last day of each three (3) calendar month interval
during such Interest Period.
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"Fixed Rate Lending Office" means, with respect to any Lender, the office
or offices of such Lender (if any) set forth below such Lender's name under the
heading "Fixed Rate Lending Office" on the signature pages hereof or on the
Assignment and Acceptance by which it became a Lender or such office or offices
of such Lender as it may from time to time specify by written notice to the
Borrowers and the Administrative Agent.
"Fixed Rate Loans" means all Loans denominated in Dollars or an Optional
Currency outstanding which bear interest at a rate determined by reference to
the Fixed Rate applicable to such currency as provided in Section 4.01(a).
"Floating Rate" means, for any period applicable to any Floating Rate Loan
denominated in any Available Currency, an interest rate per annum equal to the
Domestic Base Rate in effect from time to time with respect to Floating Rate
Loans.
"Floating Rate Loans" means all Loans denominated in Dollars which bear
interest at a rate determined by reference to the Floating Rate applicable to
such currency as provided in Section 4.01(a).
"Foreign Exchange Exposure" means, at any time and from time to time, the
amount of the obligations and liabilities of a Person with respect to each
foreign exchange contract arising as a result of a determination of the amount
of Dollars required at such time to purchase such amount of the foreign currency
covered by such foreign exchange contract at the rate equal to the spot exchange
rate offered by Citibank for the purchase of such foreign currency with Dollars
at or about 11:00 a.m. (New York time), net of liabilities owed to such Person
by the counter parties thereon.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting any of the Borrowers before any court, governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
the receipt of notice by any such party that any of them is a suspect in or a
target of any governmental inquiry or investigation, which may result in an
indictment of any of them or the seizure or forfeiture of any of their property.
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"Funded Debt" means Debt which matures more than one year from the date of
its creation or matures within one year from such date but is renewable or
extendible, at the option of the debtor, to a date more than one year from such
date or arises under a revolving credit or similar agreement which obligates the
lender or lenders to extend credit during a period of more than one year from
such date including, without limitation, all amounts of Funded Debt required to
be paid or prepaid within one year from the date of determination and excluding
the Loans.
"Funding Date" means, with respect to any Loan, the date of the funding of
such Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants Standards Board or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the date of the most recent audited
financial statements of the Borrowers delivered to the Lenders prior to the
Closing Date.
"General Intangibles" means all of a Borrower's present and future choses
in action, causes of action and all other intangible personal property of every
kind and nature (other than Receivables), including without limitation general
intangibles, contracts, corporate or other business records, designs, patents,
patent applications, trademarks, trademark applications, service marks, service
mark applications, trade names, tradestyles, trade secrets, operating
certificates, operating certificate applications, goodwill, registrations,
copyrights, licenses, franchises, permits, operating authorities, agent and
owner/operator contracts, certificates of public convenience, refunds or
reversions from any employee benefit plan or pension plan, covenants not to
compete, blueprints and other drawings, customer lists, tax refunds, tax refund
claims, rights and claims against carriers and shippers, and rights to
indemnification; provided, however, that the License Agreement and the rights of
Donna Karan Studio under the License Agreement shall be excluded from the
definition of "General Intangibles".
"Governing Documents" means, (i) with respect to any corporation, (A) the
articles/certificate of incorporation (or
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the equivalent organizational documents) of such entity, (B) the by-laws (or the
equivalent governing documents) of such entity and (C) any document setting
forth the designation, amount and/or relative rights, limitations and
preferences of any class or series of such entity's Capital Stock and (ii) with
respect to any partnership (whether limited or general), (A) the certificate of
partnership (or equivalent filings), (B) the partnership agreement (or
equivalent organizational documents) of such partnership and (C) any document
setting forth the designation, amount and/or rights, limitations and preferences
of any of such partnership's partnership interests.
"Governmental Authority" means any nation or government, any federal,
state, local or other political sub division thereof and any entity exercising
executive, legisla tive, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranties" means, collectively, the Guaranties, each dated as of
September 18, 1996, made by each of the Guarantors, each in favor of the
Administrative Agent, the Lenders and the Issuing Banks, pursuant to which such
Guarantor guarantees all of the Obligations, as such each such Guaranty may be
amended, supplemented or otherwise modified from time to time.
"Guarantors" means, collectively, the Borrowers, Donna Karan
International, DK Shoe Corp., The Donna Karan Store Corporation, Gabrielle
Japan, Inc., Gabby Apparel, Inc., DSTF Japan Company, Tolara Tetragon Inc., Full
Requirements Merchandising, Inc., TT DK Japan, Inc., FM DK Japan, Inc., Tomio
Tangents, Inc., Formal Reserve Management, Inc., Tangents Two, Inc., First Run
Management, Inc., and Donna Karan (H.K.) Limited.
"Holder" means any Person entitled to enforce any of the Obligations,
whether or not such Person holds any evidence of Indebtedness, including,
without limitation, the Administrative Agent, each Co-Agent, each Lender and
each Issuing Bank.
"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 securi ties, debentures, acceptances, notes or other
similar instru ments, and any accrued interest, fees and charges relating
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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 or (vi) which are
Accommodation Obligations; (b) all indebted ness, 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; (c) 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; (d) all preferred
stock subject (upon the occurrence of any contingency or otherwise) to mandatory
redemp tion; and (e) all contingent Contractual Obligations with respect to any
of the foregoing.
"Interbank Rate" means, for any period, (i) in respect of Loans
denominated in Dollars, the Federal Funds Rate and (ii) in respect of Loans
denominated in an Optional Currency, the Multicurrency LIBO Rate in effect on
the relevant Fixed Rate Determination Date for an Interest Period of seven (7)
days plus the Applicable Fixed Rate Margin.
"Interest Coverage Ratio" means, with respect to any Financial Covenant
Period, the ratio of (i) EBITDA to (ii) Cash Interest Expense.
"Interest Period" has the meaning set forth in Section 4.02(b).
"Interest Rate Contracts" means interest rate exchange, swap, collar, cap,
hedging or similar agreements.
"Interest Rate Determination Date" has the meaning ascribed to such term
in Section 4.02(c).
"Inventory" means all of a Borrower's present and future (i) inventory,
(ii) goods, merchandise and other personal property furnished or to be furnished
under any contract of
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service or intended for sale or lease, and all consigned goods and all other
items which have previously constituted Equipment but are then currently being
held for sale or lease in the ordinary course of such Borrower's business, (iii)
raw materials, work-in-process and finished goods, (iv) materials and supplies
of any kind, nature or description used or consumed in such Borrower's business
or in connection with the manufacture, production, packing, shipping,
advertising, finishing or sale of any of the property described in clauses (i)
through (iii) above, (v) goods in which such Borrower has a joint or other
interest or right of any kind (including, without limitation, goods in which
such Borrower has an interest or right as consignee), and (vi) goods which are
returned to or repossessed by such Borrower; in each case whether in the
possession of such Borrower, a bailee, a consignee, or any other Person for
sale, storage, transit, processing, use or otherwise, and any and all documents
for or relating to any of the foregoing.
"Investment" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any direct or indirect loan, advance (other than prepaid expenses,
accounts receivable, advances to employees and similar items made or incurred in
the ordinary course of business as presently conducted) or capital contribution
by that Person to any other Person, including all Indebtedness to such Person
arising from a sale of property by such Person other than in the ordinary course
of its business. The amount of any Investment shall be the original cost of such
Investment, plus the cost of all additions thereto less the amount of any return
of capital or principal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or decreases in value or
write-ups, write-downs or write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"Issue" means, with respect to any Letter of Credit, either issue, or
extend the expiry of, or renew, or increase the
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amount of, such Letter of Credit, and the term "Issued" or "Issuance" shall have
a corresponding meaning.
"Issuing Bank" means Citibank or any assignee of Citibank designated as an
"Issuing Bank" on the signature page of the Assignment and Acceptance by which
it became a Lender.
"Lender" has the meaning ascribed to such term in the preamble hereto.
"Letter of Credit" means any Commercial Letter of Credit or Standby Letter
of Credit Issued for the account of any Borrower pursuant to Section 2.03.
"Letter of Credit Fee" has the meaning ascribed to such term in Section
4.03(b).
"Letter of Credit Obligations" means, at any particular time, the sum of
(i) all outstanding Reimbursement Obligations at such time, plus (ii) the
aggregate undrawn face amount of all outstanding Letters of Credit at such time,
plus (iii) the aggregate face amount of all Letters of Credit requested by each
Borrower at such time but not yet issued (unless the request for an unissued
Letter of Credit has been denied pursuant to Section 2.03(c)(i)).
"Letter of Credit Reimbursement Agreement" means, with respect to a Letter
of Credit, such form of application therefor and form of reimbursement agreement
therefor (whether in a single or several documents, taken together) as the
Issuing Bank from which the Letter of Credit is requested may employ in the
ordinary course of business for its own account, with such modifications thereto
as may be agreed upon by the Issuing Bank and a Borrower; provided, however,
that in the event of any conflict between the terms of any Letter of Credit
Reimbursement Agreement and this Agreement, the terms of this Agreement shall
control.
"Leverage Ratio" means, with respect to any Financial Covenant Period, the
ratio of (i) the average of the month-end outstandings of Debt for Donna Karan
International and its Subsidiaries for such period, calculated on a consolidated
basis pursuant to GAAP, to (ii) EBITDA.
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"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses and damages with respect to or arising out of any of
the following: personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton injury,
damage or threat to the environment, natural resources or public health or
welfare, costs and expenses (including, without limitation, attorney, expert and
consulting fees and costs of or associated with investigation, feasibility or
Remedial Action studies), fines, penalties and monetary sanctions, voluntary
disclosures made to, or settlements with, any Government Authority, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, including interest, if any, thereon.
"License Agreement" means the License Agreement, dated July 3, 1996,
between Donna Karan Studio and Gabrielle Studio, Inc.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority, title retention or
other security agreement or preferential arrangement (including, without
limitation, any negative pledge arrangement and any agreement to provide equal
and ratable security) of any kind or nature whatsoever in respect of any
property of a Person, whether granted voluntarily or imposed by law, and
includes the interest of a lessor under a Capital Lease or under any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement or similar notice (other than a financing
statement filed by a "true" lessor pursuant to ss. 9-408 of the Uniform
Commercial Code or any similar statute of any relevant jurisdiction, or any
political subdivision thereof), naming the owner of such property as debtor,
under the Uniform Commercial Code or other comparable law of any jurisdiction.
"Limited Use License Agreement" means the Trademark License Agreement
(Limited Use License) dated as of September 18, 1996 between Donna Karan Studio
and the Administrative Agent, as amended, supplemented or otherwise modified
from time to time.
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"Loan Account" has the meaning ascribed to such term in Section 2.06(c).
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Contribution Agreement, the Security Agreements, the Pledge Agreements, the Cash
Collateral Pledge Agreement, the Letter of Credit Reimbursement Agreements, the
Acceptance Agreements, the Limited Use License Agreement, any Interest Rate
Contracts to which any Lender or any Affiliate of a Lender is a party, any
foreign exchange contracts to which any Lender or any Affiliate of a Lender is a
party, and all other instruments, agreements and written Contractual Obligations
between any Borrower and any of the Administrative Agent, any Co-Agent, any
Lender or any Issuing Bank delivered to either the Agent, such Co-Agent, such
Lender or such Issuing Bank pursuant to or in connection with the transactions
contemplated hereby.
"Loan Party" means each of the Borrowers and the Guarantors.
"Loans" means all Revolving Loans and Swing Loans.
"Lockboxes" means, collectively, the lockboxes established by the
Borrowers with the Blocked Account Bank for collection of payments in respect of
Receivables or other Colla teral; and "Lockbox" means any one of the Lockboxes.
"Margin Stock" means "margin stock" as such term is defined in Regulation
U and Regulation G.
"Material Adverse Effect" means a material adverse effect upon (i) the
condition (financial or otherwise), operations, assets, business, properties,
performance or prospects of Donna Karan International and its Subsidiaries taken
as a whole, (ii) the ability of the Borrowers to perform their respective
obligations under the Loan Documents, or (iii) the ability of the Lenders, the
Issuing Banks or the Administrative Agent to enforce the Loan Documents.
"Material Asset Sale" has the meaning ascribed to such term in Section
3.01(b)(ii).
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"Maximum Revolving Credit Amount" means, at any particular time, the
Commitments at such time; provided, however, if the Borrowers fail to comply
with Section 3.01(b)(iv), "Maximum Revolving Credit Amount" shall mean, at any
particular time, the lesser of (i) the Borrowing Base at such time and (ii) the
Commitments at such time.
"Multicurrency LIBO Rate" means, with respect to any Interest Period
applicable to a Borrowing of Fixed Rate Loans denominated in an Optional
Currency, the interest rate per annum equal to (A) the offered quotations for
deposits in the Optional Currency of the relevant Borrowing for a period
comparable to the relevant Interest Period which appears on the Telerate Page
3750 or Telerate Page 3740 (as appropriate) at or about 11:00 a.m. (London time)
on the applicable Fixed Rate Determination Date; or (B) if no such interest rate
determined under clause (A) is available, the arithmetic mean (rounded upward to
the nearest one-sixteenth of one percent (0.0625%)) of the interest rates, as
supplied to Citibank at its request, quoted by the "London Reference Banks" to
leading banks in the London interbank market at or about 11:00 a.m. (London
time) on the applicable Fixed Rate Determination Date for the offering of
deposits in the Optional Currency of the relevant Borrowing for a period
comparable to the relevant Interest Period. For the purposes of this definition,
"Telerate Page 3750" means the display designated as "Page 3750", and "Telerate
Page 3740" means the display designated as "Page 3740" in each case on the
Telerate Service (or such other page as may replace Page 3750 or Page 3740, as
applicable, on the service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for deposits in the Optional
Currency concerned).
"Multicurrency Loan" means a Loan denominated in an Optional Currency.
"Multiemployer Plan" means an employee benefit plan as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either a Borrower or any ERISA Affiliate.
"Net Cash Proceeds" means (A) with respect to any Asset Sale, an amount
equal to the gross cash proceeds of such Asset
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Sale, net of (i) reasonable attorneys' fees, accountants' fees, brokerage,
consultant and other customary fees, underwriting commissions and other
reasonable fees and expenses actually incurred in connection therewith, (ii)
taxes paid or reasonably estimated to be payable as a result thereof, and (iii)
appropriate amounts to be provided by the selling Borrower as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by such Borrower after such Asset Sale, and (B) with respect to any
issuance of equity of Donna Karan International, an amount equal to the gross
cash proceeds of such issuance, net of reasonable attorneys' fees, accountant's
fees, underwriting commissions and other reasonable fees and expenses actually
incurred in connection therewith.
"Net Income" means, for any Financial Covenant Period, the net earnings
(or loss) after taxes of Donna Karan International and its Subsidiaries on a
consolidated basis, determined in conformity with GAAP.
"Net Worth" means, with respect to any Person, the total assets of such
Person less total liabilities of such Person, each determined in accordance with
GAAP.
"Non-Material Asset Sale" means an Asset Sale (other than a Material Asset
Sale).
"Notes" means, collectively, the Revolving Loan Notes and the Swing Loan
Notes, and all amendments thereto, replacements thereof and substitutions
therefor.
"Notice of Borrowing" means a notice substantially in the form of Exhibit
D attached hereto and made a part hereof.
"Notice of Continuation/Conversion" means a notice substantially in the
form of Exhibit E.
"Obligations" means all Loans, advances, debts, liabilities, obligations,
Reimbursement Obligations, Acceptance Obligations, covenants and duties owing by
any Borrower to the Administrative Agent, any Co-Agent, any Lender, any Issuing
Bank, any Affiliate of the Agent, any Co-Agent, any Lender or any Issuing Bank,
or any Person entitled to indemnification pursuant
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to Section 13.05 of this Agreement, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under this Agreement, the Notes or any other Loan Document, whether or not for
the payment of money, whether arising by reason of an extension of credit,
creating an Acceptance, opening or amendment of a Letter of Credit or payment of
any draft drawn thereunder, loan, guaranty, indemnification, Interest Rate
Contract, foreign exchange contract or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired. The
term includes, without limitation, all interest, charges, expenses, fees,
attorneys' fees and disbursements and any other sum charge able to a Borrower
under this Agreement, any Note or any other Loan Document and the obligations of
such Borrower to cash collateralize the Letter of Credit Obligations and shall
also include the obligations of any Borrower, any Guarantor or any of their
respective Subsidiaries to Citibank or its Affiliates in respect of any
liabilities such Borrower, such Guarantor or such Subsidiary has in respect of
cash management functions (including Automated Clearing House (ACH) functions)
and other related services (including corporate credit cards) performed by
Citibank or its Affiliates on behalf of any Borrower, any Guarantor or any of
their respective Subsidiaries.
"Officer's Certificate" means a certificate executed by (i) the chairman
or vice-chairman of its board of directors or (ii) its president, any of its
vice-presidents, its chief financial officer, controller or its treasurer.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.
"Optional Currency" means any of the lawful currencies of Germany, Italy
or Belgium.
"Paid In Full", "Pay In Full" and "Payment In Full" means, with respect to
the Obligations of any Borrower or Guarantor, (i) with respect to each Letter of
Credit issued for the account of a Borrower, the termination and surrender for
cancellation of such Letter of Credit, (ii) with respect to (A) each Letter of
Credit (other than those referred to in clause (I)
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above, including, without limitation, any Letter of Credit with respect to
which, notwithstanding the termination thereof pursuant to its terms, the
beneficiary thereunder has a right to make drawings thereunder in accordance
with applicable law) and (B) each Draft, the delivery of Cash Collateral in such
form as requested by the Administrative Agent (and, in the case of Letters of
Credit, the applicable Issuing Bank) for deposit in the appropriate Cash
Collateral Account, together with such endorsements, and execution and delivery
of such documents and instruments as the Administrative Agent may request in
order to perfect or protect the Administrative Agent's Lien with respect
thereto, in an aggregate principal amount equal to the then outstanding Letter
of Credit Obligations and Acceptance Obligations, respectively, with respect
thereto and (iii) with respect to all other Obligations (other than, as of any
date of payment, Obligations which are contingent and unliquidated and not then
due and owing and which survive the making and repayment of the Loans, the
issuance and discharge of Letters of Credit hereunder and the termination of the
Commitments hereunder), the payment in full in cash of such Obligations.
"Payment Accounts" means the Administrative Agent's New York Account and
the Administrative Agent's London Accounts.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Permits" means any permit, approval, authorization license, variance, or
permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Existing Liens" means the Liens on assets of any Borrower
identified as such on Schedule 1.01(A).
"Permitted Existing Indebtedness" means the Indebtedness identified as
such on Schedule 1.01(B).
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust, limited liability
company or other organization, whether or not a legal entity, and any
Governmental Authority.
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"Plan" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which a Borrower or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements" means, collectively, the Stock Pledge Agreements, the
Pledge and Assignment Agreements and the Cash Collateral Pledge Agreement.
"Pledge and Assignment Agreements" means, collectively, Pledge and
Assignment Agreements, each dated as of September 18, 1996, made by each of
Donna Karan International, DK Shoe Corp., The Donna Karan Store Corporation,
Gabrielle Japan, Inc., Gabby Apparel, Inc., Tolara Tetragon Inc., Full
Requirements Merchandising, Inc., TT DK Japan, Inc., FM DK Japan, Inc., Tomio
Tangents, Inc., Formal Reserve Management, Inc., Tangents Two, Inc., and First
Run Management, Inc., in favor of the Administrative Agent for the benefit of
the Administrative Agent, the Lenders, the Issuing Banks and the other Holders,
as such Pledge and Assignment Agreements may be amended, supplemented or
otherwise modified from time to time.
"Predecessor" means the collective reference to the Borrowers, Takihyo
Fashion Company, L.P., Takihyo Design Company, L.P., TFT Store Company, L.P.,
TFT Shoe Company, L.P., TFT Japan Company, L.P., DSTF Japan Company, Gabby
Apparel, Inc. Tolara Tetragon Inc., Full Requirements Merchandising, Inc., The
Donna Karan Store Corporation, Tomio Tangents, Inc., Formal Reserve Management,
Inc., DK Shoe Corp., Tangents Two, Inc., First Run Management, Inc., Gabrielle
Japan, Inc., TT DK Japan, Inc., FM DK Japan, Inc. Donna Karan Canada Inc., Donna
Karan (H.K.) Limited, Donna Karan Italy S.R.L. and Donna Karan Japan, K.K. (for
the period it was a wholly-owned Subsidiary).
"Prepayment Discount" of any Issuing Bank means, for prepayment on any
date of an Acceptance Obligation with respect to any Acceptance created by such
Issuing Bank, an amount equal to (i) the face amount of such Acceptance times
(ii) such Issuing Bank's Discount Rate with respect to such Acceptance in effect
at the time of such prepayment minus 1/8 of 1% per annum times (iii) a fraction
the numerator of which is the number of days from such
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date to the maturity date of such Acceptance and the denominator of which is
360.
"Process Agent" has the meaning ascribed to such term in Section 13.20(a).
"Property" means any and all real property or personal property, whether
tangible or intangible, plant, building, facility, structure, underground
storage tank or unit, Equipment, Inventory, General Intangible, Receivable,
securities, account, deposit, claim, right or other asset owned, leased or
operated by the Borrower or its Subsidiaries, as applicable, (including any
surface water thereon and subsurface matrix (including but not limited to soil
and bedrock) thereunder).
"Pro Rata Share" means with respect to any Lender, the percentage obtained
by dividing (A) such Lender's Commitment at such time by (B) the aggregate
amount of all Commitments at such time; provided, however, if all of the
Commitments are terminated pursuant to the terms hereof, then "Pro Rata Share"
means the percentage obtained by dividing (x) the aggregate amount of such
Lender's Revolving Credit Obligations by (y) the aggregate amount of all
Revolving Credit Obligations.
"Public Equity Offering" means the issuance of common stock by Donna Karan
International in a primary public offering which closed on July 3, 1996.
"RCRA" means the Resource Conservation and Recovery Act of 1986, 42 U.S.C.
ss.ss. 6901 et seq., any amendments thereto, any successor statutes, and any
regulations promulgated thereunder.
"Real Property" means all of each Borrower's present and future right,
title and interest (including, without limitation, any leasehold estate) in (i)
any plots, pieces or parcels of land, (ii) any improvements, buildings,
structures and fixtures now or hereafter located or erected thereon or attached
thereto of every nature whatsoever (the rights and interests described in
clauses (i) and (ii) above being the "Premises"), (iii) all easements, rights of
way, gores of land or any lands occupied by streets, ways, alleys, passages,
sewer rights, water courses, water rights and powers, and public places
adjoining such land, and any other interests in property constituting
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appurtenances to the Premises, or which hereafter shall in any way belong,
relate or be appurtenant thereto, (iv) all hereditaments, gas, oil, minerals
(with the right to extract, sever and remove such gas, oil and minerals, and
easements, of every nature whatsoever, located in or on the Premises and (v) all
other rights and privileges thereunto belonging or apper taining and all
extensions, additions, improvements, betterments, renewals, substitutions and
replacements to or of any of the rights and interests described in clauses (iii)
and (iv) above.
"Receivables" means all of a Borrower's present and future (i) accounts,
(ii) contract rights, chattel paper, instruments, documents, deposit accounts,
and other rights to payment of any kind, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of services, and
whether or not earned by performance, (iii) any of the foregoing which are not
evidenced by instruments or chattel paper, (iv) intercompany receivables, and
any security documents executed in connection therewith, (v) proceeds of any
letters of credit or insurance policies on which such Borrower is named as
beneficiary, (vi) claims against third parties for advances and other financial
accommodations and any other obligations whatsoever owing to such Borrower,
(vii) rights in and to all security agreements, leases, guarantees, instruments,
securities, documents of title and other contracts securing, evidencing,
supporting or otherwise relating to any of the foregoing, together with all
rights in any goods, merchandise or Inventory which any of the foregoing may
represent, and (viii) rights in returned and repossessed goods, merchandise and
Inventory which any of the same may represent, including, without limitation,
any right of stoppage in transit.
"Reduction Amount" has the meaning ascribed to such term in Section
3.01(c).
"Register" has the meaning ascribed to such term in Section 13.01(c).
"Registration Rights Agreement" means the Registration Rights Agreement
made as of June 10, 1996 among Donna Karan International, Frank R. Mori,
Christopher Mori, Heather Mori, Tomio Taki, Takihyo Inc., Donna Karan, Stephan
Weiss, the trust under trust agreement for the benefit of Lisa Weiss Keyes,
Corey
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Weiss and Gabrielle Karan, the trust under trust agreement for the benefit of
Donna Karan and Gabrielle Studio, Inc.
"Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Date" has the meaning ascribed to such term in Section
2.03(d)(i)(A).
"Reimbursement Obligations" means, as to a Borrower, the aggregate
non-contingent reimbursement or repayment obliga tions of such Borrower with
respect to amounts drawn under Letters of Credit.
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any Property, including the movement of
Con taminants through or in the air, soil, surface water, groundwater or
Property.
"Remedial Action" means any action required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care.
"Rental Payments" means, for any period, the aggregate amount of all rents
paid or accrued under all Operating Leases for Equipment of any of the Borrowers
as lessee (net of sublease income), all as determined on a combined basis in
conformity with GAAP.
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"Replacement Event" means, with respect to any Lender, the appointment of,
or the taking of possession by, a receiver, custodian, conservator, trustee or
liquidator of such Lender, or the declaration by the appropriate regulatory
authority that such Lender is insolvent.
"Replacement Lender" means a financial institution which is an Eligible
Assignee or is otherwise reasonably acceptable to the Administrative Agent and
the Borrowers and which is not a Loan Party or an Affiliate of a Loan Party.
"Reportable Event" has the meaning ascribed to such term in Section 4043
of ERISA or regulations promulgated thereunder, other than an event which is not
subject to the thirty (30) day notice requirement of such regulations.
"Request for Acceptance" has the meaning ascribed to such term in Section
2.04(c).
"Requirements of Law" means, as to any Person, the charter and by-laws or
other organizational or governing docu ments of such Person, and any law, rule
or regulation, or deter mination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, U and X, ERISA, the Fair Labor Standards Act and any similar
statute of any foreign government or any political subdivision thereof and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or labor, environmental, employment, occupational safety
or health law, rule or regulation, including, without limitation, Environmental,
Health or Safety Requirements of Law.
"Requisite Lenders" means, at any time, Lenders holding, in the aggregate,
at least fifty-one percent (51%) of the then aggregate amount of the Commitments
in effect at such time; provided, however, that, in the event any of the Lenders
shall have failed to fund its Pro Rata Share of any Revolving Loan requested by
any Borrower which such Lenders are obligated to fund under the terms hereof and
any such failure has not been cured, then for so long as such failure continues,
"Requisite
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Lenders" means at least those Lenders (excluding Lenders whose failure to fund
their respective Pro Rata Share of such Revolving Loans have not been so cured)
whose Pro Rata Shares of the Credit Facilities represent at least fifty-one
percent (51%) of the aggregate Pro Rata Shares of such Lenders; provided,
further, that, in the event that the Commitments have been terminated pursuant
to the terms hereof, "Requisite Lenders" means Lenders whose aggregate ratable
shares (stated as a percentage) of the aggregate outstanding principal balance
of all Revolving Credit Obligations are at least fifty-one percent (51%).
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of capital stock of,
partnership interest of or other equity interest of, a Borrower now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of capital
stock of, partnership interest of or other equity interest of, a Borrower now or
hereafter outstanding, (iii) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
and any claim for rescission with respect to, any subordinated indebtedness and
(iv) any payment made to redeem, purchase, repurchase or retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of capital stock of, partnership interest of or other equity
interest of, a Borrower now or hereafter outstanding.
"Revolving Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Swing Loans at such time, plus (ii)
the outstanding principal amount of the Revolving Loans at such time, plus (iii)
the Letter of Credit Obligations outstanding at such time, plus (iv) the
Acceptance Obligations outstanding at such time. For purposes of determining the
amount of Revolving Credit Obligations (or any component thereof) in respect of
any Loan which is denominated in any Optional Currency, such amount shall equal
the Dollar Equivalent of the amount of such currency at the time of
determination thereof.
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"Revolving Loan" has the meaning ascribed to such term in Section 2.01(a).
"Revolving Loan Notes" means one or more notes made payable to the Lenders
evidencing the Borrowers' Obligation to repay the Revolving Loans.
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or any certificates of interest, shares,
or partici pations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Security Agreements" means, collectively, the Security Agreements, each
dated as of September 18, 1996, made by each of the Borrowers and DSTF Japan, in
favor of the Administrative Agent for the benefit of the Administrative Agent,
the Lenders, the Issuing Banks and the other Holders, as such Security
Agreements may be amended, supplemented or otherwise modified from time to time.
"Settlement Date" has the meaning ascribed to such term in Section 2.02.
"Solvent", when used with respect to any Person, means that at the time of
determination:
(i) the fair market value of its assets is in excess of the total amount
of its liabilities (including, without limitation, contingent liabilities);
and
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(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(iii) it is then able and expects to be able to pay its debts (including,
without limitation, contingent debts and other commitments) as they mature;
and
(iv) it has capital sufficient to carry on its business as conducted and
as proposed to be conducted.
"Spot Rate" means, as of any date of determination with respect to the
conversion of an amount in one currency (the "Original Currency") to another
currency (the "Other Currency"), the rate of exchange quoted by the
Administrative Agent (or its Affiliate) in New York, New York (if the Original
Currency is Dollars), or London, England (if the Original Currency is an
Optional Currency), at 11:00 a.m. (New York time or London time, as applicable)
on such date of determination to prime banks in New York, New York, or London,
England, as appropriate, for the spot purchase in the foreign exchange market of
such city of such amount of the Original Currency with such Other Currency.
"Standby Letter of Credit" means any letter of credit issued by an Issuing
Bank pursuant to Section 2.03 for the account of any Borrower, which is not a
Commercial Letter of Credit.
"Stock Pledge Agreements" means, collectively, the Pledge Agreements, each
dated as of September 18, 1996, made by each of The Donna Karan Company, Gabby
Apparel, Inc., Donna Karan (H.K.) Limited and The Donna Karan Company, in favor
of the Administrative Agent for the benefit of the Administrative Agent, the
Lenders, the Issuing Banks and the other Holders, as such Pledge Agreements may
be amended, supplemented or otherwise modified from time to time.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or
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more of the other subsidiaries of such Person or any combination thereof.
"Swing Loan" has the meaning ascribed to such term in Section 2.02(a).
"Swing Loan Bank" means Citibank, in its individual capacity or, in the
event Citibank is not the Administrative Agent, the Administrative Agent (or any
Affiliate of the Administrative Agent designated by the Administrative Agent),
in its individual capacity.
"Swing Loan Notes" has the meaning ascribed to such term in Section
2.06(a)(ii).
"Swing Loan Obligations" means the aggregate principal amount of all Swing
Loans outstanding.
"Taxes" has the meaning ascribed to such term in Section 3.03(a).
"Termination Event" means (i) any Reportable Event with respect to any
Benefit Plan, (ii) the withdrawal of the Borrower, or an ERISA Affiliate from a
Benefit Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (iii) the occurrence of an obligation
arising under Section 4041 of ERISA of the Borrower or an ERISA Affiliate to
provide affected parties with a written notice of an intent to terminate a
Benefit Plan in a distress termination described in Section 4041(c) of ERISA,
(iv) the institution by the PBGC of proceedings to terminate any Benefit Plan,
(v) any event or condition which constitutes grounds under Section 4042 of ERISA
for the appointment of a Trustee to administer a Benefit Plan, or (vi) the
partial or complete withdrawal of the Borrower or any ERISA Affiliate from a
Multiemployer Plan.
"Transaction Costs" means the fees, costs and expenses payable in
connection with the Public Equity Offering.
"Type" means, with respect to any Loan, its nature as a Fixed Rate Loan or
a Floating Rate Loan.
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"Uniform Commercial Code" means the Uniform Commercial Code as enacted in
the State of New York, as it may be amended from time to time.
"Unused Commitment Fee" shall have the meaning ascribed to such term in
Section 4.03(c).
"Unused Commitment Rate" means, as of any date, a rate equal to the
applicable rate set forth below:
If Applicable Fixed Unused Commitment
Rate Margin is Rate will be
------------------- -----------------
0.500% 0.2500%
0.625% 0.3125%
0.750%. 0.3125%
"Voting Stock" means securities of any class or classes of a corporation,
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing similar
functions).
"Working Capital" means, as at any date of determina tion, the excess, if
any, of Current Assets over Current Liabilities.
"Working Capital Ratio" means, at any time, the ratio of (a) Current
Assets to (b) Current Liabilities.
1.02. Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding". Periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed. Any period
determined hereunder by reference to a month or months or year or years shall
end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, provided that if such period commences on the last day
of a calendar month (or on a day for which there is no numerically
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corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month.
1.03. Accounting Terms. For purposes of this Agree ment, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
1.04. Other Definitional Provisions. References to the "preamble",
"Articles", "Sections", "subsections", "Schedules" and "Exhibits" shall be to
the preamble, Articles, Sections, subsections, Schedules and Exhibits,
respectively, of this Agreement unless otherwise specifically provided. The
words "hereof", "herein", and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
1.05. Other Terms. All other terms contained herein shall, unless the
context indicates otherwise, have the meanings assigned to such terms by the
Uniform Commercial Code to the extent the same are defined therein.
1.06. Payments by the Borrowers. Except as expressly set forth herein to
the contrary, (a) all payments made by the Borrowers in respect of principal of
and interest on the Loans made shall be made (i) with respect to a Domestic
Loan, in Dollars and (ii) with respect to a Multicurrency Loan, in the Optional
Currency in which the such Multicurrency Loan was made, and (b) all payments of
Reimbursement Obligations shall be made in Dollars.
ARTICLE II
TERMS OF LOANS AND LETTERS OF CREDIT
2.01. The Revolving Credit Facility.
(a) Revolving Loans. Subject to the terms and conditions set forth herein,
(i) each Lender hereby severally and not jointly agrees to make revolving loans
(each a "Revolving Loan") to the Borrowers in Dollars or any Optional Currency
from time to time on any Business Day during the period from the
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Closing Date to the Commitment Termination Date, in an aggregate amount not to
exceed at any time outstanding such Lender's Pro Rata Share of the Availability;
provided that the aggregate amount of all Multicurrency Loans outstanding at any
time shall not exceed the Dollar Equivalent of $30,000,000. All Revolving Loans
comprising the same Borrowing hereunder shall be made by the Lenders
simultaneously and proportionately to their then respective Pro Rata Shares.
Subject to the provisions hereof, any Borrower may repay any outstanding
Revolving Loan on any day which is a Business Day and any amounts so repaid may
be reborrowed, up to the amount available under this Section 2.01(a) at the time
of such Borrowing, until the Commitment Termination Date. Each Borrowing shall
be denominated in Dollars or a single Optional Currency.
(b) Notice of Borrowing in Respect of Loans under the Revolving Credit
Facility. When a Borrower desires to make a Borrowing under this Section 2.01,
it shall deliver to the Administrative Agent a signed Notice of Borrowing no
later than (A) 11:00 a.m. (New York time) on the proposed Funding Date for such
Borrowing, in the case of a proposed Borrowing of Domestic Loans consisting of
Floating Rate Loans, (B) 11:00 a.m. (New York time) at least three (3) Business
Days in advance of the proposed Funding Date for such Borrowing, in the case of
a proposed Borrowing of Domestic Loans consisting of Fixed Rate Loans and (C)
4:00 p.m. (New York Time) at least four (4) Business Days in advance of the
proposed Funding Date for such Borrowing, in the case of a proposed Borrowing of
Multicurrency Loans consisting of Fixed Rate Loans. In lieu of delivering such a
Notice of Borrowing, a Borrower may give the Administrative Agent telephonic
notice of any proposed Borrowing by the time required under this Section 2.01(b)
if it confirms such notice by delivery of the Notice of Borrowing to the
Administrative Agent promptly, but in no event later than 5:00 p.m. (New York
time) on the same day. Any Notice of Borrowing (or telephonic notice in lieu
thereof) given pursuant to this Section 2.01(b) shall be irrevocable. All Loans
made under this Section 2.01 on the Closing Date shall be made initially as
Domestic Loans consisting of Floating Rate Loans and may thereafter be continued
as Floating Rate Loans or converted into Fixed Rate Loans in the manner provided
in Section 4.01(c).
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(c) Making of Revolving Loans. (i) In the event any portion of the Loans
requested in any Notice of Borrowing delivered to the Administrative Agent
pursuant Section 2.01(b) will be made as Revolving Loans, the Administrative
Agent shall promptly notify each Lender of the amount of such Borrowing and
whether such Borrowing is to be denominated in Dollars or an Optional Currency.
Each such Lender shall deposit an amount equal to its Pro Rata Share of the
amount of such Borrowing with the Administrative Agent in the applicable Payment
Account in immediately available funds and in the appropriate currency, not
later than 3:00 p.m. (New York time), with respect to Revolving Loans
denominated in Dollars, or 12:00 noon (London time), with respect to Revolving
Loans denominated in an Optional Currency, on any Funding Date applicable
thereto (or, if the Funding Date is the Closing Date, such earlier time as the
Administrative Agent shall determine). Subject to the satisfaction of the
conditions precedent set forth in Section 5.01 (solely with respect to the
making of Revolving Loans on the Closing Date) and Section 5.02 (with respect to
the making of Revolving Loans on the Closing Date and on each Funding Date
thereafter), the Administrative Agent shall make the proceeds of such amounts
received by it available to the applicable Borrower at the Administrative
Agent's office in New York, New York, with respect to Revolving Loans
denominated in Dollars, or London, England, with respect to Revolving Loans
denominated in an Optional Currency, on such Funding Date (or as soon thereafter
as is customarily practicable) and shall disburse such proceeds to the
applicable Disbursement Account.
(ii) The failure of any Lender to deposit the amount described in clause
(i) above (or required to be paid pursuant to Section 2.02(c)) with the
Administrative Agent on the applicable Funding Date shall not relieve any other
Lender of its obligations hereunder to make its Revolving Loan on such Funding
Date. No Lender shall be responsible for any failure by any other Lender to
perform its obligation to make a Revolving Loan hereunder nor shall the
Commitment of any Lender be increased or decreased as a result of any such
failure.
(iii) Unless the Administrative Agent shall have been notified by any
Lender prior to 1:00 p.m. (New York time) or 10:00 a.m. (London time), as
applicable, on any applicable Funding Date in respect of any Borrowing of
Revolving Loans after
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the Closing Date that such Lender does not intend to fund its Loan requested to
be made on such Funding Date, the Administrative Agent may assume that such
Lender has funded its Revolving Loan and is depositing the proceeds thereof in
the applicable Payment Account on the Funding Date, and the Administrative Agent
in its sole discretion may, but shall not be obligated to, disburse a
corresponding amount to the applicable Borrower on the Funding Date. If the
Revolving Loan proceeds corresponding to that amount are advanced to such
Borrower by the Administrative Agent but are not in fact deposited with the
Administrative Agent by such Lender on or prior to the applicable Funding Date,
such Lender agrees to pay, and in addition such Borrower agrees to repay, to the
Administrative Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is disbursed to or
for the benefit of such Borrower until the date such amount is paid or repaid to
the Administrative Agent, (A) in the case of such Borrower, at the interest rate
applicable to such Borrowing and (B) in the case of such Lender, at the
Interbank Rate for the first Business Day, and thereafter at the interest rate
applicable to such Borrowing. If such Lender shall pay to the Administrative
Agent the corresponding amount, the amount so paid shall constitute such
Lender's Revolving Loan, and if both such Lender and such Borrower shall pay and
repay such corresponding amount, the Administrative Agent shall promptly pay to
such Borrower such corresponding amount (together with any interest included in
such payment). This Section 2.01(c)(iii) does not relieve any Lender of its
obligation to make its Revolving Loan on any Funding Date.
(iv) Anything hereinabove to the contrary notwithstanding, if any Lender
shall, not later than 1:00 p.m. (London time) two Business Days before the date
of any requested Borrowing of Multicurrency Loans, notify the Administrative
Agent that such Lender is not satisfied that deposits in the relevant Optional
Currency will be freely available to it in the relevant amount and, if
applicable, for the relevant Interest Period, the right of the Borrowers to
request Multicurrency Loans in such Optional Currency from such Lender as part
of such Borrowing or any subsequent Borrowing of Multicurrency Loans shall be
suspended until such Lender shall notify the Administrative Agent that the
circumstances causing such suspension no longer exist, and, at the option of the
Borrowers, the Multicurrency Loan to be
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made by such Lender as part of such Borrowing (and the Multicurrency Loan to be
made by such Lender as part of any subsequent Borrowing of Multicurrency Loans
in respect of which such Optional Currency shall have been requested during such
period of suspension) shall be denominated in any other Available Currency
requested on the same Business Day which is available, and having an Interest
Period coextensive with the Interest Period in effect in respect of all other
Multicurrency Loans comprising a part of such Borrowing. The Administrative
Agent shall, upon becoming aware that the circumstances causing any such
suspension no longer apply, promptly so notify the Borrower, provided that the
failure of the Administrative Agent to so notify the Borrower shall not impair
the rights of the Lenders under this Section 2.01(c)(iv) or expose the
Administrative Agent to any liability.
(d) Use of Proceeds. Proceeds of Loans shall be used (i) on the Closing
Date to repay certain existing indebtedness of the Borrowers and to pay
Transaction Costs and (ii) thereafter to provide for ongoing working capital
needs in the ordinary course of the business of the Borrowers and for other
lawful general corporate purposes not prohibited hereunder.
(e) Commitment Termination Date. The Commitments shall terminate, and all
outstanding Revolving Credit Obligations shall be Paid In Full, on the
Commitment Termination Date in accordance with Section 3.02(a).
2.02. Swing Loans.
(a) Swing Loans. Upon receipt of a Notice of Borrowing, the Swing Loan
Bank may, in its sole discretion, make to the Borrower or Borrowers loans (each
a "Swing Loan" and collectively, the "Swing Loans") in Dollars or an Optional
Currency on any Business Day during the period from the Closing Date to the
Commitment Termination Date, in an aggregate amount not to exceed at any time
the Dollar Equivalent of Citibank's unused portion of its Commitment. All Swing
Loans denominated in Dollars shall be made as Floating Rate Loans. All Swing
Loans denominated in an Optional Currency shall bear interest at a rate agreed
upon by the Swing Loan Bank and the Borrower. Except as otherwise provided
herein, all Swing Loans shall be subject to all the terms and conditions
applicable to Revolving Loans.
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Swing Loans shall be repaid pursuant to the terms of Section 2.06(a)(ii) and as
otherwise provided in this Agreement.
(b) Making of Swing Loans. Promptly after (in the case of Swing Loans
which are Domestic Loans) or two Business Days after (in the case of Swing Loans
which are Multicurrency Loans) receipt of a Notice of Borrowing pursuant to
Section 2.01(b) (or telephonic notice in lieu thereof), the Swing Loan Bank
shall make the proceeds of the Swing Loans it intends to fund, if any, available
to the relevant Borrower at the Administrative Agent's office in New York, New
York, with respect to Swing Loans denominated in Dollars, or London, England,
with respect to Swing Loans denominated in an Optional Currency, on the Funding
Date of the proposed Borrowing and the Administrative Agent shall disburse such
proceeds to the Disbursement Account referred to in the applicable Notice of
Borrowing. The Swing Loan Bank shall have no duty to make or to continue to make
Swing Loans. The Swing Loan Bank shall not make any Swing Loan in the period
commencing on the first Business Day after it receives written notice from any
Lender that one or more of the conditions precedent contained in Section 5.02
shall not on such date be satisfied, and ending when such conditions are
satisfied, and the Swing Loan Bank shall not otherwise be required to determine
that, or take notice whether, the conditions precedent set forth in Section 5.02
hereof have been satisfied in connection with the making of any Swing Loan.
(c) Settlement of Swing Loans. (i) The Administrative Agent shall from
time to time notify each Lender by 1:00 p.m. (New York time), in each case on a
date to be selected weekly or more frequently by the Administrative Agent, in
its sole discretion, of the aggregate principal amount of Swing Loans
outstanding as of the close of business on the Business Day immediately
preceding the date of such notice (each such Business Day being a "Settlement
Date"). Upon such notice, each Lender shall deposit in the applicable Payment
Account an amount equal to its Pro Rata Share of the principal amount of Swing
Loans outstanding in immediately available funds, not later than 3:00 p.m. (New
York time) on the date of such notice with respect to Swing Loans denominated in
Dollars and not later than 3:00 p.m. (London time) on the third Business Day
following such notice with respect to Swing Loans denominated in an Optional
Currency. Upon such payment, each Lender shall be deemed to have made a
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Revolving Loan to the applicable Borrower or Borrowers in such amount
(irrespective of the satisfaction of the conditions in Section 5.02).
(ii) In the event that no Swing Loans are outstanding on any Settlement
Date in any currency, the Administrative Agent shall, before 3:00 p.m. (New York
time or London time, as applicable) on such Settlement Date, disburse to each
Lender such Lender's Pro Rata Share of the funds in such currency, if any, on
deposit in the applicable Payment Account applicable to the repayment of the
Revolving Loans denominated in such currency.
(iii) If and to the extent any Lender shall not have made available to
the Administrative Agent on any Settlement Date any amount payable by such
Lender on such Settlement Date pursuant to this Section 2.02(c), such Lender
agrees to pay to the Administrative Agent forthwith on demand such amount in the
applicable currency together with interest thereon, for each day from such
Settlement Date until the date such amount is paid to the Administrative Agent,
for three (3) Business Days at the Interbank Rate and thereafter at the interest
rate applicable to the Loans denominated in such currency hereunder.
2.03. Letters of Credit. Subject to the terms and conditions set forth in
this Agreement, each Issuing Bank hereby severally agrees to Issue for the
account of any of the Borrowers one or more Letters of Credit during the period
from the Closing Date to the date which is the thirty-first calendar day
preceding the Commitment Termination Date, up to an aggregate face amount at any
one time outstanding for all Borrowers equal to $60,000,000, subject to the
following provisions:
(a) Types and Amounts. An Issuing Bank shall not have any obligation to
Issue, and shall not Issue, any Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to such
Issuing Bank, after giving effect to the Issuance of the Letter of Credit
requested hereunder, shall exceed any limit imposed by law or regulation upon
such Issuing Bank;
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(ii) if the Issuing Bank receives notice (A) from the Administrative Agent
at or before 11:00 a.m. (New York time) on the date of the proposed Issuance
of such Letter of Credit that, immediately after giving effect to the
Issuance of such Letter of Credit, (I) the Letter of Credit Obligations at
such time would exceed $60,000,000 or (II) the Revolving Credit Obligations
at such time would exceed the Maximum Revolving Credit Amount at such time,
or (B) from the Requisite Lenders at or before 11:00 a.m. (New York time) on
the date of the proposed Issuance of such Letter of Credit that one or more
of the conditions precedent contained in Section 5.01 (with respect to an
Issuance of a Letter of Credit on the Closing Date) or Section 5.02 would not
on such date be satisfied, unless such conditions are thereafter satisfied
and notice of such satisfaction is given to the Issuing Bank by the
Administrative Agent (and an Issuing Bank shall not otherwise be required to
determine that, or take notice whether, the conditions precedent set forth in
Sections 5.01 or 5.02, as applicable, have been satisfied); or
(iii) which has an expiration date later than the earlier of (A) the date
which occurs 360 days following the date of Issuance with respect to a
Standby Letter of Credit or 180 days following the date of Issuance with
respect to a Commercial Letter of Credit or (B) the day which is the 180th
day following the Commitment Termination Date.
(b) Conditions. In addition to being subject to the satisfaction of the
conditions precedent contained in Sections 5.01 (with respect to an Issuance of
a Letter of Credit on the Closing Date) and 5.02, the obligation of an Issuing
Bank to Issue any Letter of Credit is subject to the satisfaction in full of the
following conditions:
(i) if the Issuing Bank so requests, the applicable Borrower shall have
executed and delivered to such Issuing Bank (with a copy to the
Administrative Agent) a Letter of Credit Reimbursement Agreement and such
other documents and materials as may be required pursuant to the terms
thereof;
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(ii) the terms of the proposed Letter of Credit shall be satisfactory to
the Issuing Bank in its sole discretion; and
(iii) no order, judgment or decree of any court, arbitrator or
Governmental Authority shall purport by its terms to enjoin or restrain the
Issuing Bank from Issuing the Letter of Credit and no law, rule or regulation
applicable to the Issuing Bank and no request or directive (whether or not
having the force of law and whether or not the failure to comply therewith
would be unlawful) from any Governmental Authority with jurisdiction over the
Issuing Bank shall prohibit or request that the Issuing Bank refrain from the
Issuance of letters of credit generally or the Issuance of such Letter of
Credit.
(c) Issuance of Letters of Credit. (i) A Borrower shall deliver to an
Issuing Bank and the Administrative Agent a signed Notice of Letter of Credit
Issuance not later than 11:00 a.m. (New York time) on the fifth Business Day
preceding the requested date for Issuance thereof under this Agreement, or such
shorter notice as may be acceptable to such Issuing Bank and the Administrative
Agent. Such notice shall be irrevocable.
(ii) The Issuing Bank shall give the Administrative Agent notice of the
Issuance of a Letter of Credit.
(d) Payment of Reimbursement Obligations; Duties of Issuing Banks. (i)
Notwithstanding any provisions to the contrary in any Letter of Credit
Reimbursement Agreement:
(A) each Borrower shall reimburse the Issuing Bank for amounts drawn under
such Letter of Credit no later than the date (the "Reimbursement Date") which
is one (1) Business Day after such Borrower receives notice from the Issuing
Bank that a draft has been presented under such Letter of Credit by the
beneficiary thereof; and
(B) all Reimbursement Obligations with respect to each Letter of Credit
shall bear interest at the Domestic Base Rate from the date of the relevant
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drawing under such Letter of Credit until the Reimbursement Date and
thereafter at the rate applicable in accordance with Section 4.01(d).
(ii) The Issuing Bank shall give the Administrative Agent written notice,
or telephonic notice confirmed promptly thereafter in writing, of all drawings
under a Letter of Credit and the payment (or the failure to pay when due) by
such Borrower on account of a Reimbursement Obligation.
(iii) No action taken or omitted in good faith by an Issuing Bank under or
in connection with any Letter of Credit shall put such Issuing Bank under any
resulting liability to any Lender, or, so long as such Letter of Credit was not
Issued in violation of Section 2.03(a)(ii), relieve any Lender of its
obligations hereunder to such Issuing Bank. In determining whether to pay under
any Letter of Credit, the respective Issuing Bank shall have no obligation to
the Lenders or any Borrower other than to confirm that any documents required to
be delivered under a respective Letter of Credit appear to have been delivered
and that they appear on their face to comply with the requirements of such
Letter of Credit.
(e) Participations. (i) Immediately upon Issuance by an Issuing Bank of
any Letter of Credit for the account of any Borrower in accordance with the
procedures set forth in this Section 2.03, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from such Issuing Bank,
and such Issuing Bank shall be deemed irrevocably and unconditionally to have
sold and transferred to each Lender, without recourse or warranty, an undivided
interest and participation in such Letter of Credit to the extent of such
Lender's Pro Rata Share thereof, including, without limitation, all obligations
of such Borrower with respect thereto (other than amounts owing to the Issuing
Bank under Section 2.03(f)) and any security therefor and guaranty pertaining
thereto.
(ii) If any Issuing Bank makes any payment under any Letter of Credit for
the account of any Borrower and such Borrower does not repay such amount to the
Issuing Bank on the Reimbursement Date, the Issuing Bank shall promptly notify
the Administrative Agent, which shall promptly notify each Lender, and each
Lender shall promptly and unconditionally pay to the
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Administrative Agent for the account of such Issuing Bank, in immediately
available funds, the amount of such Lender's Pro Rata Share of such
Reimbursement Obligations, and the Administrative Agent shall promptly pay to
the Issuing Bank such amounts received by it for the Issuing Bank's account. In
the event such payments are made by such Lenders, such payments shall constitute
Domestic Loans made to the applicable Borrower pursuant to Section 2.01
(irrespective of the satisfaction of the conditions in Section 5.02). If a
Lender does not make its Pro Rata Share of the amount of any such payment
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent for the account of the Issuing Bank, forthwith on demand,
such amount together with interest thereon, for the first Business Day after the
date such payment was first due at the applicable Interbank Rate, and thereafter
at the interest rate then applicable in accordance with Section 4.01(a). The
failure of any such Lender to make available to the Administrative Agent for the
account of an Issuing Bank its Pro Rata Share of any such payment shall neither
relieve any other Lender of its obligation hereunder to make available to the
Administrative Agent for the account of such Issuing Bank such other Lender's
Pro Rata Share of any payment on the date such payment is to be made nor
increase the obligation of any other Lender to make such payment to the
Administrative Agent. This Section does not relieve any Borrower of its
obligation to pay or repay any Lender funding its Pro Rata Share of such payment
pursuant to this Section interest on the amount of such payment from such date
such payment is to be made until the date on which payment is repaid in full.
(iii) Whenever an Issuing Bank receives a payment on account of a
Reimbursement Obligation (including any interest thereon) as to which any Lender
has made a Domestic Loan pursuant to Section 2.03(e)(ii), such Issuing Bank
shall promptly pay to the Administrative Agent and the Administrative Agent
shall promptly pay to each Lender which has made a Domestic Loan, an amount
equal to such Lender's Pro Rata Share thereof.
(iv) Upon the request of any Lender, an Issuing Bank shall furnish such
Lender copies of any Letter of Credit or Letter of Credit Reimbursement
Agreement to which such Issuing Bank is a party and such other documentation as
reasonably may be requested by such Lender.
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(v) In the event any payment by a Borrower received by an Issuing Bank
with respect to a Letter of Credit Issued for the account of such Borrower and
distributed by the Administrative Agent to the Lenders on account of their
participation therein is thereafter set aside, avoided or recovered from such
Issuing Bank in connection with any receivership, liquidation or bankruptcy
proceeding, each such Lender which received such distribution shall, upon demand
by such Issuing Bank, contribute such Lender's Pro Rata Share of the amount set
aside, avoided or recovered together with interest at the rate required to be
paid by such Issuing Bank upon the amount required to be repaid by it.
(vi) The obligations of any Lender to make payments to the Administrative
Agent for the account of any Issuing Bank with respect to a Letter of Credit
shall be irrevocable, shall not be subject to any qualification or exception
whatsoever (except the Issuance of the Letter of Credit in contravention of this
Section 2.03) and shall be made in accordance with this Agreement (irrespective
of the satisfaction of the conditions described in Sections 5.01 and 5.02) under
all circumstances, including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability hereof or of any of the other
Loan Documents;
(B) the existence of any claim, setoff, defense or other right which any
Borrower may have at any time against a beneficiary named in a Letter of
Credit or any transferee of a beneficiary named in a Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative Agent,
any Issuing Bank, any Lender, or any other Person, whether in connection
herewith, with any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transactions between the
account party and beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented under the
Letter of Credit having been deter mined to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(D) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(E) any failure by such Issuing Bank to make any reports required pursuant
to Section 2.03(j) or the inaccuracy of any such report; or
(F) the occurrence of any Event of Default or Default.
(f) Issuing Bank Charges. Each Borrower for whose account a Letter of
Credit has been Issued agrees to pay to each Issuing Bank, solely for its own
account, the standard charges assessed by such Issuing Bank in connection with
the issuance, administration, amendment and payment or cancellation of Letters
of Credit and such compensation as may be agreed upon by such Borrower and such
Issuing Bank from time to time.
(g) Indemnification; Exoneration. (i) In addition to all other amounts
payable to an Issuing Bank, each of the Borrowers hereby agrees to defend,
protect, indemnify, and hold harmless the Administrative Agent, each Issuing
Bank and each Lender and each of their respective officers, directors,
employees, attorneys and agents from and against any and all claims, demands,
liabilities, penalties, damages, losses (other than loss of profits), costs,
charges and expenses (including reasonable attorneys' fees but excluding taxes)
which any of them may incur or be subject to as a consequence, direct or
indirect, of (A) the Issuance of any Letter of Credit or (B) the failure of the
Issuing Bank to honor a drawing under a Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any present or future de jure or
de facto government or Govern mental Authority; provided, however, no Borrower
shall have an obligation to any indemnified party hereunder with respect to the
matters indemnified hereunder caused by or resulting from the willful misconduct
or gross negligence of such indemnified party, as determined by a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, each Borrower shall contribute the
maximum portion which it is permitted to pay and
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satisfy under applicable law, to the payment and satisfaction of all such
indemnified matters incurred by the indemnified parties.
(ii) As between the Borrowers on the one hand and the Administrative
Agent, the Lenders and the Issuing Banks on the other hand, each of the
Borrowers assumes all risks of the acts and omissions of, or misuse of Letters
of Credit by, the respective beneficiaries of the Letters of Credit. In
furtherance and not in limitation of the foregoing, the Administrative Agent,
the Issuing Banks and the Lenders shall not be responsible for: (A) any lack of
validity or enforceability of any Letter of Credit or any agreement or
instrument relating thereto; (B) the existence of any claim, setoff, defense or
other right which such Borrower may have at any time against the beneficiary, or
the transferee, of any Letter of Credit, or the Issuing Bank, the Administrative
Agent, any Lender or any other Person; (C) any draft, certificate or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (D) any lack of validity, legality or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part; (E) failure of the beneficiary of a Letter of Credit to
strictly comply with conditions required in order to draw upon such Letter of
Credit; (F) errors, omissions, interruptions or delays in transmission or
delivery of any mes sages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (G) errors in interpretation of technical
terms; (H) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of the
proceeds thereof; (I) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; and (J) any
consequences arising from causes beyond the control of the Administrative Agent,
the Issuing Banks or the Lenders; provided, however, the Administrative Agent,
the Issuing Banks and the Lenders shall be responsible for any of the above
actions caused by or resulting from their willful misconduct or gross
negligence, as determined by a court of competent jurisdiction.
(h) Transitional Provisions. Schedule 2.03(H) contains a schedule of
certain letters of credit Issued prior to
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the Closing Date by Citibank for the account of one or more of the Borrowers.
Subject to the satisfaction of the conditions precedent contained in Sections
5.01 and 5.02 on the Closing Date (i) such letters of credit, to the extent
still outstanding, shall automatically and without further action of the parties
thereto be converted into Letters of Credit issued pursuant to this Section 2.03
and subject to the provisions hereof, and for this purpose the fees specified in
Section 2.03(f) shall be payable (in substitution for any fees set forth in the
Letter of Credit Reimbursement Agreement relating to such Letters of Credit) as
if such letters of credit had been issued on the Closing Date, (ii) the face
amount of such letters of credit shall be included in the calculation of Letter
of Credit Obligations, and (iii) all liabilities of such Borrowers with respect
to such letters of credit shall constitute Obligations. Letter of Credit Fees
shall begin to accrue as of the Closing Date.
(i) Payment of Reimbursement Obligations. Each of the Borrowers
unconditionally agrees to pay to each Issuing Bank the amount of all
Reimbursement Obligations, interest and other amounts payable to such Issuing
Bank under or in connection with any Letter of Credit Issued by such Issuing
Bank when such amounts are due and payable, irrespective of any claim, setoff,
defense or other right which such Borrower may have at any time against such
Issuing Bank or any other Person.
(j) Issuing Bank Reporting Requirements. Each Issuing Bank shall, on the
day it Issues such a Letter of Credit, provide to the Administrative Agent
separate schedules for Commercial Letters of Credit and Standby Letters of
Credit Issued by it, in form and substance reasonably satisfactory to the
Administrative Agent, setting forth the aggregate Letter of Credit Obligations
of each Borrower outstanding to it as of such date and any information requested
by the Administrative Agent relating to the date of issue, account party,
amount, expiration date and reference number of each Letter of Credit Issued by
it.
(k) Obligations Several. The obligations of each Issuing Bank and each
Lender under this Section 2.03 are several and not joint, and no Issuing Bank or
Lender shall be responsible for the obligation to Issue Letters of Credit or
participation
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obligation hereunder, respectively, of any other Issuing Bank or Lender.
2.04. Acceptances. Subject to the terms and conditions set forth in this
Agreement, each Issuing Bank hereby severally agrees to extend credit to the
Borrowers, during the period from the Closing Date to the Acceptance Termination
Date, by creating acceptances ("Acceptances") for the account of the Borrowers
from time to time up to an aggregate amount at any one time outstanding for all
Borrowers equal to $10,000,000, subject to the following provisions:
(a) Types and Amounts. An Issuing Bank shall not have any obligation to
create any Acceptance, and shall not create any Acceptance, at any time:
(i) if the aggregate Acceptance Obligations with respect to such Issuing
Bank, after giving effect to the creation of the Acceptance requested
hereunder, shall exceed any limit imposed by law or regulation upon such
Issuing Bank;
(ii) if the Issuing Bank receives notice (A) from the Agent at or before
11:00 a.m. (New York time) on the date of the proposed creation of such
Acceptance that, immediately after giving effect to the creation of such
Acceptance, (I) the Acceptance Obligations at such time would exceed
$10,000,000 or (II) the Revolving Credit Obligations at such time would
exceed the Maximum Revolving Credit Amount at such time, or (B) from the
Requisite Lenders at or before 11:00 a.m. (New York time) on the date of the
proposed creation of such Acceptance that one or more of the conditions
precedent contained in Section 5.01 (with respect to an Issuance of a Letter
of Credit on the Closing Date) or Section 5.02 would not on such date be
satisfied, unless such conditions are thereafter satisfied and notice of such
satisfaction is given to the Issuing Bank by the Agent (and an Issuing Bank
shall not otherwise be required to determine that, or take notice whether,
the conditions precedent set forth in Sections 5.01 or 5.02, as applicable,
have been satisfied); or
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(iii) which has a maturity date later than the earlier of (A) the date
which occurs 180 days following the date of creation of such Acceptance or
(B) the Acceptance Termination Date.
(b) Conditions. In addition to being subject to the satisfaction of the
conditions precedent contained in Section 5.01 (with respect to a creation of an
Acceptance on the Closing Date) and 5.02, the obligation of an Issuing Bank to
create any Acceptance is subject to the satisfaction in full of the following
conditions:
(i) if the Issuing Bank so requests, the applicable Borrower shall have
executed and delivered to such Issuing Bank (with a copy to the Agent) an
Acceptance Agreement and such other documents and materials as may be
required pursuant to the terms thereof; and
(ii) no order, judgment or decree of any court, arbitrator or Governmental
Authority shall purport by its terms to enjoin or restrain the Issuing Bank
from creating the Acceptance and no law, rule or regulation applicable to the
Issuing Bank and no request or directive (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful)
from any Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit or request that the Issuing Bank refrain from the creating the
bankers acceptances generally or the creation of such Acceptance.
(c) Creation of Acceptances. (i) A Borrower shall deliver to an Issuing
Bank and the Agent a signed Request for Acceptance not later than 11:00 a.m.
(New York time) on the third Business Day preceding the requested date for
creation thereof under this Agreement, or such shorter notice as may be
acceptable to such Issuing Bank and the Agent. Such notice shall be irrevocable.
(ii) The Issuing Bank shall give the Agent notice of the creation of an
Acceptance.
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(iii) Each Acceptance created by an Issuing Bank hereunder shall be
created by such Issuing Bank accepting a draft, in substantially the form of
Exhibit F (a "Draft"), such Draft (A) being drawn by any Borrower on such
Issuing Bank in accordance with the terms hereof, (B) being dated the date of
acceptance of such Draft by such Issuing Bank, (C) maturing on a Business Day
not less than 30 days nor more than 180 days after the date of such Draft and
not more than 60 days after the anticipated date of the purchase of the goods
specified in the Request for Acceptance relating to such Draft, and (D) having a
face amount not less than $1,000,000 nor more than $2,500,000, payable in
Dollars.
(d) Payment of Acceptance Obligations; Duties of Issuing Banks. (i)
Notwithstanding any provisions to the contrary in any Acceptance Agreement:
(A) each Borrower is obligated, and hereby unconditionally agrees, to pay
to each Issuing Bank the face amount of each Acceptance created by such
Issuing Bank on the maturity date of such Acceptance (the obligation of the
Borrowers under this Section 2.04(d) with respect to any Acceptance being the
"Acceptance Obligation" with respect to such Acceptance); and
(B) all Acceptance Obligations shall bear interest at the rate applicable
in accordance with Section 4.01(d).
(ii) The Issuing Bank shall give the Agent written notice, or telephonic
notice confirmed promptly thereafter in writing, of the payment (or the failure
to pay when due) by such Borrower on account of an Acceptance Obligation.
(iii) No action taken or omitted in good faith by an Issuing Bank under or
in connection with any Acceptance shall put such Issuing Bank under any
resulting liability to any Lender, or, so long as such Acceptance was not
created in violation of Section 2.04(a)(ii), relieve any Domestic Lender of its
obligations hereunder to such Issuing Bank.
(e) Participations. (i) Immediately upon the creation by an Issuing Bank
of any Acceptance for the account of
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any Borrower in accordance with the procedures set forth in this Section 2.04,
each Domestic Lender shall be deemed to have irrevocably and unconditionally
purchased and received from such Issuing Bank, and such Issuing Bank shall be
deemed irrevocably and unconditionally to have sold and transferred to each
Domestic Lender, without recourse or warranty, an undivided interest and
participation in such Acceptance to the extent of such Domestic Lender's Pro
Rata Share thereof, including, without limitation, all obligations of such
Borrower with respect thereto (other than amounts owing to the Issuing Bank
under Section 2.04(f)) and any security therefor and guaranty pertaining
thereto.
(ii) If any Borrower does not repay any Acceptance Obligation on the date
when due, the Issuing Bank shall promptly notify the Agent, which shall promptly
notify each Domestic Lender, and each Domestic Lender shall promptly and
unconditionally pay to the Agent for the account of such Issuing Bank, in
immediately available funds, the amount of such Domestic Lender's Pro Rata Share
of such Acceptance Obligations, and the Agent shall promptly pay to the Issuing
Bank such amounts received by it for the Issuing Bank's account. In the event
such payments are made by such Domestic Lenders, such payments shall constitute
Domestic Loans made to the applicable Borrower pursuant to Section 2.01
(irrespective of the satisfaction of the conditions in Section 5.02). If a
Domestic Lender does not make its Pro Rata Share of the amount of any such
Acceptance Obligations available to the Agent, such Domestic Lender agrees to
pay to the Agent for the account of the Issuing Bank, forthwith on demand, such
amount together with interest thereon, for the first Business Day after the date
such payment was first due at the applicable Interbank Rate, and thereafter at
the interest rate then applicable in accordance with Section 4.01(a). The
failure of any such Domestic Lender to make available to the Agent for the
account of an Issuing Bank its Pro Rata Share of any such Acceptance Obligations
shall neither relieve any other Domestic Lender of its obligation hereunder to
make available to the Agent for the account of such Issuing Bank such other
Domestic Lender's Pro Rata Share of any such Acceptance Obligations on the date
such payment is to be made nor increase the obligation of any other Domestic to
make such payment to the Agent. This Section does not relieve any Borrower of
its obligation to pay or repay any Domestic funding its Pro Rata Share of such
Acceptance Obligations pursuant to this Section
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interest on the amount of such payment from such date such payment is to be made
until the date on which payment is repaid in full.
(iii) Whenever an Issuing Bank receives a payment on account of an
Acceptance Obligation (including any interest thereon) as to which any Domestic
Lender has made a Domestic Loan pursuant to Section 2.04(e)(ii), such Issuing
Bank shall promptly pay to the Agent and the Agent shall promptly pay to each
Domestic Lender which has made a Domestic Loan, an amount equal to such Domestic
Lender's Pro Rata Share thereof.
(iv) Upon the request of any Domestic Lender, an Issuing Bank shall
furnish such Domestic Lender copies of any Acceptance Agreement to which such
Issuing Bank is a party and such other documentation as reasonably may be
requested by such Domestic Lender.
(v) In the event any payment by a Borrower received by an Issuing Bank
with respect to an Acceptance created for the account of such Borrower and
distributed by the Agent to the Domestic Lenders on account of their
participation therein is thereafter set aside, avoided or recovered from such
Issuing Bank in connection with any receivership, liquidation or bankruptcy
proceeding, each such Domestic Lender which received such distribution shall,
upon demand by such Issuing Bank, contribute such Domestic Lender's Pro Rata
Share of the amount set aside, avoided or recovered together with interest at
the rate required to be paid by such Issuing Bank upon the amount required to be
repaid by it.
(vi) The obligations of any Domestic Lender to make payments to the Agent
for the account of any Issuing Bank with respect to an Acceptance shall be
irrevocable, shall not be subject to any qualification or exception whatsoever
(except the creation of the Acceptance in contravention of this Section 2.04)
and shall be made in accordance with this Agreement (irrespective of the
satisfaction of the conditions described in Sections 5.01 and 5.02) under all
circumstances, including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability hereof or of any of the other
Loan Documents;
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(B) the existence of any claim, setoff, defense or other right which any
Borrower may have at any time against a payee under a Draft or any transferee
thereof, the Agent, any Issuing Bank, any Lender, or any other Person,
whether in connection herewith, with any Acceptance, the transactions
contemplated herein or any unrelated transactions;
(C) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(D) any failure by such Issuing Bank to make any reports required pursuant
to Section 2.04(j) or the inaccuracy of any such report; or
(E) the occurrence of any Event of Default or Default.
(f) Issuing Bank Charges. Each Borrower for whose account an Acceptance
has been created agrees to pay to each Issuing Bank, solely for its own account,
the standard charges assessed by such Issuing Bank in connection with the
creation, negotiation, administration and payment or cancellation of Acceptance
and such compensation as may be agreed upon by such Borrower and such Issuing
Bank from time to time.
(g) Acceptance Commission. Each Borrower for whose account an Acceptance
has been created agrees to pay to each Issuing Bank an acceptance commission,
with respect to each Acceptance created by such Issuing Bank on the face amount
of such Acceptance, for the period from the date of such Acceptance to the date
of its maturity, at the Acceptance Rate in effect on the date of the creation of
such Acceptance. Payment of such acceptance commission with respect to each
Acceptance created by such Issuing Bank shall be made for the account of such
Borrower by such Issuing Bank's deducting the amount of such acceptance
commission from the proceeds of such Issuing Bank's discount of such Acceptance
pursuant to Section 2.04(h).
(h) Discount. Each Issuing Bank agrees, on the terms and conditions of
this Agreement, that on the date of the creation by it of each Acceptance such
Issuing Bank will (i)
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discount such Acceptance at a rate equal to the Applicable Fixed Rate Margin
over such Issuing Bank's Discount Rate in effect for such Acceptance at the time
of creation of such Acceptance, (ii) make available to the Agent for the ratable
benefit of the Domestic Lenders in same day funds that portion of the discount
amount applicable to the rate referred to in clause (i), (iii) make available to
the Agent at its address referred to in Section 13.10, in same day funds, an
amount equal to the proceeds of the discount referred to in clause (i) less the
acceptance commission payable to such Issuing Bank with respect to such
Acceptance under Section 2.04(g), and (iv) notify the Agent, by telephone
(confirmed in writing), of the amount of the funds made available to the Agent
pursuant to clause (iii). Each Issuing Bank may at any time or from time to time
sell, rediscount or otherwise dispose of any Acceptance created and discounted
by it hereunder. After the Agent's receipt of the funds referred to in clause
(iii), the Agent will make such funds available to the Borrowers at the Agent's
office in New York, New York and shall disburse such proceeds in Dollars and in
same day funds by depositing such proceeds in the Borrowers' Account.
(i) Payment of Acceptance Obligations. Each of the Borrowers
unconditionally agrees to pay to each Issuing Bank the amount of all Acceptance
Obligations, interest and other amounts payable to such Issuing Bank under or in
connection with any Acceptance created by such Issuing Bank when such amounts
are due and payable, irrespective of any claim, setoff, defense or other right
which such Borrower may have at any time against such Issuing Bank or any other
Person.
(j) Issuing Bank Reporting Requirements. Each Issuing Bank shall, on the
day it creates an Acceptance, provide to the Agent separate a schedule for
Acceptances created by it, in form and substance reasonably satisfactory to the
Agent, setting forth the aggregate Acceptance Obligations of each Borrower
outstanding to it as of such date and any information requested by the Agent.
(k) Obligations Several. The obligations of each Issuing Bank and each
Domestic Lender under this Section 2.04 are several and not joint, and no
Issuing Bank or Domestic Lender shall be responsible for the obligation to
create Acceptances or participation obligation hereunder, respectively, of any
other Issuing Bank or Domestic Lender.
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(l) Termination of the Acceptance Commitments. Notwithstanding anything to
the contrary herein, if any of the following events shall occur:
(i) There is a determination made by any regulatory body (including,
without limitation, the staff of any Federal Reserve Bank), or there is a
change in, or change in interpretation of, any applicable rule or regulation,
to the effect, in the judgment of the Requisite Lenders, that any Acceptance
created hereunder is not, or would not be, an Eligible Acceptance; or
(ii) Any restriction is imposed on any Issuing Bank (including, without
limitation, any change in acceptance limits imposed on any Issuing Bank)
which would prevent such Issuing Bank from creating Acceptances or performing
its Acceptance Commitment under this Section 2.04;
then the Agent shall at the request, or may with the consent, of the Requisite
Lenders or any Issuing Bank, by notice to the Borrowers in writing or by
telephone (confirmed in writing), terminate the Acceptance Commitments of the
Issuing Banks in whole, effective on the date on which the Agent gives such
notice; provided that such notice shall describe in reasonable detail the nature
of such event.
2.05. Authorized Officers and Administrative Agents. On the Closing Date
and from time to time thereafter, each Borrower shall deliver to the
Administrative Agent an Officer's Certificate setting forth the names of the
officers of the general partner and agents of such Borrower authorized to
request Loans, Letters of Credit and Acceptances on behalf of such Borrower and
containing a specimen signature of each such officer or agent. The officers and
agents so authorized shall also be authorized to act for such Borrower in
respect of all other matters relating to the Loan Documents. The Administrative
Agent shall be entitled to rely conclusively on such officer's or agent's
authority to request such Loan, Letter of Credit or Acceptance until the
Administrative Agent receives written notice to the contrary. In addition, the
Administrative Agent shall be entitled to rely conclusively on any written
notice sent to it by telecopy. The Administrative Agent shall have no duty to
verify
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the authenticity of the signature appearing on, or any telecopy or facsimile of,
any written Notice of Borrowing, Notice of Letter of Credit Issuance, Request
for Acceptance or any other document, and, with respect to an oral request for
such a Loan, Letter of Credit or Acceptance, the Administrative Agent shall have
no duty to verify the identity of any person representing himself or herself as
one of the officers or agents authorized to make such request or otherwise to
act on behalf of such Borrower. None of the Administrative Agent, any Lender or
any Issuing Bank shall incur any liability to any of the Borrowers or any other
Person in acting upon any telecopy or facsimile or telephonic notice referred to
above which the Administrative Agent believes to have been given by a duly
authorized officer or other person authorized to borrow on behalf of such
Borrower.
2.06. Promise to Pay; Evidence of Debt.
(a) Promise to Pay. (i) Each of the Borrowers jointly and severally agrees
to pay the principal amount of each Revolving Loan which is made to any Borrower
on the Commitment Termination Date, and further agrees to pay all unpaid
interest accrued thereon, in accordance with the terms of this Agreement and the
promissory notes evidencing the Revolving Loans owing to the Lenders, and the
Borrowers shall execute and deliver to each Lender such promissory notes as are
necessary to evidence the Revolving Loans owing to the Lenders after giving
effect to any assignment thereof pursuant to Section 13.01, each substantially
in the form of Exhibit G-1 attached hereto and made a part hereof (all such
promissory notes and all amendments thereto, replacements thereof and
substitutions therefor being collectively referred to as the "Revolving Loan
Notes"; and "Revolving Loan Note" means any one of the Revolving Loan Notes).
(ii) Each of the Borrowers jointly and severally agrees to pay on the
seventh (7) day following the making of each Swing Loan made to any Borrower the
principal amount of such Swing Loan, and further agrees to pay all unpaid
interest accrued thereon, in accordance with the terms of this Agreement and the
promissory note evidencing the Swing Loans owing to Citibank, and the Borrowers
shall execute and deliver to Citibank such promissory note as is necessary to
evidence the Swing Loans owing to Citibank, substantially in the form of Exhibit
G-2 (all such promissory notes and all amendments thereto, replacements thereof
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and substitutions therefor being collectively referred to as the "Swing Loan
Notes"; and "Swing Loan Note" means any one of the Notes).
(b) Loan Account. Each Lender shall maintain in accordance with its usual
practice an account or accounts (a "Loan Account") evidencing the Indebtedness
of the Borrowers to such Lender resulting from each Loan owing to such Lender
from time to time, including the amount of principal and interest payable and
paid to such Lender from time to time hereunder and under the Notes.
(c) Control Account. The Register maintained by the Administrative Agent
pursuant to Section 13.01(c) shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the type of Loan
comprising such Borrowing and any Interest Period applicable thereto, (ii) the
effective date and amount of each Assignment and Acceptance delivered to and
accepted by it and the parties thereto (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrowers to each
Lender hereunder or under the Notes, and (iv) the amount of any sum received by
the Administrative Agent from the Borrowers hereunder and each Lender's share
thereof.
(d) Entries Binding. The Administrative Agent will render and deliver a
statement of the Register monthly to the Borrowers and each Lender. All entries
on any such statement shall, fifteen (15) days after the same is sent, be
presumed to be correct and shall constitute prima facie evidence of the
information contained in such statement. The Borrowers and the Lenders shall
have the express right to rebut such presumption by conclusively demonstrating
the existence of an error on the part of the Administrative Agent.
2.07. Use of Proceeds of Loans. The proceeds of the Loans shall be used to
repay certain existing obligations of the Borrowers and for working capital in
the ordinary course of business of the Borrowers and other general business and
partnership purposes not prohibited hereunder.
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ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in and Reallocations of Commitments.
(a) Voluntary Reductions of Commitments. The Borrowers, upon at least five
(5) Business Days' prior written notice to the Administrative Agent, shall have
the right, from time to time, to terminate in whole the Commitments or
permanently reduce in part the Commitments. Any partial reduction of a Lender's
Commitment shall be in an aggregate minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount and shall reduce the aggregate
Commitment of such Lender (and, where applicable, its Affiliates)
proportionately in accordance with their aggregate Pro Rata Share of all Credit
Facilities. Any notice of termination or reduction given to the Administrative
Agent under this Section 3.01(a) shall specify the date (which shall be a
Business Day) of such termination or reduction and, with respect to a partial
reduction, the aggregate principal amount thereof. When notice of termination or
reduction of the Commitments is delivered as provided herein, the principal
amount of the Loans under each Credit Facility so reduced shall become due and
payable on the date specified in such notice to the extent the Revolving Credit
Obligations under such Credit Facility would exceed the Commitments for such
Credit Facility after giving effect to such reduction. The payments in respect
of reductions and terminations described in this Section 3.01(a) may be made
without premium or penalty (except as provided in Section 4.02(f)).
(b) Mandatory Prepayments of Loans.
(i) Subject to Section 3.05, on a daily basis from funds on deposit in the
Domestic Concentration Account, the Administrative Agent shall transfer
available funds therein and thereby cause the Borrowers to make a mandatory
repayment of the Obligations denominated in Dollars owing by the Borrowers on
such Business Day; provided, however, that if (A) all Floating Rate Loans have
been repaid, (B) only Fixed Rate Loans remain outstanding and (C) no Event of
Default exists, then funds may be deposited in the Cash Collateral Account and
applied to repay
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Fixed Rate Loans on the last day of the earliest terminating Interest Periods
until all such funds have been applied to repay Fixed Loans.
(ii) Immediately after any Borrower's or any Guarantor's receipt of any
Net Cash Proceeds from an Asset Sale, each Borrower and each Guarantor receiving
such Net Cash Proceeds agrees to make or cause to be made a mandatory prepayment
of the Loans in an amount equal to one hundred percent (100%) of such Net Cash
Proceeds. If the Net Cash Proceeds from any Asset Sale (in one transaction or a
series of related transactions) are in excess of $10,000,000 (a "Material Asset
Sale"), the Commitments shall be permanently reduced by the amount of such Net
Cash Proceeds; provided, however, if such Asset Sale is permitted pursuant to
Section 9.02 and the Borrowers deliver to the Administrative Agent the
Clean-Down Forecast, the Commitments shall not be reduced. If the Net Cash
Proceeds from all Asset Sales (other than Material Asset Sales) are in excess of
$10,000,000 in the aggregate for any twelve month period, the Commitments shall
be permanently reduced by the amount of such Net Cash Proceeds that exceeds
$10,000,000; provided, however, if such Asset Sales are permitted pursuant to
Section 9.02 and the Borrowers deliver to the Administrative Agent the
Clean-Down Forecast, the Commitments shall not be reduced. If the Borrowers
deliver a Clean-Down Forecast pursuant to this Section 3.01(b)(ii), the
Clean-Down Amount for all Clean-Down Periods following the delivery of such
Clean-Down Forecast shall be reduced by the aggregate amount of such Net Cash
Proceeds from Material Asset Sales and Non-Material Asset Sales (but shall in no
event be less than $0).
(iii) Immediately upon Donna Karan International's receipt of any Net Cash
Proceeds from the issuance of Common Stock (other than the issuance of Common
Stock pursuant to, or upon the exercise of options or benefits granted under, an
employee or director benefit or incentive plan), the Borrowers shall cause to be
made a mandatory prepayment of the Loans in an amount equal to 100% of such Net
Cash Proceeds. The Commitments shall be permanently reduced by the amount of
such Net Cash Proceeds; provided, however, if the Borrowers deliver to the
Administrative Agent a Clean-Down Forecast, the Commitments shall not be
reduced. If the Borrowers deliver the Clean-Down Forecast pursuant to the
preceding sentence, the Clean-Down Amount for the
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Clean-Down Period immediately following the delivery of such Clean-Down Forecast
shall be reduced by the aggregate amount of such Net Cash Proceeds (but in no
event less than $0).
(iv) During the period from November 1 of each Fiscal Year to March 1 of
the following Fiscal Year (the "Clean-Down Period"), the Borrowers shall make or
cause to be made a mandatory prepayment of all outstanding Loans, and shall not
borrow any other Loans, in excess of the Clean-Down Amount for a period of
forty-five (45) consecutive days; provided, however, the Borrowers shall not be
required to make or cause to be made such mandatory prepayment during any
Clean-Down Period if, during the period commencing with the 45th day immediately
prior to the last day of such Clean-Down Period and ending on the date that the
Borrowers have complied with the mandatory prepayment required to be made
pursuant to this subsection (iv) for the immediately succeeding Clean-Down
Period, (A) the Borrowers are delivering the Borrowing Base Certificates in
accordance with, and are otherwise in compliance with, Section 7.02 and (B) the
Borrowers are meeting the Borrowing Base Criteria.
(v) The Borrowers shall, within one Business Day after their receipt of a
notice of termination of the Acceptance Commitments of any Issuing Bank pursuant
to Section 2.04(l), prepay the Acceptance Obligations with respect to each
Acceptance then outstanding by paying to such Issuing Bank the face amount of
such Acceptances created by such Issuing Bank less such Issuing Bank's
Prepayment Discount with respect to such Acceptance in effect for such
prepayment.
(v) Nothing in this Section 3.01(b) shall be construed to constitute the
Lenders' consent to any transaction which is not expressly permitted by Article
IX.
3.02. Payments. (a) Manner and Time of Payment. All payments of principal
of and interest on the Loans, Reimbursement Obligations, Acceptance Obligations
and other Obligations (including, without limitation, fees and expenses) which
are payable to the Administrative Agent, the Lenders or any Issuing Bank shall
be made without condition or reservation of right, in immediately available
funds, delivered to the Administrative Agent (or, in the case of Reimbursement
Obligations or Acceptance Obligations, to the Issuing Bank) not later than 11:00
a.m. (New
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York time), with respect to Loans denominated in Dollars, or 11:00 a.m. (London
time), with respect to Loans denominated in an Optional Currency, on the date
and at the place due, to the applicable Payment Account (or, in the case of
Reimbursement Obligations or Acceptance Obligations, such account of the Issuing
Bank, as it may designate). Thereafter, payments in respect of any Swing Loans
received by the Administrative Agent shall be distributed to the applicable
Swing Loan Bank and payments in respect of any Revolving Loan received by the
Administrative Agent shall be distributed to each Lender in accordance with its
Pro Rata Share in accordance with the provisions of Section 3.02(b) on the date
received, if received prior to 11:00 a.m., and (except in the case of repayment
of Swing Loans) on the next succeeding Business Day if received thereafter, by
the Administrative Agent. All payments of principal of and interest on the
Multicurrency Loans, whether made directly or pursuant to Section 3.05(c)(ii),
shall be made upon at least two (2) Business Days' prior notice to the
Administrative Agent.
(b) Apportionment of Payments. (i) Subject to the provisions of Section
3.02(b)(ii) and (iv), (A) all payments of principal and interest in respect of
outstanding Revolving Loans under any Credit Facility, and all payments in
respect of Reim bursement Obligations and Acceptance Obligations, shall be
allocated among such of the Lenders and Issuing Banks as are entitled thereto,
in proportion to their respective Pro Rata Shares of such Credit Facility and
(B) all payments of fees and all other payments in respect of any other
Obligation shall be allocated among such of the Lenders and Issuing Banks as are
entitled thereto, in proportion to their respective Pro Rata Shares of the
applicable Credit Facility (if such Obligation relates to such Credit Facility)
or otherwise to their respective Pro Rata Shares of all the Credit Facilities.
All such payments and any other proceeds of Collateral or other amounts received
by the Administrative Agent from or for the benefit of a Borrower shall be
applied first, to pay principal of and interest on any portion of the Loans made
to such Borrower which the Administrative Agent may have advanced pursuant to
the express provisions of this Agreement on behalf of any Lender, for which the
Administrative Agent has not then been reimbursed by such Lender or such
Borrower, second, to pay the outstanding Reimbursement Obligations and
Acceptance Obligations owing to any
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Issuing Bank for which such Issuing Bank has not then been paid by such Borrower
or reimbursed by the Lenders, third, to pay all other Obligations of such
Borrower then due and payable and fourth, to the applicable Cash Collateral
Account for such currency to be held as Cash Collateral in accordance with this
Agreement. Except as set forth in Sections 3.01(a) and (b) and unless otherwise
designated by the Borrowers, (A) all principal payments made by any Borrower in
respect of outstanding Swing Loans or Revolving Loans of such Borrower, as the
case may be, shall be applied first, to the outstanding Swing Loans of such
Borrower and second, to the outstanding Revolving Loans of such Borrower, in
each case, first, to repay outstanding Floating Rate Loans, and then to repay
outstanding Fixed Rate Loans with those Loans which have earlier expiring
Interest Periods being repaid prior to those which have later expiring Interest
Periods (provided, that, so long as no Default or Event of Default shall have
occurred and be continuing, such Borrower may, in lieu of having amounts applied
to repay, in full or in part, a Fixed Rate Loan on a date which is not the last
day of the applicable Interest Period, request that any amount to be so applied
be deposited into such Borrower's Cash Collateral Account (or, in the case of
Fixed Rate Loans denominated in an Optional Currency, a Cash Collateral Account
for such currency) as Cash Collateral for application by the Administrative
Agent to such Loan on the last day of such Interest Period).
(ii) After the occurrence and during the continuance of an Event of
Default, the Administrative Agent may, and shall upon the acceleration of the
Obligations pursuant to Section 11.02(a), apply all payments in respect of any
Obligations and all proceeds of Collateral (including, without limitation, all
amounts held as Cash Collateral) to the Obligations in the following order (it
being understood that the Administrative Agent shall have the right to convert,
at a rate of exchange equal to the Spot Rate as of such conversion date and at
the Borrowers' expense, any of such payments or proceeds of Collateral into the
currency in which such Obligations are denominated):
(A) first, to pay interest on and the principal of any portion of the
Revolving Loans which the Administrative Agent may have advanced on behalf of
any Lender for which the Administrative Agent has not then been reimbursed by
such Lender or a Borrower;
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(B) second, to pay interest on and then principal of any Swing Loan;
(C) third, to pay Obligations in respect of any expense reimbursements,
indemnities or other liabilities then due to the Administrative Agent
("Administrative Agent's Obligations"), including, without limitation,
liabilities in respect of foreign exchange services, cash management services
and other related services provided to the Borrowers and its Affiliates by
the Administrative Agent, in an aggregate amount of up to $15,000,000;
(D) fourth, to pay Obligations in respect of any expense reimbursements or
indemnities then due to the Lenders and the Issuing Banks;
(E) fifth, to pay Obligations in respect of any fees then due to the
Administrative Agent, the Lenders and the Issuing Banks;
(F) sixth, to pay interest due in respect of the Revolving Loans,
Reimbursement Obligations and Acceptance Obligations;
(G) seventh, to pay all outstanding Letter of Credit Obligations and
Acceptance Obligations;
(H) eighth, to pay or prepay principal outstanding on Revolving Loans and
the Administrative Agent's Obligations in excess of $15,000,000;
(I) ninth, to the extent such Obligations are contingent, provide Cash
Collateral pursuant to Section 11.02(b) in respect of Letter of Credit
Obligations and Acceptance Obligations; and
(J) tenth, to the ratable payment of all other Obligations;
provided, however, if sufficient funds are not available to fund all payments to
be made in respect of any of the Obligations described in any of the foregoing
clauses (A) through (J), the available funds being applied with respect to any
such
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Obligations referred to in any one of such clauses (unless otherwise specified
in such clause) shall be allocated to the payment of such Obligations ratably,
based on the proportion of the Administrative Agent's and each Lender's or
Issuing Bank's interest in the aggregate outstanding Obligations described in
such clauses.
(iii) The Administrative Agent, in its sole discretion subject only to the
terms of this Section 3.02(b)(iii), may pay from the proceeds of Revolving Loans
made under the applicable Credit Facility (which Loans may not have been
requested by a Borrower pursuant to a Notice of Borrowing) made to a Borrower
hereunder, whether made following a request by such Borrower pursuant to Section
2.01, 2.02, 2.03 or 2.04, all amounts then due and payable by any Borrower
hereunder, including, without limitation, amounts payable with respect to
payments of principal, interest, Reimbursement Obligations, Acceptance
Obligations and fees and all reimbursements for expenses pursuant to Section
13.04. Each Borrower hereby irrevocably authorizes each Swing Loan Bank and the
Lenders to make Swing Loans or Revolving Loans in the appropriate currency, in
each case, upon notice from the Administrative Agent as described in the
following sentence for the purpose of paying principal, interest, Reimbursement
Obligations and fees due from any Borrower, reimbursing expenses pursuant to
Section 13.04 and paying any and all other amounts due and payable by any
Borrower hereunder or under the Notes, and agrees that all such Loans so made
shall be deemed to have been requested by it pursuant to Section 2.01 and 2.02
as of the date of the aforementioned notice. The Administrative Agent shall
request Swing Loans or Revolving Loans on behalf of a Borrower as described in
the preceding sentence by notifying the Lenders under the applicable Credit
Facility by telex, telecopy, telegram or other similar form of transmission
(which notice the Administrative Agent shall thereafter promptly transmit to
such Borrower), of the amount and Funding Date of the proposed Borrowing and
that such Borrowing is being requested on such Borrower's behalf pursuant to
this Section 3.02(b)(iii). On the proposed Funding Date, the relevant Swing Loan
Bank or Lenders under the relevant Credit Facility, as the case may be, shall
make the requested Loans in accordance with the procedures and subject to the
conditions specified in Section 2.01 or 2.02 (irrespective of the satisfaction
of the conditions described in Section 5.02 or the requirement to deliver a
Notice of Borrowing
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in Section 2.01(b), which conditions and requirements, for the purposes of the
payment of Swing Loans and Revolving Loans at the request of the Administrative
Agent as described in the preceding sentence, the Lenders irrevocably waive).
(iv) If any Lender fails to fund its Pro Rata Share of any Revolving Loan
Borrowing requested by a Borrower under any Credit Facility which such Lender is
obligated to fund under the terms hereof (the funded portion of such Revolving
Loan Borrowing being hereinafter referred to as a "Non Pro Rata Loan"),
excluding any such Lender who has delivered to the Administrative Agent written
notice that one or more of the conditions precedent contained in Section 5.02
shall not on the date of such request be satisfied and until such conditions are
satisfied, then until the earlier of such Lender's cure of such failure and the
termination of the Revolving Credit Commitments, the proceeds of all amounts
thereafter repaid to the Administrative Agent by any Borrower in respect of such
Credit Facility and otherwise required to be applied to such Lender's share of
all other Obligations pursuant to the terms hereof shall be advanced to the
Borrower requesting such Revolving Loan Borrowing by the Administrative Agent on
behalf of such Lender to cure, in full or in part, such failure by such Lender,
but shall nevertheless be deemed to have been paid to such Lender in
satisfaction of such other Obligations. Notwithstanding anything contained
herein to the contrary:
(A) the foregoing provisions of this Section 3.02(b)(iv) shall apply only
with respect to the proceeds of payments of Obligations;
(B) a Lender shall be deemed to have cured its failure to fund its Pro
Rata Share of any Revolving Loan at such time as an amount equal to such
Lender's original Pro Rata Share of the requested principal portion of such
Revolving Loan is fully funded to the applicable Borrower, whether made by
such Lender itself or by operation of the terms of this Section 3.02(b)(iv),
and whether or not the Non Pro Rata Loan with respect thereto has been
repaid;
(C) amounts advanced to a Borrower to cure, in full or in part, any such
Lender's failure to fund its
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Pro Rata Share of any Revolving Loan Borrowing ("Cure Loans") shall bear
interest from and after the date made available to the applicable Borrower at
the rate applicable to the other Revolving Loans comprising such Borrowing
and shall be treated as Revolving Loans comprising such Borrowing for all
purposes herein;
(D) regardless of whether or not an Event of Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to its
desired application, all repayments of principal which, in accordance with
the other terms of this Section 3.02, would be applied to the outstanding
Revolving Loans shall be applied first, ratably to all Revolving Loans
constituting Non Pro Rata Loans, second, ratably to Revolving Loans other
than those constituting Non Pro Rata Loans or Cure Loans and, third, ratably
to Revolving Loans constituting Cure Loans; and
(E) no Lender shall be relieved of any obligation such Lender may have to
the Borrower under the terms of this Agreement as a result of the provisions
of this Section 3.02(b)(iv).
(c) Payments on Non-Business Days. Whenever any pay ment to be made by a
Borrower hereunder or under the Notes is stated to be due on a day which is not
a Business Day, the payment shall instead be due on the next succeeding Business
Day (or, as set forth in Section 4.02(b)(iv), the next preceding Business Day),
and any such extension of time shall be included in the computation of the
payment of interest and fees hereunder.
3.03. Taxes.
(a) Payment of Taxes. Any and all payments by the Borrowers hereunder,
under the Notes or under any other Loan Document shall be made free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender, each Issuing Bank and the Administrative
Agent, taxes imposed on its income, capital, profits or gains and franchise
taxes imposed on it, in each case by (i) the United States except withholding
taxes contemplated pursuant to Section 3.03(e)(ii)(C), (ii) the
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Governmental Authority of the jurisdiction in which such Lender's office is
located or (iii) the Governmental Authority in which such Person is organized,
managed, controlled or doing business, in each case including all political
subdivisions thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Borrower shall be required by law to withhold or deduct any Taxes from or
in respect of any sum payable hereunder, under the Notes or under any other Loan
Document to any Lender, any Issuing Bank or the Administrative Agent, (x) such
sum payable shall be increased as may be necessary so that after making all
required withholdings or deductions (including withholdings or deductions
applicable to additional sums payable under this Section 3.03) such Lender, such
Issuing Bank or the Administrative Agent (as the case may be) receives an amount
equal to the sum it would have received had no such withholdings or deductions
been made, (y) such Borrower shall make such withholdings or deductions, and (z)
such Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) Other Taxes. In addition, the Borrowers agree to pay any present or
future stamp, value-added or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from and which relate directly to
(i) any payment made under any Loan Document or (ii) the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the Notes or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Indemnification. The Borrowers will indemnify each Lender, each
Issuing Bank and the Administrative Agent against, and reimburse each on demand
for, the full amount of all Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any Governmental Authority on
amounts payable under this Section 3.03 and any additional income or franchise
taxes resulting therefrom) incurred or paid by such Lender, such Issuing Bank or
the Administrative Agent (as the case may be) or any Affiliate of such Lender or
Issuing Bank and any liability (including penalties, interest, and out-of-pocket
expenses paid to third parties) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or lawfully payable. A
certificate as to any amount payable to
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any Person under this Section 3.03 submitted by such Person to the Borrowers
shall, absent manifest error, be final, conclusive and binding upon all parties
hereto. This indemnification shall be made within thirty (30) days from the date
such Person makes written demand therefor and within thirty (30) days after the
receipt of any refund of the Taxes or Other Taxes following final determination
that the Taxes or Other Taxes which gave rise to the indemnification were not
required to be paid, such Person shall repay the amount of such paid indemnity
to the Borrowers.
(d) Receipts. Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by any of the Borrowers, such Borrower will furnish to the
Administrative Agent, at its address referred to in Section 13.10, the original
or a certified copy of a receipt or other documentation reasonably satisfactory
to the Administrative Agent evidencing payment thereof. The Borrowers will
furnish to the Administrative Agent upon the Administrative Agent's request from
time to time an Officer's Certificate stating that all Taxes and Other Taxes of
which it is aware that are due have been paid and that no additional Taxes or
Other Taxes of which it is aware are due.
(e) Foreign Bank Certifications. (i) Each Lender that is not created or
organized under the laws of the United States or a political subdivision thereof
shall deliver to the Borrowers and the Administrative Agent on or before the
Closing Date or the date on which such Lender becomes a Lender pursuant to
Section 13.01 hereof a true and accurate certificate executed in duplicate by a
duly authorized officer of such Lender to the effect that such Lender is
eligible to receive payments hereunder and under the Notes without deduction or
withholding of United States federal income tax (I) under the provisions of an
applicable tax treaty concluded by the United States (in which case the
certificate shall be accompanied by two duly completed copies of IRS Form 1001
(or any successor or substitute form or forms)) or (II) under Sections
1442(c)(1) and 1442(a) of the Internal Revenue Code (in which case the
certificate shall be accompanied by two duly completed copies of IRS Form 4224
(or any successor or substitute form or forms)).
(ii) Each such Lender further agrees to deliver to the Borrowers and the
Administrative Agent from time to time, a true and accurate certificate executed
in duplicate by a duly author-
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ized officer of such Lender before or promptly upon the occurrence of any event
requiring a change in the most recent certificate previously delivered by it to
the Borrowers and the Administrative Agent pursuant to this Section 3.03(e).
Each certificate required to be delivered pursuant to this Section 3.03(e)(ii)
shall certify as to one of the following:
(A) that such Lender can receive payments here under and under the Notes
without deduction or withholding of United States federal income tax;
(B) that such Lender cannot continue to receive payments hereunder and
under the Notes without deduction or withholding of United States federal
income tax as specified therein but does not require additional payments
pursuant to Section 3.03(a) because it is entitled to recover the full amount
of any such deduction or withholding from a source other than the Borrowers;
(C) that such Lender is no longer capable of receiving payments hereunder
and under the Notes without deduction or withholding of United States federal
income tax as specified therein by reason of a change in law (including the
Code or applicable tax treaty) after the later of the Closing Date or the
date on which a Lender became a Lender pursuant to Section 13.01 and that it
is not capable of recovering the full amount of the same from a source other
than the Borrowers; or
(D) that such Lender is no longer capable of receiving payments hereunder
without deduction or withholding of United States federal income tax as
specified therein other than by reason of a change in law (including the Code
or applicable tax treaty) after the later of the Closing Date or the date on
which a Lender became a Lender pursuant to Section 13.01.
3.04. Increased Capital. If after the date hereof any Lender or Issuing
Bank determines that (i) the adoption or implementation of or any change in or
in the interpretation or administration of any law or regulation or any
guideline or
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request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender, Issuing Bank or banks or financial institutions generally (whether or
not having the force of law), compliance with which affects or would affect the
amount of capital required or expected to be maintained by such Lender or
Issuing Bank or any corporation controlling such Lender or Issuing Bank and (ii)
the amount of such capital is increased by or based upon (A) the making or
maintenance by any Lender of its Loans, any Lender's participation in or
obligation to participate in the Loans, Letters of Credit Acceptances or other
advances made hereunder or the existence of any Lender's obligation to make
Loans or (B) the issuance or maintenance by any Issuing Bank of, or the
existence of any Issuing Bank's obligation to Issue or create, Letters of Credit
or Acceptances, then, in any such case, upon written demand by such Lender or
Issuing Bank (with a copy of such demand to the Administrative Agent), the
Borrowers jointly and severally agree immediately to pay to the Administrative
Agent for the account of such Lender or Issuing Bank, from time to time as
specified by such Lender or Issuing Bank, additional amounts sufficient to
compensate such Lender or Issuing Bank or such corporation therefor. Such demand
shall be accompanied by a statement as to the amount of such compensation and
include a brief summary of the basis for such demand. Such statement shall be
conclusive and binding for all purposes, in the absence of manifest error.
3.05. Cash Management and Cash Collateral Accounts.
(a) Establishment of Accounts. On the Closing Date, the Borrowers shall
have established the Lockboxes, Blocked Accounts, Concentration Accounts, Cash
Collateral Accounts and Disbursement Accounts identified on Schedule 6.01(Y).
(b) Collections. Each Borrower has directed, and in the future will
direct, all of its account debtors to remit all monies, checks, notes, drafts or
funds received by it, including, without limitation, all payments in respect of
Receivables and other proceeds of Collateral directly to a Lockbox or Blocked
Account. To the extent that the account debtors of such Borrower,
notwithstanding the instructions described in the preceding sentence, remit such
monies, checks, notes, drafts or funds directly to such Borrower, such Borrower
hereby agrees to
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deposit all such collections of Receivables into a Blocked Account (or, in the
case of collections of Receivables denominated in an Optional Currency, into the
applicable Borrower's Multicurrency Account for such currency) promptly upon
such Person's receipt thereof and, pending deposit, to hold such collections in
trust for the benefit of the Administrative Agent, the Lenders, the Issuing
Banks and the other Holders. The contents of each Lockbox shall automatically be
deposited into a Blocked Account or be emptied and deposited into a Blocked
Account by a representative of the Blocked Account Bank at which the applicable
Blocked Account has been established. Only the Administrative Agent and the
Blocked Account Bank, if any, shall have power of withdrawal from each Lockbox
and the related Blocked Account. The Borrowers and Donna Karan International
agree to cause all collections of Receivables, all proceeds of Collateral and
all Net Cash Proceeds now or hereafter received directly or indirectly by any of
them or their respective Subsidiaries, to be held in trust for the
Administrative Agent for the benefit of the Lenders and, promptly upon receipt
thereof, to be deposited into a Blocked Account.
(c) Concentration Account; Cash Collateral Accounts. All immediately
available funds in any Blocked Account located in the United States shall be
automatically transferred into the Domestic Concentration Account. The Domestic
Concentration Account shall be under the sole dominion and control of the
Administrative Agent. With respect to the Domestic Concentration Account and the
Cash Collateral Account, the Administrative Agent alone shall have power of
withdrawal from such accounts. Each Borrower hereby authorizes the
Administrative Agent to apply all immediately available funds on deposit in its
Domestic Concentration Account and, if necessary, the Cash Collateral Account to
such Borrower's Obligations denominated in Dollars. To the extent any such funds
remain after such application, each Borrower hereby authorizes the
Administrative Agent to transfer such funds to the Cash Collateral Account and
invest the same in accordance with the Cash Collateral Pledge Agreement.
Notwithstanding anything to the contrary contained in this Agreement, except as
set forth in this subsection (c), none of the Borrowers or any Person or entity
claiming on behalf of or through a Borrower shall have any right to withdraw any
of the funds held in the Domestic Concentration Account or any Cash Collateral
Account.
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(d) Fees and Expenses. The Borrowers jointly and severally agree to pay to
the Administrative Agent any and all reasonable fees, costs and expenses which
the Administrative Agent incurs in connection with opening and maintaining the
Blocked Accounts, the Concentration Accounts and the Cash Collateral Accounts.
The Borrowers jointly and severally agree to reimburse the Administrative Agent
for any amounts paid to the Blocked Account Bank arising out of any required
indemnification by the Administrative Agent of such Blocked Account Bank against
damages incurred by the Blocked Account Bank in the operation of a Blocked
Account.
3.06. Replacement of Lender in Event of Adverse Condition. If any Borrower
becomes obligated to pay additional amounts to any Lender pursuant to Sections
3.03, 3.04 or 4.01(f) as a result of any condition described in such Sections
which is not generally applicable to all Lenders, then, unless such Lender has
theretofore taken steps to remove or cure, and has removed or cured, the
conditions creating the cause for such obligation to pay such additional
amounts, the Borrower may designate a Replacement Lender to assume all of the
obligations of such Lender hereunder and to purchase for cash all of the Notes
of such Lender and all of such Lender's rights hereunder, without recourse to or
warranty (other than title) by, or expense to, such Lender for a purchase price
equal to the outstanding principal amount of the Notes payable to such Lender
plus any accrued but unpaid interest on such Notes and accrued but unpaid
commitment and other fees, expense reimbursements and indemnities in respect of
that Lender's Commitment. Such Lender shall consummate such sale in accordance
with such terms (and, if such Lender is an Issuing Bank, such other terms as may
be reasonably necessary to compensate fully such Lender) within a reasonable
time not exceeding 15 Business Days from the date the Borrower designates a
Replacement Lender, and thereupon such Lender shall no longer be a party hereto
or have any obligations or rights hereunder (except rights which, pursuant to
the provisions of this Agreement, survive the termination of this Agreement and
the repayment of the Notes), and the Replacement Lender shall succeed to such
obligations and rights.
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ARTICLE IV
INTEREST AND FEES
4.01. Interest on the Loans and Other Obligations. (a) Rate of Interest.
All Loans and the out standing principal balance of all other Obligations shall
bear interest on the unpaid principal amount thereof from the date such Loans
are made and such other Obligations are due and payable until paid in full,
except as otherwise provided in Section 4.01(d), as follows:
(i) If a Floating Rate Loan or such other Obligation, at a rate per annum
equal to the Floating Rate in effect from time to time as interest accrues;
(ii) If a Fixed Rate Loan, at a rate per annum equal to the sum of (A) the
Fixed Rate determined for the applicable Interest Period and the applicable
currency, plus (B) the Applicable Fixed Rate Margin in effect from time to
time during such Interest Period;
The applicable basis for determining the rate of interest on any Loan shall be
initially determined at the time a Notice of Borrowing is delivered by the
Borrowers to the Administrative Agent and in accordance with Section 2.01(b).
The applicable basis for determining the rate of interest on such Loan shall be
selected thereafter by the relevant Borrower at the time a Notice of
Conversion/Continuation is delivered by such Borrower to the Administrative
Agent. Notwithstanding the foregoing, such Borrower may not select the Fixed
Rate as the applicable basis for determining the rate of interest on such a Loan
if (x) such Loan is to be made on the Closing Date or (y) at the time of such
selection an Event of Default or Default would occur or has occurred and is
continuing. If on any day any Loan is outstanding with respect to which notice
has not been timely delivered to the Administrative Agent in accordance with the
terms hereof specifying the basis for determining the rate of interest on that
day, then for that day interest on that Loan shall be determined by reference to
the Floating Rate with respect to Domestic Loans and to the Multicurrency LIBO
Rate in effect on the relevant Fixed Rate Determination Date for an Interest
Period of seven (7) days plus the Applicable Fixed Rate Margin. with respect to
Multicurrency Loans.
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(b) Interest Payments. (i) Interest accrued on each Floating Rate Loan
shall be payable in arrears in Dollars (A) on the first Business Day of each
calendar month for the preceding calendar month, commencing on the first such
day following the making of such Floating Rate Loan and (B) if not theretofore
paid in full, on the Commitment Termination Date.
(ii) Interest accrued on each Fixed Rate Loan shall be payable in arrears
in the currency in which such Loan is denominated (A) on the last day of each
Fixed Rate Interest Payment Date with respect to such Loan and (B) if not
theretofore paid in full, on the Commitment Termination Date.
(iii)Interest accrued on the principal balance of all other Obligations
shall be payable in arrears in the currency in which such Obligation is
denominated (A) on the first Business Day of each month, commencing on the first
such day following the incurrence of such Obligation and (B) if not theretofore
paid in full, at the time such other Obligation becomes due and payable (whether
by acceleration or otherwise).
(c) Conversion or Continuation. (i) Each Borrower shall have the option
(A) to convert at any time all or any part of its outstanding Floating Rate
Loans (other than Swing Loans) to Fixed Rate Loans; (B) to convert all or any
part of its outstanding Fixed Rate Loans denominated in Dollars and having
Interest Periods which expire on the same date to Floating Rate Loans on such
expiration date; or (C) to continue all or any part of its outstanding Fixed
Rate Loans having Interest Periods which expire on the same date as Fixed Rate
Loans denominated in the same currency, and the succeeding Interest Period of
such continued Loans shall commence on such expiration date; provided, however,
no such outstanding Loan may be continued as, or be converted into, a Fixed Rate
Loan (i) if the continuation of, or the conversion into, would violate any of
the provisions of Section 4.02 or (ii) if an Event of Default or Default would
occur or has occurred and is continuing. Any conversion into or continuation of
Fixed Rate Loans under this Section 4.01(c) shall be in a minimum amount of
$5,000,000 (or the Dollar Equivalent of $1,500,000 for Fixed Rate Loans
denominated in an Optional Currency) and in integral Dollar Equivalent multiples
of $1,000,000 (or approximately similar intervals in Optional Currencies) in
excess of that amount.
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(ii) To convert or continue a Loan under Section 4.01(c)(i), the
applicable Borrower shall deliver a Notice of Conversion/Continuation to the
Administrative Agent no later than 11:00 a.m. (New York time or London time, as
applicable) at least (A) three (3) Business Days in advance of the proposed
conversion/continuation date in the case of Domestic Loans or (B) four (4)
Business Days in advance of the proposed conversion/continuation date in the
case of Multicurrency Loans. Promptly after receipt of a Notice of
Conversion/Continuation under this Section 4.01(c)(ii), the Administrative Agent
shall notify each Lender under the applicable Credit Facility by telex or
telecopy, or other similar form of transmission, of the proposed
conversion/continuation. Any Notice of Conversion/Con tinuation for conversion
to, or continuation of, a Loan shall be irrevocable, and the applicable Borrower
shall be bound to convert or continue in accordance therewith.
(d) Default Interest. Notwithstanding the rates of interest specified in
Section 4.01(a) or elsewhere herein, and to the extent permitted by applicable
law, effective immediately upon the occurrence of any Event of Default and for
as long thereafter as such Event of Default shall be continuing, the principal
balance of all Loans and of all other Obligations shall bear interest at a rate
which is two percent (2.0%) per annum in excess of the rate of interest
applicable to such Loans and Obligations from time to time.
(e) Computation of Interest. Interest on all Obliga tions shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days (or the applicable number of days
in the relevant market). In computing interest on any Loan, the date of the
making of the Loan shall be included and the date of payment shall be excluded;
provided, however, if a Loan is repaid on the same day on which it is made, one
(1) day's interest shall be paid on such Loan.
(f) Changes; Legal Restrictions. If after the date hereof any Lender or
Issuing Bank determines that the adoption or implementation of or any change in
or in the interpretation or administration of any law or regulation or any
guideline or request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or
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control over any Lender, Issuing Bank or over banks or financial institutions
generally (whether or not having the force of law), compliance with which, in
each case after the date hereof:
(i) subjects a Lender or an Issuing Bank (or its Applicable Lending
Office) to charges (other than Taxes) of any kind which is applicable to the
Commitments of the Lenders and/or the Issuing Banks to make Fixed Rate Loans
or to Issue or create and/or participate in Letters of Credit or Acceptances;
or
(ii) imposes, modifies or holds applicable, any reserve (other than
reserves taken into account in calculating any Fixed Rate), special deposit,
compulsory loan, FDIC insurance or similar requirement against assets held
by, or deposits or other liabilities (including those pertaining to Letters
of Credit) in or for the account of, advances or loans by, commitments made
or other credit extended by, or any other acquisition of funds by, a Lender
or an Issuing Bank or any Applicable Lending Office or Fixed Rate Affiliate
of that Lender or Issuing Bank;
and the result of any of the foregoing is to increase the cost to that Lender or
Issuing Bank of making, renewing or maintaining the Loans or its Commitments or
issuing or participating in the Letters of Credit or creating or participating
in the Acceptances or to reduce any amount receivable thereunder; then, in any
such case, upon written demand by such Lender or Issuing Bank (with a copy of
such demand to the Administrative Agent), the Borrowers jointly and severally
agree promptly to pay to the Administrative Agent for the account of such Lender
or Issuing Bank, from time to time as specified by such Lender or Issuing Bank,
such amount or amounts as may be necessary to compensate such Lender or Issuing
Bank or its Fixed Rate Affiliate for any such additional cost incurred or
reduced amount received. Such demand shall be accompanied by a statement as to
the amount of such compensation and include a summary of the basis for such
demand. Such statement shall be conclusive and binding for all purposes, absent
manifest error.
(g) Confirmation of Fixed Rate. Upon the reasonable request of any
Borrower from time to time, the Administrative
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Agent shall promptly provide to such Borrower such information with respect to
the applicable Fixed Rate as may be so requested.
(h) Additional Costs. Without limitation of any other provision hereof, if
any Acceptance created by any Issuing Bank hereunder is not, for any reason
beyond the control of such Issuing Bank, an Eligible Acceptance at the time of
its creation, the Borrowers shall, upon demand by such Issuing Bank, pay to such
Issuing Bank additional amounts sufficient to indemnify such Issuing Bank
against any additional costs, as determined by such Issuing Bank, incurred by
such Issuing Bank (including, but not limited to, costs resulting from reserve
requirements, or premium liability to the Federal Deposit Insurance Corporation,
or a higher discount rate) in connection with such Acceptance resulting from
such Acceptance not being an Eligible Acceptance.
4.02. Special Provisions Governing Fixed Rate Loans. With respect to Fixed
Rate Loans:
(a) Amount of Advance. Each Fixed Rate Loan shall be for a minimum amount
of $5,000,000 (or the Dollar Equivalent of $1,500,000 for Fixed Rate Loans
denominated in an Optional Currency) and in integral $1,000,000 amounts (or
approximately similar intervals in Optional Currencies) in excess thereof.
(b) Determination of Interest Period. By giving notice as set forth in
Section 2.01(b) (with respect to a new Borrowing of Domestic Loans or
Multicurrency Loans) or Section 4.01(c) (with respect to a conversion into or
continuation of a Fixed Rate Loan), the applicable Borrower shall have the
option, subject to the other provisions of this Section 4.02, to select an
interest period (each, an "Interest Period") to apply to the Loans described in
such notice, subject to the following provisions:
(i) Such Borrower may only select, as to a par ticular Borrowing of Fixed
Rate Loans, a Interest Period of either one (1), two (2), three (3) or six
(6) months in duration;
(ii) In the case of immediately successive Interest Periods applicable to
a Borrowing of Fixed Rate Loans, each successive Interest Period shall
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commence on the day on which the next preceding Interest Period expires;
(iii) If any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall be extended to expire on the next
succeeding Business Day if the next succeeding Business Day occurs in the
same calendar month, and if there shall be no succeeding Business Day in such
calendar month, such Interest Period shall expire on the immediately
preceding Business Day;
(iv) Such Borrower may not select a Interest Period as to any Loan if such
Interest Period terminates later than the Commitment Termination Date;
(v) There shall be no more than six (6) Interest Periods for Fixed Rate
Loans in effect at any one time; and
(vi) No Fixed Rate Loan may be borrowed on the Closing Date, and no Notice
of Conversion/Continuation may be delivered prior to the Closing Date.
(c) Determination of Interest Rate. As soon as prac ticable on the
applicable Fixed Rate Determination Date, the Administrative Agent shall
determine (pursuant to the procedures set forth in the definition of "Fixed
Rate") the interest rate which shall apply to Fixed Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
currency and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrowers and to each Lender. The Administrative
Agent's determination shall be presumed to be correct, absent manifest error,
and shall be binding upon such Borrowers.
(d) Interest Rate Unascertainable, Inadequate or Unfair. In the event that
at least one (1) Business Day before the Fixed Rate Determination Date:
(i) the Administrative Agent determines that adequate and fair means do
not exist for ascertaining the applicable interest rates by reference to
which the
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applicable Fixed Rate for the applicable Available Currency then being
determined is to be fixed;
(ii) the Administrative Agent determines that deposits in such currency
and in the principal amounts of the Fixed Rate Loans comprising such
Borrowing are not generally available in the London interbank market for a
period equal to such Interest Period; or
(iii) the Requisite Lenders in the applicable Credit Facility advise the
Administrative Agent that the applicable Fixed Rate for the applicable
Available Currency, as determined by the Administrative Agent, after taking
into account the adjustments for reserves and increased costs provided for in
Section 4.01(f), will not adequately and fairly reflect the cost to such
Lenders of funding the relevant Fixed Rate Loans in the currency in which
such Loans are denominated;
then the Administrative Agent shall forthwith give notice thereof to the
Borrowers, whereupon (until the Administrative Agent noti fies the Borrowers
that the circumstances giving rise to such suspension no longer exist) the right
of the Borrowers to elect to have Loans bear interest based upon the Fixed Rate
shall be suspended and each outstanding Fixed Rate Loan which is denominated in
Dollars shall be converted into a Floating Rate Loan denominated in Dollars on
the last day of the then current Interest Period therefor, and any Notice of
Borrowing with respect to Loans denominated in Dollars for which Revolving Loans
have not then been made shall be deemed to be a request for Floating Rate Loans
in Dollars, notwithstanding any prior election by a Borrower to the contrary.
(e) Illegality. (i) If at any time any Lender deter mines (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties) that the making or continuation of any Fixed Rate Loan in any
currency has become unlawful or impermissible by compliance by that Lender with
any law, governmental rule, regulation or order of any Governmental Authority
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful or would result in costs or penalties), then, and in
any such event, such Lender may give notice of that determination, in writing,
to the
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Borrowers and the Administrative Agent, and the Administrative Agent shall
promptly transmit the notice to each other Lender.
(ii) When notice is given by a Lender under Section 4.02(e)(i), (A) the
Borrowers' right to request from such Lender and such Lender's obligation, if
any, to make Fixed Rate Loans in such currency shall be immediately suspended,
and such Lender shall make a Floating Rate Loan as part of any requested
Borrowing of Fixed Rate Loans in such currency and (B) if the affected Fixed
Rate Loan or Loans are then outstanding, the applicable Borrower shall
immediately, or if not permitted by applicable law to do so immediately, then by
no later than the date it is permitted to do so in accordance with applicable
law, upon at least one (1) Business Day's prior written notice to the
Administrative Agent and the affected Lender, convert each such Loan into a
Floating Rate Loan with respect to Domestic Loans and to the Multicurrency LIBO
Rate in effect on the relevant Fixed Rate Determination Date for an Interest
Period of seven (7) days plus the Applicable Fixed Rate Margin with respect to
Multicurrency Loans.
(iii) If at any time after a Lender gives notice under Section 4.02(e)(i)
in respect of a Fixed Rate Loan in any currency such Lender determines that it
may lawfully make Fixed Rate Loans in such currency, such Lender shall promptly
give notice of that determination, in writing, to the Borrowers and the
Administrative Agent, and the Administrative Agent shall promptly transmit the
notice to each other Lender. The Borrowers' right to request, and such Lender's
obligation, if any, to make Fixed Rate Loans shall thereupon be restored.
(f) Compensation. In addition to all amounts required to be paid by the
Borrower pursuant to Section 4.01, each Borrower agrees to compensate each
Lender, upon demand, for all losses, expenses and liabilities (including,
without limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Fixed Rate Loans made to such Borrower but excluding any
loss of the Applicable Fixed Rate Margin on the relevant Loans) which that
Lender may sustain (i) if for any reason a Borrowing of, conversion into or
continuation of, such Fixed Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of
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Conversion/Continuation given by such Borrower or a successive Interest Period
does not commence after notice therefor is given pursuant to Section 4.01(c),
including, without limitation, pursuant to Section 4.02(d), (ii) if for any
reason any Fixed Rate Loan made to such Borrower is prepaid (including, without
limitation, mandatorily pursuant to Section 3.01) on a date which is not the
last day of the applicable Interest Period, (iii) as a consequence of a required
conversion of such Fixed Rate Loan to a Floating Rate Loan as a result of any of
the events indicated in Section 4.02(d) or (e) or (iv) as a consequence of any
failure by such Borrower to repay Fixed Rate Loans when required by the terms
hereof. The Lender making demand for such compensation shall deliver to the
applicable Borrower concurrently with such demand a written statement in
reasonable detail as to such losses, expenses and liabilities, and this
statement shall be conclusive as to the amount of compensation due to that
Lender, absent manifest error.
(g) Booking of Fixed Rate Loans. Any Lender may make, carry or transfer
Fixed Rate Loans at, to or for the account of its Fixed Rate Lending Office or
Fixed Rate Affiliate or its other offices or Affiliates. No Lender shall be
entitled, however, to receive any greater amount under Sections 3.03, 3.04,
4.01(f) or 4.02(f) as a result of the transfer of any such Fixed Rate Loan to
any office (other than such Fixed Rate Lending Office) or any Affiliate (other
than such Fixed Rate Affiliate) than such Lender would have been entitled to
receive immediately prior thereto, unless (i) the transfer occurred at a time
when circumstances giving rise to the claim for such greater amount did not
exist and (ii) such claim in the relevant amount would have arisen even if such
transfer had not occurred.
(h) Affiliates Not Obligated. No Fixed Rate Affiliate or other Affiliate
of any Lender shall be deemed a party hereto or shall have any liability or
obligation hereunder.
4.03. Fees. (a) Administrative Agent's Fee. The Borrowers jointly and
severally agree to pay to the Administrative Agent solely for its own account
such other fees as are set forth in the Letter Agreement in accordance with the
terms thereof.
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(b) Letter of Credit Fee. In addition to any charges paid pursuant to
Section 2.03(f), the Borrowers jointly and severally agree to pay to the
Administrative Agent, for the account of the Lenders, a fee (the "Letter of
Credit Fee") equal to (i) one-half of one percent (1/2 of 1%) per annum on the
average undrawn face amount of each outstanding Commercial Letter of Credit for
the period of time such Commercial Letter of Credit is outstanding, payable
monthly in arrears on the first Business Day of each month during such period
and (ii) the Applicable Fixed Rate Margin then in effect on the average undrawn
face amount of each outstanding Standby Letter of Credit for the period of time
such Standby Letter of Credit is outstanding, payable monthly in arrears on the
first Business Day of each month during such period; provided, however,
immediately upon the occurrence of an Event of Default, and for as long
thereafter as such Event of Default shall be continuing, the Letter of Credit
Fee shall be equal to two percent (2%) per annum in excess of the fee otherwise
applicable hereunder.
(c) Unused Commitment Fee. The Borrowers jointly and severally agree to
pay to the Administrative Agent, for the account of the Lenders in accordance
with their respective Pro Rata Shares, a fee (the "Unused Commitment Fee"),
accruing at the rate equal to the Unused Commitment Rate on the average amount
by which the Commitments exceed the Revolving Credit Obligations for the period
commencing on the Closing Date and ending on the Commitment Termination Date,
such fee being payable monthly, in arrears, on the first Business Day of each
calendar month and on the Commitment Termination Date.
(d) Calculation and Payment of Fees. All of the above fees that are based
on a per annum rate shall be calculated on the basis of the actual number of
days elapsed in a 360-day year. All such fees shall be payable in addition to,
and not in lieu of, interest, expense reimbursements, indemnification and other
Obligations. Fees shall be payable to the applicable Payment Account in
accordance with Section 3.02. All fees payable hereunder shall be fully earned
and nonrefundable when paid. All fees specified or referred to herein due to the
Administrative Agent, any Issuing Bank or any Lender, including, without
limitation, those referred to in this Section 4.03, shall bear interest, if not
paid when due, at the interest rate for Loans in
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accordance with Section 4.01(d), shall constitute Obligations and shall be
secured by the Collateral.
ARTICLE V
CONDITIONS TO LOANS, LETTERS OF CREDIT AND ACCEPTANCES
5.01. Conditions Precedent to the Initial Loans, Letters of Credit and
Acceptances. The obligation of each Lender on the Closing Date to make its Loan
requested to be made by it and the agreement of each Issuing Bank on the Closing
Date to Issue Letters of Credit or create Acceptances, shall be subject to the
satisfaction of all of the following conditions precedent:
(a) Documents. The Administrative Agent (on behalf of itself and the
Lenders) shall have received on or before the Closing Date all of the following:
(i) this Agreement, the Notes and all other agreements, documents and
instruments described in the List of Closing Documents attached hereto and
made a part hereof as Exhibit H (the "Closing List"), each duly executed
where appropriate and in form and substance satisfactory to the Lenders and
in sufficient copies for each of the Lenders; and
(ii) such additional documentation as the Administrative Agent and the
Lenders may reasonably request.
(b) Collateral Information; Perfection of Liens. The Administrative Agent
shall have received complete and accurate information from the Borrowers with
respect to the name and the location of the principal place of business and
chief executive office for each Borrower and each Guarantor; all Uniform
Commercial Code and other filing and recording fees and taxes shall have been
paid or duly provided for; and the Administrative Agent be satisfied that all
Liens granted to the Administrative Agent with respect to all Collateral are
valid and effective and, upon the filing of the duly executed Uniform Commercial
Code financing statements (or similar filings required by the applicable
statutes of any foreign jurisdiction in which the Administrative Agent is being
granted a Lien by the Borrowers)
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which shall have been delivered to the Administrative Agent prior to the Closing
Date in time to have such statements filed with the relevant filing office at
least two (2) Business Days prior to the Closing Date, will be perfected and of
first priority, except as otherwise permitted under this Agreement. All
certificates representing Capital Stock included in the Collateral shall have
been delivered to the Administrative Agent (with duly executed stock powers, as
appropriate) and all instruments included in the Collateral shall have been
delivered to the Administrative Agent (duly endorsed to the Administrative
Agent).
(c) No Legal Impediments. No law, regulation, order, judgment or decree of
any Governmental Authority shall exist, and the Administrative Agent shall not
have received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
Governmental Authority which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or the Issuance of the Letters of
Credit or the Creation of the Acceptances. on the Closing Date or (B) the
consummation of the transactions contemplated hereby or (ii) would be reasonably
expected to impose or result in the imposition of a Material Adverse Effect.
(d) No Change in Condition. No change deemed material by the Lenders, in
their opinion, in the condition (financial or otherwise), business, performance,
assets, operations or prospects of the Borrowers that would (i) have a material
adverse effect on the ability of the Borrowers to perform their obligations
under the Loan Documents or (ii) have a material adverse effect on the ability
of the Lenders, the Issuing Banks or the Administrative Agent to enforce the
Loan Documents.
(e) No Default. No Event of Default or Default shall have occurred and be
continuing or would result from the making of the Loans requested to be made or
the Issuance of the Letters of Credit requested to be Issued or the creation of
the Acceptances requested to be created, on the Closing Date.
(f) Representations and Warranties. All of the repre sentations and
warranties contained in Section 6.01 and in any of the other Loan Documents
shall be true and correct in all
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material respects on and as of the Closing Date, both before and immediately
after giving effect to the making of the Loans.
(h) Fees and Expenses Paid. There shall have been paid to the
Administrative Agent, for its account and the respective accounts of the
Lenders, all fees (including, without limitation, the reasonable legal fees of
counsel to the Administrative Agent and local counsel to the Administrative
Agent for the benefit of the Lenders) due and payable on or before the Closing
Date (including, without limitation, all such fees described in the Letter
Agreement), and all reasonable expenses (including, without limitation, legal
expenses) due and payable on or before the Closing Date.
(i) Closing Date. The Closing Date shall have occurred on or prior to
September 19, 1996.
(j) Consents, Etc. Donna Karan International, each Borrower, and each of
their respective Subsidiaries shall have received all material consents and
authorizations required pursuant to any material Contractual Obligation with any
other Person and shall have obtained all material Permits of, and effected all
notices to and filings with, any Governmental Authority as may be necessary to
allow Donna Karan International, each Borrower and each of their respective
Subsidiaries lawfully (A) to execute, deliver and perform, in all material
respects, their respective obligations hereunder, under the other Loan Documents
to which each of them is, or shall be, a party and each other agreement or
instrument to be executed and delivered by each of them pursuant thereto or in
connection therewith, (B) to consummate the transactions contemplated under the
Loan Documents and (C) to create and perfect the Liens on the Collateral to be
owned by each of them in the manner and for the purpose contemplated by the Loan
Documents.
5.02. Conditions Precedent to All Loans, Letters of Credit and
Acceptances. The obligation of each Lender to make any Loan requested to be made
by it on any Funding Date on or after the Closing Date and the agreement of each
Issuing Bank to Issue any Letter of Credit or to create the Acceptances on any
date on or after the Closing Date is subject to the following conditions
precedent as of each such date:
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(a) Representations and Warranties. As of such date, both before and after
giving effect to the Loans to be made or the Letter of Credit to be Issued or
the Acceptance to be created on such date, all of the representations and
warranties contained in Section 6.01 and in any of the other Loan Documents
shall be true in all material respects.
(b) No Defaults. As of such date, no Event of Default or Default shall
have occurred and be continuing or would result from the making of the requested
Loan, the application of the proceeds therefrom, the Issuance of the requested
Letter of Credit, the creation of the requested Acceptance or the application of
the proceeds therefrom.
(c) No Change in Condition. As of such date, no material adverse change
shall have occurred in the condition (financial or otherwise), performance,
properties, operations or prospects of the Borrowers or Donna Karan
International and its Subsidiaries, taken as a whole since March 31, 1996, as
reflected in the Pro Forma Combined Financial Statements contained in the
Prospectus of Donna Karan International dated June 27, 1996.
Each request by any Borrower for a Loan, each submission by any Borrower of a
Notice of Borrowing, each acceptance by any Borrower of the proceeds of each
Loan made hereunder, each submission by any Borrower to an Issuing Bank of a
Notice of Letter of Credit Issuance and each issuance of such Letter of Credit,
and each submission by any Borrower to an Issuing Bank of a Request for
Acceptance and each creation of an Acceptance, shall constitute a representation
and warranty by the Borrowers as of the Funding Date in respect of such Loan or
the date of issuance in respect of such Letter of Credit or the date of creation
in respect of such Acceptance that all the conditions contained in this Section
5.02 have been satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties of the Borrowers. In order to induce
the Lenders to enter into this Agreement and to make the Loans and the other
financial accommodations to the Borrowers and induce the Issuing Banks to issue
the Letters of
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Credit described herein, each Borrower hereby represents and warrants to each
Lender, each Issuing Bank and the Administrative Agent that the following
statements are true, correct and complete:
(a) Organization; Powers. Each Borrower (i) is a general partnership duly
organized, validly existing and in good standing under the laws of the State of
New York and (ii) has all requisite power and authority to own, operate and
encumber its assets and to conduct its business as presently conducted.
(b) Authority. (i) Each Borrower and each of its general partners has the
requisite power and authority to execute, deliver and perform each of the Loan
Documents to which such Borrower is a party.
(ii) No other action or proceeding on the part of any Borrower or any of
its general partners is necessary to execute, deliver and perform each of the
Loan Documents to which such Borrower is a party thereto or to consummate the
transactions contemplated thereby.
(iii) Each of the Loan Documents to which any Borrower is a party has been
duly executed and delivered by such Borrower and one of its general partners on
such Borrower's behalf and constitutes the legal, valid and binding obligation
of such Borrower, enforceable against such Borrower in accordance with its
terms.
(c) Ownership. Schedule 6.01(C) sets forth the ownership of each Borrower.
Each of the Borrowers has delivered to the Lenders true and complete copies of
its respective Governing Documents. Except as set forth on Schedule 6.01(C)(1),
there exist no other agreement or understanding (written or oral) affecting in
any material respect the relative rights, obligations or liabilities of the
general partners of each of the Borrowers other than said Governing Documents so
delivered and each of the general partners of each of the Borrowers are in
compliance in all material respects with all of the Governing Documents related
to its respective general partnership.
(d) No Conflict. The execution, delivery and perfor mance by each Borrower
and each of its general partners on behalf
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of such Borrower of each Loan Document to which such Borrower is a party and the
consummation of the transactions contemplated thereby do not and will not (i)
conflict with the Governing Documents of such Borrower or its general partners
(except as may be consented to by the general partners in accordance with the
provisions of the Governing Documents), (ii) violate any Requirements of Law or,
to the best knowledge of each Borrower, Contractual Obligation of such Borrower
or require the termi nation of such Contractual Obligation by such Borrower, the
consequences of which violation or termination, singly or in the aggregate, will
have or is reasonably likely to have a Material Adverse Effect or may subject
the Administrative Agent, any of the Lenders or any of the Issuing Banks to any
liability, (iii) constitute a tortious interference with any Contractual
Obligation of any Person, or (iv) result in or require the creation or
imposition of any Lien whatsoever upon any of the property or assets of such
Borrower, other than Liens contem plated by the Loan Documents.
(e) Governmental Consents. The execution, delivery and performance by each
Borrower of each Loan Document to which such Borrower is a party and the
consummation of the transactions contemplated thereby do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by any Governmental Authority, except filings necessary to
create or perfect security interests in the Collateral.
(f) Governmental Regulation. None of the Borrowers is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940,
or any other federal or state statute or regulation which limits its ability to
incur indebtedness or its ability to consummate the transactions contemplated by
the Loan Documents.
(g) Subsidiaries. None of the Borrowers has any Subsidiaries or interests
in any joint venture or partnership of any other Person other than as set forth
on Schedule 6.01(G).
(h) Financial Position. True and complete copies of the following
financial statements have been delivered to each of the Lenders: the audited
combined balance sheets of the Predecessor as at the end of fiscal year ended
December 31, 1995
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and the related combined statements of income, stockholders' equity and cash
flow of the Predecessor for such fiscal year then ended as set forth in the
Prospectus of Donna Karan International dated June 27, 1996. The foregoing
financial statements were prepared in conformity with GAAP, except as otherwise
noted therein, and fairly present the financial positions and the results of
operations and cash flows of the Predecessor for each of the periods covered
thereby as at the respective dates thereof. The Predecessor has no Accommodation
Obligation, con tingent liability or liability for any Taxes, long-term leases
or commitments, not reflected in the foregoing financial statements which will
have or is reasonably likely to have a Material Adverse Effect.
(i) Projections. The Borrowers have delivered to each Lender certain
projected financial statements of Donna Karan International and its Subsidiaries
dated March 7, 1996 which have been prepared using accounting principles
consistently applied and on a basis consistent with the Predecessor's past
practices.
(j) Litigation; Adverse Effects. Except as set forth in Schedules 6.01(J)
and 6.01(P), there is no action, suit, proceeding, investigation or arbitration
before or by any Governmental Authority or private arbitrator pending or, to the
knowledge of any Borrower, threatened against any Borrower or any of its
respective assets (i) challenging the validity or the enforceability of any of
the Loan Documents or transactions contemplated thereby or (ii) which will or is
reasonably likely to result in any Material Adverse Effect. There is no material
loss contingency within the meaning of GAAP which has not been reflected in the
combined financial statements of the Donna Karan Group. None of the Borrowers is
(A) in violation of any applicable Requirements of Law which violation will have
or is reasonably likely to have a Material Adverse Effect or (B) subject to, or
in default with respect to, any final judgment, writ, injunction, restraining
order or order of any nature, decree, rule or regulation of any court or
Governmental Authority which will have or is reasonably likely to have a
Material Adverse Effect.
(k) No Material Adverse Effect. Since March 31, 1996, as reflected in the
Pro Forma Combined Financial Statements contained in the Prospectus of Donna
Karan International dated
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June 27, 1996, there has occurred no event which has had or is reasonably likely
to have a Material Adverse Effect.
(l) Payment of Taxes. All tax returns and reports to be filed by Donna
Karan International and each of its Subsidiaries have been timely filed, and all
taxes, assessments, fees and other governmental charges shown on such returns
have been paid when due and payable, except such taxes, if any, as are reserved
against in accordance with GAAP, such taxes as are being contested in good faith
by appropriate proceedings or such taxes, the failure to make payment of which
when due and payable would not have, in the aggregate, a Material Adverse
Effect. None of the Borrowers has knowledge of any proposed tax assessment
against Donna Karan International or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect, which is not being actively contested
in good faith by such Person. All deficiencies which have been asserted against
Donna Karan International or any of its Subsidiaries as a result of any federal,
state, local or foreign tax examination for each taxable year in respect of
which an examination has been conducted by the IRS have been fully paid or
finally settled or are being contested in good faith, and no issue has been
raised in any such examination which, by application of similar principles,
reason ably can be expected to result in assertion of a material deficiency for
any other year not so examined which has not been reserved for in Donna Karan
International and its Subsidiaries consolidated financial statements to the
extent, if any, required by GAAP.
(m) Performance. None of the Borrowers has received notice or has actual
knowledge that (i) it is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Contractual Obligation applicable to it or (ii) any condition exists which, with
the giving of notice or the lapse of time or both, would constitute a default
with respect to any such Contractual Obligation, except, in each case, where
such default or defaults, singly or in the aggregate, will not have or is not
reasonably likely to have a Material Adverse Effect.
(n) Disclosure. The representations and warranties of each Borrower
contained in the Loan Documents and all certificates and other documents
delivered pursuant to the terms
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thereof, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. No
Borrower has intentionally withheld any fact from the Administrative Agent, the
Issuing Banks or the Lenders in regard to any matter which will have or is
reasonably likely to have a Material Adverse Effect.
(o) Requirements of Law. The Borrowers are in compliance with all
Requirements of Law applicable to them and their respective businesses, in each
case where the failure to so comply individually or in the aggregate will have
or is reason ably likely to have a Material Adverse Effect.
(p) Environmental Matters. To the best of each Borrower's knowledge, upon
inquiry and investigation completed by such Borrower as diligently and as
thoroughly as would reasonably be required to determine any facts relevant to
the represen tations set forth herein, and except as set forth in Schedule
6.01(P) hereto, (i) the operations of each Borrower comply in all material
respects with all applicable environmental, health and safety Requirements of
Law; (ii) each Borrower has obtained all environmental, health and safety
Permits necessary for its operations, and all such Permits are in good standing
and each Borrower is in material compliance with all terms and conditions of
such Permits; (iii) none of the Borrowers nor any of their operations are
subject to any order from or agreement with any Governmental Authority or
private party or any judicial or administrative proceeding or investigations
respecting any environmental, health or safety Requirements of Law; (iv) none of
the Borrowers nor its past or present Property or operations is subject to any
Remedial Action or other Liabilities and Costs greater than Five Hundred
Thousand Dollars ($500,000) for any single event or in the aggregate greater
than One Million Dollars ($1,000,000) arising from the Release or threatened
Release of a Contaminant into the environment; (v) none of the Borrowers has
filed any notice under any Requirement of Law indicating past or present
treatment, storage or disposal of a hazardous waste, as that term is defined
under 40 CFR Part 261 or any applicable state equivalent; (vi) none of the
Borrowers has filed any notice under applicable Requirement of Law reporting a
Release of a Contaminant into the environment; (vii) there is not now, nor has
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there ever been, on or in the Property of any Borrower: (A) any generation,
treatment, recycling, storage or disposal of any hazardous waste, as that term
is defined under 40 CFR Part 261 or any applicable state equivalent, (B) any
underground storage tanks or surface impoundments, (C) any asbestos-containing
material, or (D) any polychlorinated biphenyls (PCB's) used in hydraulic oils,
electrical transformers or other equipment; (viii) none of the Borrowers has
received any notice or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a Contaminant into
the environment; and (ix) no Environmental Lien has attached to any Property of
any Borrower.
(q) ERISA. Neither any Borrower nor any ERISA Affiliate maintains or
contributes to any Benefit Plan other than a Benefit Plan listed on Schedule
6.01(Q). Each Plan which is maintained or contributed to by a Borrower which is
intended to be a qualified plan has been determined by the IRS to be qualified
under Section 401(a), and each trust related to any such Plan has been so
determined to be exempt from federal income tax under Section 501(a) of the
Internal Revenue Code prior to its amendment by the Tax Reform Act of 1986, and
such Plan and trust are being operated in all material respects in compliance
with and will be timely amended as necessary in accordance with the Tax Reform
Act of 1986 and the Omnibus Budget Reconciliation Act of 1987 as interpreted by
the regulations promulgated thereunder, provided that certain operational
defects in the Donna Karan New York 401(k) Retirement Plan have recently been
discovered and have been the subject of an application to the IRS under its
Voluntary Compliance Resolution ("VCR") program filed on or about June 18, 1996;
and provided further that in connection with such filing under the VCR program,
the audited financial report for such plan for 1994 has been delayed pending
such VCR filing and whereas the annual report for such plan for 1994 has been
timely filed, it is expected that an amended annual report will be filed shortly
after the audited financial report containing a reference to the VCR filing is
completed. Neither any Borrower nor any ERISA Affiliate, to the extent such
ERISA Affiliate at any time has joint and several liability with any Borrower or
any Subsidiary maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA, other than a Multiemployer Plan,
which provides lifetime benefits to retirees other than as may be required by
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the Consolidated Omnibus Reconciliation Act of 1985, as amended and interpreted
by regulations promulgated thereunder. Each Borrower is in compliance in all
material respects with the responsibilities, obligations or duties imposed on it
by ERISA or regulations promulgated thereunder with respect to all Plans, except
the operational defects in, and delay in the 1994 audited financial report for,
the Donna Karan New York 401(k) Retirement Plan, as described in this Section
6.01(q). No material accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA and Section 412(a) of the Internal Revenue Code) exists in
respect to any Benefit Plan. Neither any Borrower nor, to any Borrower's
knowledge, any ERISA Affiliate nor any fiduciary of any Plan has engaged in a
nonexempt "prohibited transaction" described in Section 406 of ERISA or Section
4975 of the Internal Revenue Code. Neither any Borrower nor any ERISA Affiliate
nor any fiduciary of any Plan has taken any action which would constitute or
result in a Termination Event with respect to any Plan such that the actions
described in the preceding sentence or this sentence, or both, would result in a
Material Adverse Effect. Neither any Borrower nor any ERISA Affiliate has
incurred any material liability to the PBGC which remains outstanding other than
the liability to pay the PBGC insurance premiums for the current year. Schedule
B to the most recent annual report filed with the IRS with respect to each
Benefit Plan and furnished to the Administrative Agent is complete and accurate
in all material respects. Since the date of each such Schedule B, there has been
no material adverse change in the funding status or financial condition of the
Benefit Plan relating to such Schedule B which would result in a Material
Adverse Effect. Neither any Borrower nor any ERISA Affiliate has failed to make
any required installment under subsection (m) of Section 412 of the Internal
Revenue Code and any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment
which would in the aggregate have a Material Adverse Effect. Neither any
Borrower nor any ERISA Affiliate is required to provide security to a Benefit
Plan under Section 401(a)(29) of the Internal Revenue Code due to a Plan
amendment that results in an increase in current liability for the plan year.
The Borrowers and its ERISA Affiliates are current with respect to all
obligations they may have relating to any Multiemployer Plan to which they are
or have been obligated to contribute to. Neither any Borrower nor any ERISA
Affiliate has or is likely to incur
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any withdrawal liability with respect to any Multiemployer Plan which would have
a Material Adverse Effect.
(r) Labor Matters. Except as disclosed on Schedule 6.01(R), no Borrower is
a party to any labor contract. There are no strikes, lockouts or other disputes
relating to any collective bargaining or similar agreement to which any Borrower
is a party which would have or is reasonably likely to have a Material Adverse
Effect.
(s) Securities Activities. None of the Borrowers is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(t) Solvency. After giving effect to the receipt and application of the
Loans in accordance with the terms of this Agreement, each Borrower is Solvent.
(u) Patents, Trademarks, Permits, etc.; Government Approvals. (i) Except
as disclosed on Schedules 6.01(J) and 6.01(P), each Borrower owns, is licensed
or otherwise has the lawful right to use all permits and other governmental
approvals, patents, trademarks, trade names, copyrights, technology, know-how
and processes used in or necessary for the conduct of its business as currently
conducted which are material to its condition (financial or otherwise),
operations, performance and prospects, taken as a whole. There are no claims
pending or, to the best of such Borrower's knowledge, threatened that such
Borrower is infringing or otherwise adversely affecting the rights of any Person
with respect to such permits and other governmental approvals, patents,
trademarks, trade names, copy rights, technology, know-how and processes, except
for such claims and infringements as do not, in the aggregate, give rise to any
liability on the part of such Borrower which has or is reasonably likely to have
a Material Adverse Effect.
(ii) Except for the Limited Use License Agreement, the consummation of the
transactions contemplated by the Loan Documents will not impair any Borrower's
ownership of or rights under (or the license or other right to use, as the case
may be) any permits and governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how or processes in any
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manner which has or is reasonably likely to have a Material Adverse Effect.
(v) Assets and Properties. Each of the Borrowers has good and marketable
title to substantially all of its assets and property (tangible and intangible),
and all such assets and property are free and clear of all Liens except Liens
securing the Obligations and Liens permitted under Section 9.03. Substan tially
all of the assets and property owned by, leased to or used by each of the
Borrowers are in adequate operating condition and repair, ordinary wear and tear
excepted, are free and clear of any known defects except such defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations, and are able to serve the function for which they are currently
being used, except in each case where the failure of such asset to meet such
requirements would not have or is not reasonably likely to have a Material
Adverse Effect. Neither this Agreement nor any other Loan Document, nor any
transaction contemplated under any Loan Document, will affect any right, title
or interest of any Borrower in and to any of such assets in a manner that would
have or is reasonably likely to have a Material Adverse Effect.
(w) Insurance. Schedule 6.01(W) accurately sets forth as of the Closing
Date all insurance policies and programs currently in effect with respect to the
respective property and assets and business of each Borrower, specifying for
each such policy and program, (i) the amount thereof, (ii) the risks insured
against thereby, (iii) the name of the insurer and each insured party
thereunder, (iv) the policy or other identification number thereof, (v) the
expiration date thereof, (vi) the annual premium with respect thereto and (vii)
the current rating of such insurer by an established rating agency. Such
insurance policies and programs are in amounts which are consistent with past
practices.
(x) Material Adverse Agreements. After giving effect to this Agreement, no
Borrower is a party to or subject to any Contractual Obligation or other
restriction contained in its Governing Documents which has or is reasonably
likely to have a Material Adverse Effect.
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(y) Bank Accounts. Schedule 6.01(Y) sets forth, as of the Closing Date,
all of the bank accounts of Donna Karan International, each Borrower and each of
their respective Subsidiaries and the banks where funds are from time to time
deposited.
(z) Acceptances.
(i) Eligibility. Each Acceptance when created hereunder will be an
Eligible Acceptance.
(ii) Maturity of Drafts. The maturity of a Draft when drawn hereunder as
part of an Acceptance created hereunder will be reasonably commensurate with
the anticipated time required on usual credit terms of the quantity of goods
identified in the applicable Request for Acceptance as being financed by such
Draft.
(iii) Financing Amount. The aggregate face amount of the Draft relating to
the purchase of goods identified in each Request for Acceptance will not
exceed the Cost of such goods. No financing, acceptance or otherwise, other
than that provided under this Agreement has been or will be outstanding for
such goods; and no Acceptance created hereunder shall finance the goods
financed by an Acceptance created as part of another Acceptance hereunder or
by a Revolving Loan hereunder.
(iv) Approvals. All approvals required under applicable law and
regulations for the exportation or importation, as the case may be, and
payment of the purchase price and related costs of the goods identified in
each Request for Acceptance will have been obtained prior to delivery by the
Borrowers to the Issuing Bank of such Request for Acceptance.
ARTICLE VII
REPORTING COVENANTS
Each Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full
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of all of the Obligations unless the Requisite Lenders shall otherwise give
prior written consent thereto:
7.01. Financial Statements. Donna Karan International, each Borrower and
each of their respective Subsidiaries shall maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of consolidated financial statements in conformity with GAAP,
and each of the financial statements described below shall be prepared from such
system and records. The Borrowers shall deliver or cause to be delivered to the
Administrative Agent and the Lenders:
(a) Monthly Reports. As soon as practicable, and in any event within
twenty-five (25) days after the end of each fiscal month in each fiscal year,
the consolidated balance sheets of Donna Karan International and its
Subsidiaries as at the end of such fiscal month (and showing the same period
from the previous fiscal year) and the related consolidated statements of income
and cash flow of Donna Karan International and its Subsidiaries for such fiscal
month and the related consolidating statements of income of each Borrower for
such fiscal month and for the period commencing on the first day of such fiscal
year and ending the last day of such fiscal month (and showing the same periods
from the previous fiscal year), certified by the chief financial officer,
controller or other designated executive officer (acceptable to the
Administrative Agent) of Donna Karan International as fairly presenting the
consolidated financial position of Donna Karan International and its
Subsidiaries as at the dates indicated and the results of their operations and
cash flow for the fiscal months indicated in accordance with GAAP, subject to
normal year end adjustments.
(b) Quarterly Reports. As soon as practicable, and in any event within
forty-five (45) days after the end of each fiscal quarter in each fiscal year,
the consolidated balance sheets of Donna Karan International and its
Subsidiaries as at the end of such period, the related consolidated statements
of income and cash flow of Donna Karan International and its Subsidiaries and
the related consolidating statements of income of each Borrower for such fiscal
quarter, certified by the chief financial officer, controller or other
designated executive officer (acceptable to the Administrative Agent) of Donna
Karan
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International as fairly presenting the consolidated and consolidating financial
position of Donna Karan International as at the dates indicated and the results
of their operations and cash flow for the fiscal quarters indicated in
accordance with GAAP, subject to normal year end adjustments.
(c) Annual Reports. As soon as practicable, and in any event within ninety
(90) days after the end of each fiscal year, (i) the audited consolidated
balance sheets of Donna Karan International and its Subsidiaries as of the end
of such fiscal year, the related audited consolidated statements of income,
stockholders' equity and cash flow of Donna Karan International and its
Subsidiaries and the related consolidating statements of income of each Borrower
for such fiscal year, and (ii) a report thereon of Ernst & Young or other
independent certified public accountants acceptable to the Administrative Agent,
which report shall be unqualified and shall state that such financial statements
fairly present the consolidated and consolidating financial position of Donna
Karan International and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and that the
examination by such accountants in connection with such consolidated and
consolidating financial statements has been made in accordance with generally
accepted auditing standards.
(d) Officer's Certificate. Together with each delivery of any financial
statement pursuant to paragraphs (a), (b) and (c) of this Section 7.01, (i) an
Officer's Certificate substantially in the form of Exhibit I attached hereto and
made a part hereof, stating that the executive officer signatory thereto has
reviewed the terms of the Loan Documents, and has made, or caused to be made
under his supervision, a review in reasonable detail of the transactions and
consolidated and consolidating (where applicable) financial condition of Donna
Karan International and its Subsidiaries during the accounting period covered by
such financial statements, that such review has not disclosed the existence
during or at the end of such accounting period, and that such officer does not
have knowledge of the existence as at the date of such Officer's Certificate, of
any condition or event which constitutes an Event of Default or Default, or, if
any such condition or event existed or exists, specifying the nature and period
of existence thereof and what
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action the Borrowers have taken, are taking and propose to take with respect
thereto and (ii) a certificate substantially in the form of Exhibit J attached
hereto (the "Compliance Certificate"), signed by Donna Karan International's
chief financial officer or controller, setting forth calculations (with such
specificity as the Lenders may reasonably request) for the period then ended
which demonstrate compliance, when applicable, with the provisions of Article IX
and Article X.
(e) Budgets; Business Plans; Financial Projections. As soon as practicable
and in any event not later than thirty (30) days after the beginning of each
fiscal year of Donna Karan International for each Fiscal Years (i) a monthly
budget for such Fiscal Year; (ii) 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 (iii) a consolidated and
consolidating plan and financial forecast, prepared in accordance with Donna
Karan International's normal accounting procedures applied on a consistent
basis, for each succeeding Fiscal Year until the Commitment Termination Date,
including, without limitation, (A) a forecasted consolidated balance sheet, and
the related consolidated statements of income, stockholders' equity and cash
flows of Donna 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, (B) forecasted consolidated balance sheets, and
the related consolidated statements of income, stockholders' equity and cash
flows of Donna 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, (C) the amount of forecasted Capital Expenditures for such
Fiscal Year and (D) forecasted compliance with the provisions of Article X.
7.02. Borrowing Base Certificate. (a) In the event that the Borrowers do
not comply with the prepayment requirements set forth in Section 3.01(b)(iv)
during any Clean-Down Period, the Borrowers shall provide the Administrative
Agent and each Lender with a Borrowing Base Certificate, certified as being true
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and correct by the Borrowers' chief financial officer or controller, on the day
which is the 45th day prior to the end of such Clean-Down Period and thereafter
on the seventh Business Day following the last day of each fiscal month, or more
frequently if requested by the Administrative Agent, until such time as the
Borrowers have complied with the prepayment requirements set forth in Section
3.01(b)(iv). 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 fiscal month. 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 monthly summary aging of Receivables, a
monthly schedule 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.
(b) At least once each fiscal month (and more often if so requested by the
Administrative Agent) during the period that a Borrowing Base Certificate is
required to be delivered pursuant to Section 7.02(a), provide the Administrative
Agent and the Lenders with a report (a "Monthly Report"), dated the last day of
such fiscal month, and certified by the Borrowers' chief financial officer or
controller, which Monthly Report shall include the following information for the
Borrowers, and shall cover the period since the last prior Monthly Report
delivered to the Administrative Agent:
(i) A summary aging of Receivables and Eligible Receivables specifying the
Receivables and Eligible Receivables created or acquired during the prior
month;
(ii) A schedule of all Eligible Inventory that has become ineligible,
specifying the applicable category of ineligibility;
(iii) A list of all Receivables, Inventory, Equipment and Real Property
which do not satisfy any warranty, repre sentation or covenant contained in
this Agreement or any other Loan Document and an explanation thereof;
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(iv) A schedule listing all material disputes and claims arising, or
claims, offsets or counterclaims asserted with respect to, Receivables, any
material delays or expected delays in the Borrowers' performance of any of
its obligations to any account debtor, and all adverse information relating
to the financial condition of any account debtor which may reasonably be
expected to impair the collectability of a material portion of the
Receivables;
(v) An aging of accounts payable, if so requested by any Lender; and
(vi) A list of all new locations, offices, or places of business opened by
any Borrower or at which any Borrower has located any of the Collateral, its
operations, assets, property or books and records, or to which it has
relocated its headquarters, and a description of the Collateral or other
property located thereon, and a list of any locations, offices or places of
business closed or abandoned by any Borrower.
Each fiscal month's Monthly Report shall be delivered to the Administrative
Agent within twenty-five (25) days after the end of such month.
7.03. Other Financial Information. (a) Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments with respect
to (i) the Collateral and (ii) each Borrower's business, condition (financial or
other wise), operations, performance, properties or prospects as the
Administrative Agent or any Lender may, from time to time, reasonably request.
Each Borrower hereby authorizes the Administrative Agent, each Lender and their
respective representatives to communicate directly with the accountants and
authorizes the accountants to disclose to the Administrative Agent, each Lender
and their respective representatives any and all financial statements and other
information of any kind, including copies of any management letter or the
substance of any oral information, that such accountants may have with respect
to the Collateral or any Borrower's condition (financial or otherwise),
operations, properties, performance and prospects. The Administrative Agent, the
Lenders and such representatives shall treat any non-public information so
obtained as
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confidential. The Borrowers, on or before the Closing Date, shall deliver a
letter addressed to the accountants instructing them to disclose such
information in compliance with this Section 7.03(a).
(b) Copies of all financial statements, reports and notices, if any, sent
or made available generally by any Borrower to the holders of its publicly-held
Securities or to a trustee under any indenture or filed with the Commission, and
of all press releases made available generally by any Borrower to the public
concerning material developments in such Borrower's business.
(c) Copies of any management reports delivered to any Borrower or to any
officer or employee thereof by the accountants in connection with the financial
statements delivered pursuant to Section 7.01.
7.04. Events of Default. Promptly upon any Borrower obtaining knowledge
(i) of any condition or event which constitutes an Event of Default or Default,
or becoming aware that any Lender or the Administrative Agent has given any
notice with respect to a claimed Event of Default or Default under this
Agreement, (ii) that any Person has given any notice to any Borrower or taken
any other action with respect to a claimed default or event or condition of the
type referred to in Section 11.01(e) or (iii) of any condition or event which
has or is reasonably likely to have a Material Adverse Effect or affect the
value of, or the Administrative Agent's interest in, the Collateral in any
material respect, the Borrowers shall deliver to the Administrative Agent and
the Lenders an Officer's Certificate specifying (A) the nature and period of
existence of any such claimed default, Event of Default, Default, condition or
event, (B) the notice given or action taken by such Person in connection
therewith and (C) what action the Borrowers have taken, are taking and proposes
to take with respect thereto.
7.05. Lawsuits. (i) Promptly upon any Borrower obtaining knowledge of the
institution of, or written threat of, (A) any action, suit, proceeding or
arbitration against or affecting any Borrower or any asset of such Borrower not
previously disclosed pursuant to Schedule 6.01(J) or Schedule 6.01(P) involving
money or property valued in excess of One
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Million Dollars ($1,000,000) or any actions, suits, proceedings or arbitration
which in the aggregate involve money or property valued in excess of Two Million
Dollars ($2,000,000), (B) any investigation or proceeding before or by any
Governmental Authority, the effect of which is reasonably likely to limit,
prohibit or restrict materially the manner in which any Borrower currently
conducts its business or to declare any substance contained in such products
manufactured or distributed by it to be dangerous, such Borrower shall give
written notice thereof to the Administrative Agent and the Lenders and provide
such other information as may be reasonably available to enable the each Lender
and the Administrative Agent and its counsel to evaluate such matters except, in
each case, where the same is fully covered by insurance (other than applicable
deductible) or (C) any Forfeiture Proceeding; (ii) as soon as practicable and in
any event within forty-five (45) days after the end of each fiscal quarter of
the Borrowers, the Borrowers shall provide the Administrative Agent and the
Lenders with a litigation status report covering the institution of, or written
threat of, any action, suit, proceeding, governmental investigation or arbitra
tion reported pursuant to clause (i)(A) and (B) above and shall provide such
other information at such time as may be reasonably available to enable each
Lender and the Administrative Agent and its counsel to evaluate such matters;
and (iii) in addition to the requirements set forth in clauses (i) and (ii) of
this Sec tion 7.05, the Borrowers upon request of the Administrative Agent or
the Requisite Lenders shall promptly give written notice of the status of any
action, suit, proceeding, governmental investi gation or arbitration covered by
a report delivered pursuant to clause (i) or (ii) above and provide such other
information as may be reasonably available to it to enable each Lender and the
Administrative Agent and its counsel to evaluate such matters.
7.06. Insurance. As soon as practicable and in any event by the last day
of November in each fiscal year, the Borrowers shall deliver to the
Administrative Agent and the Lenders (i) an updated Schedule 6.01(W) in form and
substance reasonably satisfactory to the Administrative Agent and the Lenders
outlining all insurance policies and programs currently in effect with respect
to the respective property and assets and business of the Borrowers, insurance
coverage maintained as of the date of such report by the Borrowers and the loss
payment
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provisions of such coverage and (ii) evidence that all premiums with respect to
such coverage have been paid when due.
7.07. ERISA Notices.
(i) As soon as possible, and in any event within twenty (20) days after
either a Borrower or an ERISA Affiliate knows or has reason to know that a
Termination Event has occurred, a written statement of the chief financial
officer or controller of such Borrower describing such Termination Event and
the action, if any, which such Borrower or such ERISA Affiliate has taken, is
taking or proposes to take, with respect thereto, and, when known, any action
taken or threatened by the IRS, the DOL or the PBGC with respect thereto;
(ii) as soon as possible, and in any event within fifteen (15) days, after
either a Borrower or, to the knowledge of such Borrower, an ERISA Affiliate
knows or has reason to know that a non-exempt prohibited transaction (defined
in Section 406 of ERISA and Section 4975 of the Code) has occurred, a
statement of the chief financial officer or controller of such Borrower
describing such transaction;
(iii) within ten (10) days after the filing thereof with the DOL, the IRS
or the PBGC, copies of each annual report, including Schedule B thereto,
filed with respect to each Benefit Plan;
(iv) within ten (10) days after the filing thereof with the IRS, a copy of
each funding waiver request filed with respect to any Benefit Plan and all
communications received by either a Borrower or an ERISA Affiliate with
respect to such request;
(v) within ten (10) days after the first to occur of an amendment of any
existing Benefit Plan which will result in an increase in the benefits under
such Benefit Plan or a notification of any such increase, or the
establishment of any new Benefit Plan or the commencement of contributions to
any Benefit Plan to
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which either a Borrower or an ERISA Affiliate was not previously
contributing, a copy of said amendment, notification or Benefit Plan;
(vi) promptly upon, and in any event within ten (10) days after, receipt
by a Borrower or an ERISA Affiliate of a notice of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice;
(vii) promptly upon, and in any event within ten (10) days after, receipt
by either a Borrower or an ERISA Affiliate of an unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section
401(a) of the Code, a copy of said determination letter, if such
disqualification would have a Material Adverse Effect on any Borrower or any
Subsidiary;
(viii) promptly upon, and in any event within ten (10) days after receipt
by a Borrower of a notice from a Multiemployer Plan regarding the imposition
of withdrawal liability, a copy of said notice; and
(ix) promptly upon, and in any event within fifteen (15) days after, any
Borrower fails to make a required installment under subsection (m) of Section
412 of the Code or any other payment required under Section 412 of the Code
on or before the due date for such installment or payment, a notification of
such failure, if such failure could result in either the imposition of a Lien
under said Section 412 or otherwise have a Material Adverse Effect on any
Borrower.
7.08. Environmental Notices. Each Borrower shall notify the Administrative
Agent and each Lender, in writing, promptly, and in any event within twenty
(20) days after such Borrower's learning thereof, of any: (i) written notice
or claim to the effect that a Borrower is or may be liable to any Person as a
result of the Release or threatened Release of any Contaminant into the
environment; (ii) written notice that any
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Borrower or any Subsidiary is subject to investigation by any Governmental
Authority evaluating whether any Remedial Action is needed to respond to the
Release or threatened Release of any Contaminant into the environment; (iii)
written notice that any Property of any Borrower is subject to an Environmental
Lien; (iv) written notice of violation to any Borrower or awareness by any
Borrower of a condition which might reasonably result in a notice of violation
of any environmental, health or safety Requirement of Law, which could have a
Material Adverse Effect on any Borrower; (v) commencement or written threat of
any judicial or administrative proceeding alleging a violation of any
environmental, health or safety Requirement of Law; (vi) written notice from a
Governmental Authority of any changes to any existing environmental, health or
safety Requirement of Law that could have a Material Adverse Effect on the
operations of any Borrower; or (vii) any proposed acquisition of stock, assets,
real estate or leasing of property, or any other action by any Borrower that
could subject such Borrower to environmental, health or safety Liabilities and
Costs that could have a Material Adverse Effect. For purposes of clauses (i),
(ii) and (iii), written notice shall include other non-written communications
given to an agent or employee of a Borrower with direct or indirect supervisory
responsibility with respect to the activity, if any, which is the subject of
such communication, if such activity could have a Material Adverse Effect. With
respect to clauses (i) through (vii) above, such notice shall be required only
if (A) the liability or potential liability, or with respect to clause (vi), the
cost or potential cost of compliance, which is the subject matter of the notice
is likely to exceed Five Hundred Thousand Dollars ($500,000), or if (B) such
liability or potential liability or cost of compliance when added to other
liabilities of the Borrowers of the kind referred to in clauses (i) through
(vii) above is likely to exceed One Million Dollars ($1,000,000).
7.09. Labor Matters. Each Borrower shall notify the Administrative Agent
and the Lenders in writing, promptly, but in any event with ten (10) days after
learning thereof, of (i) any material labor dispute to which any Borrower may
become a party, any strikes, lockouts or other disputes relating to such
Borrower's plants and other facilities and (ii) any material liability incurred
with respect to the closing of any plant or other facility of any Borrower.
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7.10. Other Information. Promptly upon receiving a request therefor from
the Administrative Agent or the Requisite Lenders, the Borrowers shall prepare
and deliver to the Administrative Agent and the Lenders such other information
with respect to any Borrower or the Collateral, including, without limitation,
schedules identifying and describing the Collateral and any dispositions
thereof, as from time to time may be reasonably requested by the Administrative
Agent or the Requisite Lenders.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
unless the Requisite Lenders shall otherwise give prior written consent:
8.01. Existence, etc. Each Borrower shall at all times maintain its
existence and preserve and keep, or cause to be preserved and kept, in full
force and effect its rights and franchises material to its businesses except
where the loss or termination of such rights and franchises does not have or is
not likely to have a Material Adverse Effect.
8.02. Powers; Conduct of Business. Each Borrower shall qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified except for those jurisdictions where
failure to so qualify does not have or is not reasonably likely to have a
Material Adverse Effect.
8.03. Compliance with Laws, etc. Each Borrower shall, (a) comply with all
Requirements of Law and all restrictive covenants affecting such Person or the
business, property, assets or operations of such Person, and (b) obtain as
needed all Permits necessary for its operations and maintain such Permits in
good standing except in the case where noncompliance with either clause (a) or
(b) above does not have or is not reasonably likely to have a Material Adverse
Effect.
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8.04. Payment of Taxes and Claims. Each Borrower shall pay (a) all taxes,
assessments and other governmental charges imposed upon it or on any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, the failure to make
payment of which will have or is reasonably likely to have a Material Adverse
Effect, and (b) all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums, material in the aggregate to such
Borrower which have become due and payable and which by law have or may become a
Lien upon any of such Borrower's properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto; provided, however,
that no such taxes, assessments, and governmental charges referred to in clause
(a) above or claims referred to in clause (b) above need be paid if being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if adequate reserves shall have been set aside therefor
in accordance with GAAP.
8.05. Insurance. (a) Each Borrower shall maintain for itself in full force
and effect the insurance policies and programs listed on Schedule 6.01(W) or
substantially similar policies and programs or other policies and programs in
accordance with past practices of the Borrowers. All such policies and programs
shall be maintained with insurers reasonably acceptable to the Administrative
Agent. Each certificate and policy relating to property damage, machinery and/or
business interruption coverage shall contain an endorsement, in form and
substance acceptable to the Administrative Agent, showing loss payable to the
Administrative Agent, for the ratable benefit of the Lenders, and, if required
by the Administrative Agent, naming the Administrative Agent as an additional
insured under such policy. Each certificate and policy relating to coverages
other than the foregoing shall, if required by the Administrative Agent, contain
an endorsement naming the Administrative Agent as an additional insured under
such policy. Such endorsement or an independent instrument furnished to the
Administrative Agent shall provide that the insurance companies will give the
Administrative Agent at least thirty (30) days' written notice before any such
policy or policies of insurance shall be altered adversely to the interests of
the Administrative Agent and the Lenders or cancelled and that no act, whether
willful or negligent, or default of any Borrower
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or any other Person shall affect the right of the Administrative Agent to
recover under such policy or policies of insurance in case of loss or damage. In
the event any Borrower, at any time or times hereafter shall fail to obtain or
maintain any of the policies or insurance required herein or to pay any premium
in whole or in part relating thereto, then the Administrative Agent, without
waiving or releasing any obligations or resulting Event of Default hereunder,
may at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which the Administrative Agent deems
advisable. The Administrative Agent agrees to provide the Borrowers with
contemporaneous notice of any action taken by the Administrative Agent pursuant
to the immediately preceding sentence. All sums so disbursed by the
Administrative Agent shall be part of the Obligations hereunder, payable on
demand.
(b) Each Borrower hereby directs all insurers under policies of property
damage, machinery and business interruption insurance to pay all proceeds
payable thereunder directly to the Administrative Agent and in no case to such
Borrower and the Administrative Agent jointly. Each Borrower irrevocably makes,
constitutes and appoints the Administrative Agent and any Person whom the
Administrative Agent may from time to time designate as such Borrower's true and
lawful attorney (and agent-in-fact) for the purpose of endorsing the name of
such Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance subject to the provisions
of the following sentence with respect to the making, settling and adjusting of
claims. Each Borrower will appoint or designate a person, with the approval of
the Administrative Agent, to settle or adjust such claims individually not in
excess of One Million Dollars ($1,000,000) per occurrence or in the aggregate
Two Million Dollars ($2,000,000) during any fiscal year, and in the event such
claims, individually or in the aggregate, have or are likely to have a Material
Adverse Effect, such settlements and adjustments thereof which shall be made
with the Administrative Agent's consent, which consent shall not be unreasonably
withheld. The Administrative Agent shall apply the net proceeds of any such
insurance claim or settlement received by the Administrative Agent to the
Obligations, after deducting any expenses and fees
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incurred by the Administrative Agent in the settlement and collection thereof,
as follows: (i) if no Default or Event of Default then exists, the
Administrative Agent shall apply such net proceeds to the outstanding balance of
the Loans or (ii) if a Default or Event of Default then exists, the
Administrative Agent shall apply such net proceeds to the Obligations in
accordance with Section 3.02.
8.06. Inspection of Property; Books and Records; Discussions. Each
Borrower shall permit any authorized representative(s) designated by either the
Administrative Agent or any Lender to visit and inspect any of the assets of
such Borrower, to examine, audit, check and make copies of their respective
financial and accounting records, books, journals, orders, receipts and any
correspondence and other data relating to their respective businesses or the
transactions contemplated by the Loan Documents (including, without limitation,
in connection with environmental compliance, hazard or liability), and to
discuss their affairs, finances and accounts with their officers and independent
certified public accountants, all upon reasonable notice and at such reasonable
times during normal business hours, as often as may be reasonably requested.
Each such visitation and inspection (i) by or on behalf of any Lender shall be
at such Lender's expense and (ii) by or on behalf of the Administrative Agent
shall be at the Borrowers' expense (it is anticipated that Administrative Agent
will require at least two such visitation and inspections annually). The
Administrative Agent shall cause its representatives to visit and inspect
certain assets of the Borrowers and to examine and audit the books and records
of the Borrowers at least twice in each Fiscal Year. The Borrowers shall keep
and maintain in all material respects proper books of record and account in
which entries in conformity with GAAP shall be made of all dealings and
transactions in relation to their respective businesses and activities,
including, without limitation, transactions and other dealings with respect to
the Collateral. If an Event of Default has occurred and is continuing, the
Borrowers, upon the Administrative Agent's request, shall turn over any such
records to the Administrative Agent or its representatives.
8.07. Tax Identification Numbers. Each Borrower shall provide the
Administrative Agent in writing the tax
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identification numbers of such Borrower promptly upon the availability thereof.
8.08. ERISA Compliance. Each Borrower shall, and shall cause each of its
ERISA Affiliates to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all other applicable
laws, and the regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
8.09. Maintenance of Property. Each Borrower shall maintain in all
material respects all of its owned and leased property in good, safe and
insurable condition and repair, and not permit, commit or suffer any waste
(except in the ordinary course of business) or abandonment of any such property
and from time to time shall make or cause to be made all material repairs,
renewal and replacements thereof; provided, however, that such property may be
altered or renovated in the ordinary course of business.
8.10. Condemnation. Immediately upon learning of the institution of any
proceeding for the condemnation or other tak ing of any of the owned or leased
Real Property of any Borrower, a Borrower shall notify the Administrative Agent
of the pendency of such proceeding, and permit the Administrative Agent to
participate in any such proceeding, and from time to time will deliver to the
Administrative Agent all instruments reasonably requested by the Administrative
Agent to permit such participation.
8.11. Maintenance of Licenses, Permits, etc. The Borrowers shall maintain
in full force and effect all licenses, permits, governmental approvals,
franchises, authorizations or other rights necessary for the operation of its
business, except where the failure to obtain any of the foregoing would not have
or is not reasonably likely to have a Material Adverse Effect; and notify the
Administrative Agent in writing, promptly after learning thereof, of the
suspension, cancellation, revocation or discontinuance of or of any pending or
threatened action or proceeding seeking to suspend, cancel, revoke or
discontinue any such license, permit, governmental approval, franchise authoriza
tion or right.
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8.12. Post Closing Matters. The Borrowers shall cause each of the
requirements set forth on Schedule 8.13 to be satisfied on or before the date
set forth opposite such requirement.
ARTICLE IX
NEGATIVE COVENANTS
Each Borrower covenants and agrees that it shall comply with the following
covenants so long as any Commitments are out standing and thereafter until
payment in full of all of the Obligations unless the Requisite Lenders shall
otherwise give prior written consent:
9.01. Indebtedness. No member of the Donna Karan Group shall, directly or
indirectly, create, incur, assume or otherwise become or remain liable with
respect to any Indebtedness, except:
(i) the Obligations;
(ii) trade payables in the ordinary course of business;
(iii) Permitted Existing Indebtedness;
(iv) to the extent permitted by Section 9.14, Capital Leases and purchase
money Indebtedness incurred by any member of the Donna Karan Group to finance
the acquisition of fixed assets, and Indebtedness incurred by such member to
refinance such Capital Leases and purchase money Indebtedness, in an
aggregate amount not to exceed $5,000,000 at any time, provided that
additional Capital Leases and purchase money Indebtedness may be incurred by
any member of the Donna Karan Group to finance the acquisition of fixed
assets so long as the sum of the aggregate amount of Capital Leases and such
Indebtedness plus the aggregate amount of Indebtedness permitted by Section
9.01(vii) plus the aggregate amount of Accommodation Obligations permitted by
Section 9.05(iii) does not exceed Fifty Million Dollars ($50,000,000) at any
time;
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(v) subordinated indebtedness incurred by The Donna Karan Company owing to
DSTF Japan Company and evidenced by subordinated notes, substantially in the
form of Exhibit B attached hereto, which notes shall have been pledged to the
Administrative Agent;
(vi) Letters of Credit issued on behalf of Donna Karan Japan K.K. for the
account of The Donna Karan Company in an aggregate face amount not to exceed
$5,000,000 at any one time outstanding; and
(vii) in addition to the Indebtedness permitted by clauses (i) through
(vi) above, unsecured Indebtedness incurred in connection with reasonable and
appropriate corporate purposes, provided that the sum of the aggregate amount
of such Indebtedness plus the aggregate amount of additional Capital Lease
and purchase money Indebtedness permitted under the proviso in Section
9.01(iv) plus the aggregate amount of Accommodation Obligations permitted by
Section 9.05(iii) does not exceed Fifty Million Dollars ($50,000,000) at any
time.
9.02. Sales of Assets. No member of the Donna Karan Group shall sell,
assign, transfer, lease, license, convey or otherwise dispose of any assets,
whether now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so, except:
(i) the sale of Inventory in the ordinary course of business;
(ii) the disposition of Equipment if such Equipment is obsolete or no
longer useful in the ordinary course of such Borrower's business;
(iii) sales of assets with an aggregate market value not in excess of Two
Million Dollars ($2,000,000) in any rolling twelve (12) month period for all
Borrowers;
(iv) sub-licensing of the trademarks pursuant to the terms of the License
Agreement in connection with any business in which a Borrower is engaged at
such time, together with the sale of any inventory in connection with
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such sub-licensing, or the sale of a Subsidiary of Donna Karan International
(other than Donna Karan Studio); provided that (A) the business in connection
with such sub- licensing or such Subsidiary did not generate revenues for the
twelve month period ending on the last day of the immediately preceding
fiscal quarter greater than the lesser of (I) 10% of the revenues for Donna
Karan International and its Subsidiaries on a consolidated basis for such
period and (II) $60,000,000 and (B) the consideration for such sub- licensing
and sale of inventory or for such sale of a Subsidiary is equivalent to the
fair market value thereof;
(v) the sub-licensing of the trademarks pursuant to the terms of the
License Agreement in any of the following businesses prior to the end of
1996: jeanswear and related apparel, swimwear, DKNY underwear, watches and
home furnishings; together with the sales of inventory in connection with any
such sub-licensing; and
(vi) the sub-licensing of the trademarks pursuant to the terms of the
License Agreement in connection with any business in which no Borrower
participates at such time, together with the sale of any inventory in
connection with such sub-licensing, provided that the consideration for such
sub-licensing and sale of inventory is equivalent to the fair market value
thereof.
9.03. Liens. No member of the Donna Karan Group shall, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with respect
to any of their respective properties or assets, except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens;
(iv) purchase money Liens granted by any member of the Donna Karan Group
(including the interest of a lessor under a Capital Lease) securing
Indebtedness permitted under Section 9.01(iv) and limited in each
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case to the property purchased or subject to such lease;
(v) Liens set forth in Section 2(c) of the Agreement dated as of March 29,
1995, as amended to the date hereof, among Hotel Properties Limited, Kendale
Investments PTE LTD., The Donna Karan Company, Donna Karan Japan K.K., DSTF
Japan Company, and Donna Karan Studio; and
(vi) judgement Liens against any Loan Party or any of its assets provided
that the amount of any such judgement Lien is not in excess of Two Million
Dollars ($2,000,000) and such judgment Lien is discharged, vacated, bonded or
stayed within thirty (30) days of the entry thereof.
9.04. Investments. No member of the Donna Karan Group shall, directly or
indirectly, make or own any Investment, except:
(i) Investments in Cash Equivalents;
(ii) subordinated loans made by DSTF Japan Company to The Donna Karan
Company evidenced by subordinated notes, substantially in the form of Exhibit
B attached hereto, which notes shall have been pledged to the Administrative
Agent;
(iii) the thirty percent (30%) equity interest of The Donna Karan Company
in Donna Karan Japan K.K. and other cash Investments by The Donna Karan
Company in Donna Karan Japan K.K. so long as such cash Investments do not
exceed $1,000,000 in any Fiscal Year; and
(iv) other Investments, provided that the sum of the aggregate amount of
such other Investments and the aggregate amount of Capital Expenditures made
pursuant to Section 9.14 do not exceed the amount permitted pursuant to
Section 9.14.
9.05. Accommodation Obligations. No member of the Donna Karan Group shall,
directly or indirectly, create or become or be liable with respect to any
Accommodation Obligation, except:
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(i) Guaranties and recourse Obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of business;
(ii) Accommodation Obligations in respect of the Letters of Credit issued
on behalf of Donna Karan Japan K.K. for the account of The Donna Karan
Company to the extent permitted under Section 9.01(vi); and
(iii) In addition to the Accommodation Obligations permitted by clauses
(i) and (ii), Accommodation Obligations incurred in connection with
reasonable and appropriate corporate purposes, provided that the sum of the
aggregate amount of such Accommodation Obligations plus the aggregate amount
of Indebtedness permitted by Section 9.01(vii) plus the aggregate amount of
additional Capital Lease and purchase money Indebtedness permitted under the
proviso in Section 9.01(iv)does not exceed Fifty Million Dollars
($50,000,000) at any time.
9.06. Restricted Junior Payments. None of the Borrowers shall declare or
make any Restricted Junior Payment, except:
(i) the amounts sufficient for Donna Karan International and its
Subsidiaries to pay their Federal, foreign, state and local taxes (and
interest and penalties, if any, relating thereto) and estimates of such
amounts;
(ii) the costs and expenses incurred by Donna Karan International relating
to the businesses of the Borrowers in the ordinary course of business
(including, without limitation, the costs and expenses of the shareholders
under the Registration Rights Agreement);
(iii) the costs and expenses incurred by Donna Karan International;
(iv) the costs and expenses relating to the Public Equity Offering which
were previously disclosed to the Administrative Agent and not paid at the
time the Public Equity Offering was consummated;
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(v) the amount sufficient to pay the obligations of Donna Karan
International under Section 4.4 of the Agreement of Contribution; and
(vi) amounts sufficient to pay dividends declared by Donna Karan
International on its Common Stock or repurchases by Donna Karan International
of its Common Stock provided that:
(A) no Default or Event of Default has occurred and is continuing at
such time;
(B) the Borrowers have delivered to the Agent the Clean-Down
Forecast and the Clean-Down Amount shall permanently be reduced to $0;
(C) during any rolling twelve month period, the aggregate amount of
such dividend payments do not exceed the lesser of (I) 25% of Net Income
as of the last day of the immediately preceding fiscal quarter for the
twelve month period then ended and (II) $10,000,000; and
(D) the aggregate amount of such repurchases does not exceed
$40,000,000 in the aggregate for all such repurchases.
9.07. Change in Nature of Business. No member of the Donna Karan Group
shall make any material change in the nature or conduct of their respective
businesses, in each case as carried on at the date hereof.
9.08. Transactions with Affiliates. No member of the Donna Karan Group
shall, directly or indirectly, enter into or permit to exist any transaction
with any Affiliate of any Borrower on terms that are less favorable to such
Borrower than those that might be obtained in an arm's length transaction at the
time from Persons who are not an Affiliate; provided, however, the Borrower
shall not be permitted to pay any management fee or consulting fee or transfer
any assets to any Partner or an Affiliate of any Partner, except:
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(i) any transaction expressly permitted by Section 9.06;
(ii) employment contracts and increases in compensation and benefits for
officers and employees of any Borrower which are customary in the industry or
as approved by the Board of Directors of Donna Karan International;
(iii) transactions among the members of the Donna Karan Group, provided
that such transactions are in the ordinary course of such members'
businesses;
(iv) the grant of a license and the payment of royalties by one Borrower
to another Borrower provided such grant is in the ordinary course of such
Borrower's business and in compliance with the terms of the License
Agreement;
(v) payments of taxes required to be paid to the appropriate Japanese
taxing authority under Japanese law by Donna Karan Japan K.K. on behalf of
DSTF Japan Company;
(vi) the agreements and transactions set forth in the License Agreement;
(vii) the on-going royalty fees payable to Gabrielle Studio, Inc. pursuant
to the terms of the License Agreement;
(viii) the transactions set forth in the Agreement dated as of March 29,
1995 among Hotel Properties Limited, Kendale Investments PTE LTD., The Donna
Karan Company, Donna Karan Japan K.K., DSTF Japan Company, and Donna Karan
Studio; and
(ix) any transaction between any Borrower or any Subsidiary thereof and a
retail store exclusively carrying Donna Karan products pursuant to the terms
of any joint venture agreement, the form and substance of which are
satisfactory to the Administrative Agent.
9.09. Restriction on Fundamental Changes. (a) No member of the Donna Karan
Group shall enter into any merger or consolidation, or liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), or convey, lease, sell,
transfer or otherwise dispose of, in one transaction or series of trans-
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actions, all or substantially all of such member's business or assets, whether
now or hereafter acquired.
(b) No member of the Donna Karan Group shall (i) acquire by purchase or
otherwise all or substantially all of the business property or assets of, or
stock or other evidence of beneficial ownership of, any Person or (ii) create
any new Subsidiary, provided, however, that a member of the Donna Karan Group
may create a new Subsidiary if (i) all the partnership interests and/or equity
interests and assets of such new Subsidiary are pledged to the Administrative
Agent, on terms and conditions satisfactory to the Administrative Agent; (ii)
such new Subsidiary guarantees the Obligations on terms and conditions
satisfactory to the Agent; (iii) no Event of Default shall then have occurred
and be continuing; and (iv) all documentation (including, without limitation,
security agreements, guarantees, pledge agreements, UCC financing statements,
opinions of counsel, and appropriate requests for registration) in connection
with such new Subsidiary shall be in form and substance reasonably satisfactory
to the Administrative Agent and the Requisite Lenders.
(c) No member of the Donna Karan Group shall change its partnership,
capital or legal structure.
9.10. Sales and Leasebacks. No member of the Donna Karan Group shall
become liable, by assumption or by Accommodation Obligation, with respect to any
lease, whether an Operating Lease or a Capital Lease, of any property (whether
real or personal or mixed) (i) which it sold or transferred or is to sell or
transfer to any other Person or (ii) which it intends to use for substantially
the same purposes as any other asset which has been or is to be sold or
transferred by it to any other Person in connection with such lease.
9.11. Margin Regulations. None of the Borrowers shall use all or any
portion of the proceeds of any Loan made under this Agreement to purchase or
carry Margin Stock.
9.12. ERISA. No member of the Donna Karan Group shall, nor shall they
permit any of their respective ERISA Affiliates to, do any of the following to
the extent that such act or failure to act would result in the aggregate, after
taking
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into account any other such acts or failure to act, in a Material Adverse
Effect:
(i) engage, or knowingly permit an ERISA Affiliate to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
for which a class exemption is not available or a private exemption has not
been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as defined in
Sections 302 of ERISA and 412 of the Code), with respect to any Benefit Plan,
which has not been waived;
(iii) fail, or permit any ERISA Affiliate to fail, to pay timely required
contributions or annual install ments due with respect to any waived funding
deficiency to any Plan if such failure could result in the imposition of a
Lien or otherwise could have a Material Adverse Effect on any member of the
Donna Karan Group;
(iv) terminate, or permit any ERISA Affiliate to terminate, any Benefit
Plan which would result in any liability of any member of the Donna Karan
Group or any ERISA Affiliate under Title IV of ERISA; or
(v) fail, or permit any ERISA Affiliate to fail, to pay any required
installment under section (m) of Section 412 of the Code or any other payment
required under Section 412 of the Code on or before the due date for such
installment or other payment, if such failure could result in the imposition
of a Lien or otherwise could have a Material Adverse Effect on any member of
the Donna Karan Group.
9.13. Operating Leases. No member of the Donna 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 unless,
immediately after giving effect to the incurrence of liability with respect to
such Operating Lease, the aggregate amount of all Rental Payments for
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Operating Leases for all members of the Donna Karan Group for such fiscal year
shall not exceed $25,000,000.
9.14. Capital Expenditures. No member of the Donna Karan Group shall make
or incur Capital Expenditures during any Fiscal Year if the aggregate amount of
Capital Expenditures for the Donna Karan Group plus the aggregate amount of the
Investments made pursuant to Section 9.04(iii) would exceed Fifteen Million
Dollars ($15,000,000) for such Fiscal Year; provided, however, that the Donna
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 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.
9.15. Amendment of Governing Documents. No member of the Donna Karan Group
shall amend, supplement or otherwise change their respective Governing Documents
in any material respect.
9.16. Environmental Liabilities. Except as disclosed in Schedule 6.01(P),
no member of the Donna Karan Group shall become subject to any Liabilities and
Costs which exceed $500,000 in a particular instance or $1,000,000 in the
aggregate, arising out of or relating to (a) the Release or threatened Release
at any location of any Contaminant into the environment, or any Remedial Action
in response thereto or (b) any violation of any environmental, health or safety
Requirement of Law.
9.17. No Activities Leading to Forfeiture. No member of the Donna Karan
Group shall engage in the conduct of any business or activity which could result
in a Forfeiture Proceeding.
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ARTICLE X
FINANCIAL COVENANTS
Each Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations:
10.01. Minimum Adjusted Net Worth. The Adjusted Net Worth of Donna 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
-------------- --------------
Fourth Fiscal Quarter 1996 $185,000,000
First Fiscal Quarter 1997 $190,000,000
Second Fiscal Quarter 1997 $190,000,000
Third Fiscal Quarter 1997 $200,000,000
Fourth Fiscal Quarter 1997 $210,000,000
First Fiscal Quarter 1998 $220,000,000
Second Fiscal Quarter 1998 $220,000,000
Third Fiscal Quarter 1998 $230,000,000
Fourth Fiscal Quarter 1998 $240,000,000
First Fiscal Quarter 1999 $250,000,000
Second Fiscal Quarter 1999 $250,000,000
Third Fiscal Quarter 1999 $270,000,000
Fourth Fiscal Quarter 1999 $280,000,000
10.02. Minimum Interest Coverage Ratio. The Interest Coverage Ratio of
Donna Karan International and its Subsidiaries on a consolidated basis at the
end of each fiscal quarter shall not be less than 15.00 to 1.00.
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10.03. Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio of Donna 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 1996 5.0 to 1.0
First Fiscal Quarter 1997 5.0 to 1.0
Second Fiscal Quarter 1997 5.0 to 1.0
Third Fiscal Quarter 1997 7.0 to 1.0
Fourth Fiscal Quarter 1997 7.5 to 1.0
First Fiscal Quarter 1998 8.0 to 1.0
Second Fiscal Quarter 1998 8.5 to 1.0
Third Fiscal Quarter 1998 9.0 to 1.0
Fourth Fiscal Quarter 1998 10.0 to 1.0
First Fiscal Quarter 1999 11.0 to 1.0
Second Fiscal Quarter 1999 11.0 to 1.0
Third Fiscal Quarter 1999 13.0 to 1.0
Fourth Fiscal Quarter 1999 15.0 to 1.0
10.04. Minimum Working Capital Ratio. The Working
Capital Ratio of Donna 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 1996 2.0 to 1.0
First Fiscal Quarter 1997 2.0 to 1.0
Second Fiscal Quarter 1997 2.0 to 1.0
Third Fiscal Quarter 1997 2.0 to 1.0
Fourth Fiscal Quarter 1997 2.5 to 1.0
First Fiscal Quarter 1998 2.5 to 1.0
Second Fiscal Quarter 1998 2.5 to 1.0
Third Fiscal Quarter 1998 2.5 to 1.0
Fourth Fiscal Quarter 1998 2.5 to 1.0
First Fiscal Quarter 1999 2.5 to 1.0
Second Fiscal Quarter 1999 2.5 to 1.0
Third Fiscal Quarter 1999 2.5 to 1.0
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Fourth Fiscal Quarter 1999 2.5 to 1.0
10.05. Maximum Leverage Ratio. The Leverage Ratio of Donna 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 1996 2.5 to 1.0
First Fiscal Quarter 1997 2.5 to 1.0
Second Fiscal Quarter 1997 2.5 to 1.0
Third Fiscal Quarter 1997 2.5 to 1.0
Fourth Fiscal Quarter 1997 2.0 to 1.0
First Fiscal Quarter 1998 2.0 to 1.0
Second Fiscal Quarter 1998 2.0 to 1.0
Third Fiscal Quarter 1998 2.0 to 1.0
Fourth Fiscal Quarter 1998 2.0 to 1.0
First Fiscal Quarter 1999 2.0 to 1.0
Second Fiscal Quarter 1999 2.0 to 1.0
Third Fiscal Quarter 1999 2.0 to 1.0
Fourth Fiscal Quarter 1999 2.0 to 1.0
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrowers shall fail to pay any
principal of any Note when due, or shall fail to pay any interest on any Note or
any other Obligation within one (1) Business Day after such interest or
Obligation shall become due; or
(b) Breach of Representation or Warranty. Any repre sentation or warranty
made or deemed to have been made by any Loan Party under, relating to or in
connection with this Agreement, the Notes or any of the other Loan Documents
shall be false or misleading in any material respect when made or deemed to have
been made; or
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(c) Breach of Certain Covenants. Any Loan Party shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under Section 7.04, Section 8.05, Article IX or Article X of this
Agreement or under any section of any of the other Loan Documents; or
(d) Other Defaults. Any Loan Party shall fail duly and punctually to
perform or observe any term, covenant or obligation binding on such Person (i)
under Section 7.01 or Section 7.02 of this Agreement and such failure shall
continue for ten (10) Business Days after such failure or (ii) under Section
8.06 of this Agreement and such failure shall continue for two (2) Business Days
after such failure or (iii) under this Agreement or under any of the other Loan
Documents (other than as described in Sections 11.01(a), (c) or (d)(i) or (ii)),
and such failure shall continue for thirty (30) days after the Loan Party knew,
or, in the exercise of due care, should have known, of such failure (or such
lesser period of time as is mandated by applicable Requirements of Law); or
(e) Default as to Other Indebtedness. Any Loan Party shall fail to make
any payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (other than
an Obligation) if the aggregate amount of such other Indebtedness is Three
Million Dollars ($3,000,000) or more; or any breach, default or event of default
shall occur, or any other condition shall exist under any instrument, agreement
or indenture pertaining to any such Indebtedness, if the effect thereof (with or
without the giving of notice or lapse of time or both) is to cause an
acceleration, mandatory redemption or other required repurchase of such
Indebtedness or permit the holder or holders of such Indebtedness to accelerate
the maturity of any such Indebtedness or require a redemption or other
repurchase of such Indebtedness; or any such Indebtedness shall be otherwise
declared to be due and payable (by acceleration or otherwise) or required to be
prepaid, redeemed or otherwise repurchased by such Loan Party (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
or the holder or holders of any Lien, in any amount, shall commence foreclosure
of such Lien upon property of any Loan Party having an aggregate value in excess
of Three Million Dollars ($3,000,000); or
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(f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) An
involuntary case shall be commenced against any Loan Party and the petition
shall not be dismissed, stayed, bonded or discharged within sixty (60) days
after commencement of the case; or a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of any Loan Party in an
involuntary case, under any applicable bankruptcy, insolvency or other similar
law now or hereinafter in effect; or any other similar relief shall be granted
under any applicable federal, state, local or foreign law; or the board of
directors of any Loan Party or partner of any Loan Party (or any committee
thereof) adopts any resolution or otherwise authorizes any action to approve any
of the foregoing; or
(ii) A decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over any Loan Party or over all or a
substantial part of the assets of such Loan Party shall be entered; or an
interim receiver, trustee or other custodian of any Loan Party or of all or a
substantial part of the assets of such Loan Party shall be appointed or a
warrant of attachment, execution or similar process against any substantial part
of the assets of such Loan Party shall be issued and any such event shall not be
stayed, dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance; or the board of directors of any Loan Party or partner
of any Loan Party (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing; or
(g) Voluntary Bankruptcy; Appointment of Receiver, etc. Any Loan Party
shall commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its assets; or any Loan Party shall
make any assignment for the benefit of creditors or shall be unable or fail, or
admit in writing its inability, to pay its debts as such debts become due, or
the board of directors of any Loan Party or partner of any Loan Party (or any
committee thereof) adopts any resolution
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or otherwise authorizes any action to approve any of the fore going; or
(h) Judgments and Attachments. Any money judgment (other than a money
judgment covered by insurance as to which the insurance company has acknowledged
coverage), writ or warrant of attachment, or similar process against any Loan
Party or any of its assets involving in any case an amount in excess of Two
Million Dollars ($2,000,000) is entered and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days; or
(i) Dissolution. Any order, judgment or decree shall be entered against
any Loan Party decreeing its involuntary dis solution or split up and such order
shall remain undischarged and unstayed for a period in excess of thirty (30)
days; or any Loan Party shall otherwise dissolve or cease to exist; or
(j) Loan Documents; Failure of Security. At any time, for any reason, (i)
any Loan Document ceases to be in full force and effect or any Loan Party
thereto seeks to repudiate its obligations thereunder and the Liens intended to
be created thereby are, or any Loan Party seeks to render such Liens, invalid
and unperfected, or (ii) Liens in favor of the Administrative Agent and/or the
Lenders contemplated by the Loan Documents shall, at any time, for any reason,
be invalidated or otherwise cease to be in full force and effect, or such Liens
shall be subordinated or shall not have the priority contemplated by this
Agreement or the Loan Documents, or (iii) the Limited Use License Agreement is
terminated or ceases to be in full force and effect; or
(k) ERISA Liabilities. Any Termination Event occurs which will or is
reasonably likely to subject either a Borrower or an ERISA Affiliate to a
liability which the Administrative Agent determines will, or is reasonably
likely to have, a Material Adverse Effect on any Borrower or any Subsidiary; or
(l) Waiver Application. The plan administrator of any Benefit Plan applies
under Section 412(d) of the Code for a waiver of the minimum funding standards
of Section 412(a) of the Code and the Administrative Agent believes that the
substantial business hardship upon which the application for the waiver is
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based could subject either any Borrower or any ERISA Affiliate to liability
which the Administrative Agent determines will or is reasonably likely to have a
Material Adverse Effect; or
(m) Material Adverse Change. There shall have occurred any condition or
event which the Requisite Lenders determine has or reasonably could be expected
to have a Material Adverse Effect since March 31, 1996, as reflected in the Pro
Forma Combined Financial Statements contained in the Prospectus of Donna Karan
International dated June 27, 1996; or
(n) Forfeiture Proceeding. Any Forfeiture Proceeding shall have been
commenced or any of the Borrowers shall have given the Administrative Agent
written notice of the commencement of any Forfeiture Proceeding as provided
herein and the Administrative Agent has, or Requisite Lenders have, declared
such event to be an Event of Default hereunder; or
(o) Change of Control. A Change of Control shall have occurred; or
(p) Termination of License Agreement. The License Agreement shall have
expired or be terminated for any reason.
An Event of Default shall be deemed "continuing" until cured or waived in
writing in accordance with Section 13.09.
11.02. Rights and Remedies.
(a) Acceleration and Termination. Upon the occurrence of any Event of
Default described in Sections 11.01(f) or 11.01(g), the Commitments, the
Acceptance Commitment and the commitment of each Issuing Bank to Issue Letters
of Credit shall automatically and immediately terminate and the unpaid principal
amount of, and any and all accrued interest on, the Obligations and all accrued
fees shall automatically become immediately due and payable, without
presentment, demand, or protest or other requirements of any kind (including,
without limitation, valua tion and appraisement, diligence, presentment, notice
of intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by each Borrower, and the obligations of the Lenders to make
Loans hereunder, and the Issuing Banks to issue any Letter of Credit or create
any Acceptance, shall
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thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, the Administrative Agent shall at the request, or may
with the consent, of the Requisite Lenders, (i) upon three (3) days' prior
written notice to the Borrowers (unless an Event of Default specified in Section
11.01(a) has occurred and is continuing or Indebtedness referred to in Section
11.01(e) has been accelerated, in which events no prior notice is required),
declare that the Commitments, the Acceptance Commitment and the commitment of
each Issuing Bank to Issue Letters of Credit are terminated, whereupon the
Commitments and the commitment of each Issuing Bank to Issue Letters of Credit
and the obligation of each Lender to make any Loan hereunder and of each Issuing
Bank to issue any Letter of Credit not then issued or create any Acceptance not
then created shall immediately terminate, and/or (ii) upon three (3) days' prior
written notice to the Borrowers (unless an Event of Default specified in Section
11.01(a) has occurred and is continuing or Indebtedness referred to in Section
11.01(e) has been accelerated, in which events no prior notice is required),
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Obligations to be, and the same shall thereupon be, immediately
due and payable, without presentment, demand, or protest or other requirements
of any kind (including, without limitation, valuation and appraisement,
diligence, presentment, notice of intent to demand or accelerate and of
acceleration), all of which are hereby expressly waived by each Borrower.
(b) Deposit for Letters of Credit and Acceptances. In addition, on the
Commitment Termination Date or after the occurrence and during the continuance
of an Event of Default, each Borrower shall, promptly upon demand by the
Administrative Agent, deliver to the Administrative Agent, Cash Collateral in
such form as requested by the Administrative Agent for deposit in the Cash
Collateral Account, together with such endorsements, and execution and delivery
of such documents and instruments as the Administrative Agent may request in
order to perfect or protect the Administrative Agent's Lien with respect
thereto, in an aggregate principal amount equal to the greatest amount for which
the outstanding Letters of Credit can be drawn and the Acceptances can be
presented. Such deposit shall be held by the Administrative Agent as security
for, and to provide for the
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payment of, the Reimbursement Obligations and the Acceptance Obligations.
(c) Enforcement. Each Borrower acknowledges that in the event any Loan
Party fails to perform, observe or discharge any of its respective obligations
or liabilities under this Agreement or any other Loan Document, any remedy of
law may prove to be inadequate relief to the Administrative Agent and the
Lenders; therefore, each Borrower agrees that the Administrative Agent and the
Lenders shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
ARTICLE XII
THE ADMINISTRATIVE AGENT
12.01. Appointment. (a) Each Lender hereby designates and appoints
Citibank as the Administrative Agent of such Lender under this Agreement, and
each Lender hereby irre vocably authorizes the Administrative Agent to take such
action on its behalf under the provisions of this Agreement, the Notes and the
Loan Documents and to exercise such powers as are set forth herein or therein
together with such other powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of any amount payable under any provision
of Article III when due) or the other Loan Documents, the Administrative Agent
shall not be required to exercise any discretion or take any action.
Notwithstanding the foregoing, the Administrative Agent shall be required to act
or refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Requisite Lenders (unless the
instructions or consent of all of the Lenders is required hereunder or
thereunder) and such instructions shall be binding upon all Lenders, Issuing
Banks and Holders of Notes; provided, however, the Administrative Agent shall
not be required to take any action which (i) the Administrative Agent reasonably
believes will expose it to personal liability unless the Administrative Agent
receives an indemnification satisfactory to it from the Lenders with respect to
such action or (ii) is contrary to this Agreement, the Notes, the other Loan
Documents or applicable law. The Administrative Agent agrees to act as such on
the express conditions contained in this Article XII.
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(b) The provisions of this Article XII are solely for the benefit of the
Administrative Agent, the Lenders and Issuing Banks, and none of the Loan
Parties shall have any rights to rely on or enforce any of the provisions hereof
(other than as expressly set forth in Section 12.07). In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as agent of the Lenders and the Issuing Banks and does not assume and
shall not be deemed to have assumed any obligation or relationship of agency,
trustee or fiduciary with or for any Loan Party. The Administrative Agent may
perform any of its duties hereunder, or under the Loan Documents, by or through
its agents or employees.
12.02. Nature of Duties. The Administrative Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement or
in the Loan Documents. The duties of the Administrative Agent shall be
mechanical and administrative in nature. The Administrative Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Holder.
Nothing in this Agreement or any of the Loan Documents, expressed or implied, is
intended to or shall be construed to impose upon the Administrative Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. Each Lender and each Issuing Bank shall
make its own independent investigation of the financial condition and affairs of
the Borrowers and other Loan Parties in connection with the making and the
continuance of the Loans hereunder and with the issuance of the Letters of
Credit and shall make its own appraisal of the credit worthiness of the
Borrowers and the other Loan Parties initially and on a continuing basis, and
the Administrative Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Holder with any credit or
other information with respect thereto (except for reports required to be
delivered by the Administrative Agent under the terms of this Agreement). If the
Administrative Agent seeks the consent or approval of the Lenders to the taking
or refraining from taking of any action hereunder, the Administrative Agent
shall send notice thereof to each Lender. The Administrative Agent shall
promptly notify each Lender at any time that the Lenders so required hereunder
have instructed the Administrative Agent to act or refrain from acting pursuant
hereto.
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12.03. Rights, Exculpation, etc. (a) Liabilities; Responsibilities. None
of the Administrative Agent, any Affiliate of the Administrative Agent, or any
of their respective officers, directors, employees, agents, attorneys or
consultants shall be liable to any Holder for any action taken or omitted by
them hereunder, under the Notes or under any of the Loan Documents, or in
connection therewith, except that no Person shall be relieved of any liability
imposed by law for gross negligence or willful misconduct. The Administrative
Agent shall not be liable for any apportionment or distribution of payments made
by it in good faith pursuant to Section 3.02(b), and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Holder to whom payment was due, but not made, shall be to
recover from other Holders any payment in excess of the amount to which they are
determined to have been entitled. The Administrative Agent shall not be
responsible to any Holder for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectability, or sufficiency of this Agreement, the
Notes or any of the other Loan Documents or the transactions contemplated
thereby, or for the financial condition of the Borrowers or any of the other
Loan Parties. The Administrative Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Notes or any of the Loan Documents or the
financial condition of the Borrowers or any of the other Loan Parties, or the
existence or possible existence of any Default or Event of Default.
(b) Right to Request Instructions. The Administrative Agent may at any
time request instructions from the Lenders with respect to any actions or
approvals which by the terms of any of the Loan Documents the Administrative
Agent is permitted or required to take or to grant, and the Administrative Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever to any Person for
refraining from any action or with holding any approval under any of the Loan
Documents until it shall have received such instructions from those Lenders from
whom the Administrative Agent is required to obtain such instructions for the
pertinent matter in accordance with the Loan Documents. Without limiting the
generality of the foregoing, no
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Holder shall have any right of action whatsoever against the Administrative
Agent as a result of the Administrative Agent acting or refraining from acting
under the Loan Documents in accordance with the instructions of the Requisite
Lenders or, where required by the express terms of this Agreement, a greater
proportion of the Lenders.
12.04. Reliance. The Administrative Agent shall be entitled to rely upon
any written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel, independent public
accountants and other experts selected by it.
12.05. Indemnification. To the extent that the Administrative Agent is not
reimbursed and indemnified by the Borrowers, the Lenders will reimburse and
indemnify the Administrative Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, reasonable
costs, reasonable expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by, or asserted against it in any way relating
to or arising out of the Loan Documents or any action taken or omitted by the
Administrative Agent under the Loan Documents, in proportion to each Lender's
Pro Rata Share; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. The obligations of the Lenders under this
Section 12.05 shall survive the payment in full of the Loans, the Reimbursement
Obligations, the Acceptance Obligations and all other Obligations and the
termination of this Agreement. In the event that after payment and distribution
of any amount by the Administrative Agent to Lenders, any Lender or third party,
including the Borrowers, any creditor of any Borrower or a trustee in
bankruptcy, recovers from the Administrative Agent any amount found to have been
wrongfully paid to the Administrative Agent or disbursed by the Administrative
Agent to Lenders, then Lenders, in proportion to their respective Pro Rata
Shares, shall reimburse the Administrative Agent for all such amounts.
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12.06. The Administrative Agent Individually. With respect to its Pro Rata
Share of the Commitments hereunder, if any, and the Loans made by it, if any,
Citibank shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
Citibank in its individual capacity as a Lender or one of the Requisite Lenders.
Citibank and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any
Borrower or any of its Subsidiaries as if it were not acting as the
Administrative Agent pursuant hereto.
12.07. Successor Administrative Agents. (a) Resignation. The
Administrative Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) days' prior written
notice to the Borrowers and the Lenders. Such resignation shall take effect upon
the acceptance by a successor Administrative Agent of appointment pursuant to
this Section 12.07.
(b) Appointment by Requisite Lenders. Upon any such notice of resignation,
the Requisite Lenders shall have the right to appoint a successor Administrative
Agent selected from among the Lenders, which appointment shall be subject to the
prior written approval of the Borrowers (which may not be unreasonably withheld,
and shall not be required upon the occurrence and during the continuance of an
Event of Default or Default).
(c) Appointment by Retiring Administrative Agent. If a successor
Administrative Agent shall not have been appointed within the thirty (30) day
period provided in paragraph (a) of this Section 12.07, the retiring
Administrative Agent, with the consent of the Borrowers (which may not be
unreasonably withheld, and shall not be required upon the occurrence and during
the continuance of an Event of Default or Default), shall then appoint a
successor Administrative Agent who shall serve as the Administrative Agent until
such time, if any, as the Requisite Lenders appoint a successor Administrative
Agent as provided above.
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(d) Rights of the Successor and Retiring Administrative Agents. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Article XII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Administrative Agent
under this Agreement.
12.08. Relations Among Lenders. Each Lender and each Issuing Bank agrees
that it will not take any legal action, nor institute any actions or
proceedings, against the Borrowers or any other obligor hereunder or with
respect to any Collateral, without the prior written consent of the Requisite
Lenders. Without limiting the generality of the foregoing, no Lender may
accelerate or otherwise enforce its portion of the Obligations, or unilaterally
terminate its Commitments, except in accordance with Section 11.02(a).
12.09. Concerning the Collateral and the Loan Documents. (a) Authority.
Each Lender and each Issuing Bank authorizes and directs the Administrative
Agent to enter into the Loan Documents relating to the Collateral for the
benefit of the Lenders and the Issuing Banks. Each Lender and each Issuing Bank
agrees that any action taken by the Administrative Agent or the Requisite
Lenders (or, where required by the express terms of this Agreement, a greater
proportion of the Lenders) in accordance with the provisions of this Agreement
or the other Loan Documents, and the exercise by the Administrative Agent or the
Requisite Lenders (or, where so required, such greater proportion) of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Lenders and
Issuing Banks. Without limiting the generality of the foregoing, the
Administrative Agent shall have the sole and exclusive right and authority to
(i) act as the disbursing and collecting agent for the Lenders and the Issuing
Banks with respect to all payments and collections arising in connection with
this Agreement and the Loan Documents relating to the Collateral; (ii)
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execute and deliver each Loan Document relating to the Collateral and accept
delivery of each such agreement delivered by any Loan Party; (iii) act as
collateral agent for the Lenders and the Issuing Banks for purposes of the
perfection of all security interests and Liens created by such agreements and
all other purposes stated therein, provided, however, the Administrative Agent
hereby appoints, authorizes and directs the Lenders and the Issuing Banks to act
as collateral sub-agents for the Administrative Agent, the Lenders and the
Issuing Banks for purposes of the perfection of all security interests and Liens
with respect to any Borrower's deposit accounts maintained with, and cash and
Cash Equivalents held by, such Lender or such Issuing Bank; (iv) manage,
supervise and otherwise deal with the Collateral; (v) take such action as is
necessary or desirable to maintain the perfection and priority of the security
interests and Liens created or purported to be created by the Loan Documents;
and (vi) except as may be otherwise specifically restricted by the terms of this
Agreement or any other Loan Document, exercise all remedies given to the
Administrative Agent, the Lenders or the Issuing Banks with respect to the
Collateral under the Loan Documents, applicable law or otherwise.
(b) Release of Collateral. (i) Each Lender hereby directs, in accordance
with the terms of this Agreement, the Administrative Agent to release or to
subordinate any Lien held by the Administrative Agent for the benefit of the
Lenders and the Issuing Banks:
(A) against all of the Collateral, upon payment in full of the Obligations
and termination of this Agreement;
(B) against that portion of the collateral being sold, assigned,
transferred, leased, licensed, conveyed, or otherwise disposed of in
accordance with Section 9.02; or
(C) against collateral of any holder of a Lien permitted under Section
9.03.
(ii) Each Lender and each Issuing Bank hereby directs the Administrative
Agent to execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release Liens to be
released pursuant
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to this Section 12.09(b) promptly upon the effectiveness of any such release.
Upon request by the Administrative Agent at any time, the Lenders will confirm
in writing the Administrative Agent's authority to release particular types or
items as Collateral pursuant to this Section 12.09.
(iii) Without in any manner limiting the Administrative Agent's authority
to act without any specific or further authorization or consent by Requisite
Lenders (as set forth in Section 12.09(b)), each Lender agrees to confirm in
writing, upon request by the Borrowers, the authority to release Collateral
conferred upon the Administrative Agent under clauses (A) through (C) of Section
12.09(b). So long as no Event of Default or Default is then continuing, upon
receipt by the Administrative Agent of any such written confirmation from
Requisite Lenders of its authority to release any particular items or types of
Collateral, and upon at least five (5) Business Days prior written request by
the Borrowers, the Administrative Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the Liens granted to the Administrative Agent for the benefit of
Lenders herein or pursuant hereto upon such Collateral; provided, that (i) the
Administrative Agent shall not be required to execute any such document on terms
which, in the Administrative Agent's opinion, would expose the Administrative
Agent to liability or create any obligation or entail any consequence other than
the release of such Liens without recourse or warranty, and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any Liens
upon (or obligations of the Borrowers in respect of) all interests retained by
the Borrowers all of which shall continue to constitute part of the Collateral.
(iv) The Administrative Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or is owned
by any Loan Party or is cared for, protected or insured or has been encumbered
or that the Liens granted to the Administrative Agent pursuant to the Security
Agreements have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights,
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authorities and powers granted or available to the Administrative Agent in this
Section 12.09 or in any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or in any act, omission or event related
thereto, the Administrative Agent may act in any manner it may deem appropriate,
in its sole discretion, given its own interest in the Collateral as one of the
Lenders and that the Administrative Agent shall have no duty or liability
whatsoever to any Lender unless required to act or refrain from acting upon the
instructions of the Requisite Lenders and then only in accordance with Section
12.01.
12.10. Co-Agents. The parties hereto agree that the Co-Agents do not have
any special rights or powers under this Agreement but are entitled, in their
capacity as Co-Agents hereunder, to the same protections afforded to the
Administrative Agent under this Article XII.
ARTICLE XIII
MISCELLANEOUS
13.01. Assignments and Participations. (a) Assign ments. No assignments or
participations of any Lender's rights or obligations under this Agreement and
the Notes shall be made except in accordance with this Section 13.01. Each
Lender may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement and the Notes (including all of its
rights and obligations with respect to the Revolving Loans and the Letters of
Credit) in accordance with the provisions of this Section 13.01.
(b) Limitations on Assignments. Each assignment shall be subject to the
following conditions: (i) each assignment shall be of a constant, and not a
varying, ratable percentage of all of the assigning Lender's rights and
obligations in respect of its interest being assigned under this Agreement and
its Note and, in the case of a partial assignment, shall be in a minimum
principal amount of Ten Million Dollars ($10,000,000) and shall be an integral
multiple of One Million Dollars ($1,000,000) except that such limitations shall
not apply to an assignment by any Lender of any portion of its rights and
obligations to another Lender or an assignment by any Lender of all of its
rights or obligations to another Person, (ii) each such assign-
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ment shall be to an Eligible Assignee, and (iii) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with a processing and recordation fee of Three Thousand Dollars ($3,000);
provided, however, any Lender may assign any or all of its rights and
obligations under this Agreement to any of its Affiliates without notice to or
consent of any Borrower or the Administrative Agent and without being subject to
the foregoing conditions. Upon such execution, delivery, acceptance and
recording in the Register, from and after the effective date specified in each
Assignment and Acceptance and accepted by the Administrative Agent (which
effective date shall not be any earlier than the date on which the
Administrative Agent so accepts and records the Assignment and Acceptance in the
Register), (x) the assignee thereunder shall, in addition to any rights and
obligations hereunder held by it immediately prior to such effective date, if
any, have the rights and obligations hereunder that have been assigned to it
pursuant to such Assign ment and Acceptance and shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder as if it were an
original Lender hereunder and (y) the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of such assigning Lender's
rights and obligations under this Agreement, the assigning Lender shall cease to
be a party hereto).
(c) The Register. The Administrative Agent, acting for this purpose as
agent for the Borrowers, shall maintain at its address referred to in Section
13.09 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register (the "Register") for the recordation of the names and addresses
of the Lenders and the Commitment of each Lender from time to time and whether
such Lender is an original Lender or the assignee of another Lender pursuant to
an Assignment and Acceptance. The Administrative Agent shall incur no liability
of any kind to the Borrowers, any Lender or any other Person with respect to its
maintenance of the Register or the recordation of information therein. The
Register shall include a control account and a subsidiary account for each
Lender, in which
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accounts (taken together) shall be recorded (i) the date and amount of each
Borrowing made hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrowers to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent from the
Borrowers hereunder and each Lender's share thereof. The Administrative Agent
will render a monthly statement of such accounts to the Borrowers. Each such
statement shall be deemed final, binding and conclusive upon the Borrowers in
all respects as to all matters reflected therein (absent manifest error) unless
the Borrowers, within thirty (30) days after the date such statement is
rendered, delivers to the Administrative Agent written notice of any objections
which the Borrowers may have to any such statement. In that event, only those
items expressly objected to in such notice shall be deemed to be disputed by the
Borrowers. The entries in the Register shall be final, conclusive and binding
upon the Borrowers for all purposes, absent manifest error, and each Borrower
and each other Loan Party, the Administrative Agent and the Lenders shall treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice. No assignment shall be effective unless and until the
Assignment and Acceptance has been accepted by the Administrative Agent and
registered in the Register.
(d) Fee. Upon its receipt of an Assignment and Accep tance executed by the
assigning Lender and an Eligible Assignee and a processing and recordation fee
of $3,000 (payable by the assigning Lender or the assignee, as shall be agreed
between them), the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in compliance with this Agreement and in substantially
the form of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii)
record the informa tion contained therein in the Register and (iii) give prompt
notice thereof to the Borrowers and the other Lenders.
(e) Participations. Each Lender may sell partici pations to one or more
commercial banks, lending institutions, finance companies, insurance companies,
other financial institutions or funds in or to all or a portion of its rights
and obligations under and in respect of any and all facilities under
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this Agreement (including, without limitation, all or a portion of any or all of
its Commitments hereunder and the Loans owing to it and its undivided interest
in the Letters of Credit); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitments hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (iv) such participant's rights to agree or
to restrict such Lender's ability to agree to the modification, waiver or
release of any of the terms of the Loan Documents or to the release of any
Collateral covered by the Loan Documents, to consent to any action or failure to
act by any party to any of the Loan Documents or any of their respective
Affiliates, or to exercise or refrain from exercising any powers or rights which
any Lender may have under or in respect of the Loan Documents or any Collateral,
shall be limited to the right to consent to (A) the increase in the Commitment
of the Lender from whom such participant purchased a participation, (B) the
reduction of the principal of, or rate or amount of interest on, the Loans
subject to such participation (other than by the payment or prepayment thereof),
(C) the postponement of any date fixed for any payment of principal of, or
interest on, the Loan(s) subject to such participation (except with respect to
any modifications of the provisions relating to prepayments of Loans and other
Obligations) and (D) the release of any guarantor of the Obligations or all or a
substantial portion of the Collateral except as provided in Section 12.09(b).
(f) Information Regarding the Borrowers. Subject to the provisions of
Section 9.06(d), any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
13.01, disclose to the assignee or participant or proposed assignee or
participant, any information relating to any of the Borrowers or any other Loan
Party furnished to such Lender by the Administrative Agent or by or on behalf of
such Borrower or such Loan Party; provided that, prior to any such disclosure,
such assignee or participant, or proposed assignee or participant, shall agree
to preserve in
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accordance with Section 13.23 the confidentiality of any con fidential
information described therein.
(g) Payment to Participants. Anything in this Agree ment to the contrary
notwithstanding, in the case of any participation, all amounts payable by the
Borrowers under the Loan Documents shall be calculated and made in the manner
and to the parties required hereby as if no such participation had been sold.
(h) Lenders' Creation of Security Interests. Notwithstanding any other
provision set forth in this Agreement, any Lender may at any time create a
security interest in all or any portion of its rights under this Agreement and
its Note (including, without limitation, Obligations owing to it and the Note
held by it) in favor of any Federal Reserve Bank of the Federal Reserve Board
without notice to or consent of any of the Borrowers or the Administrative
Agent.
13.02. Relations Among Lenders.
(a) Except as contemplated under this Agreement, no Lender shall make any
loan, advance or other financial accommoda tion to any Borrower without the
prior written consent of Requisite Lenders.
(b) Each Lender agrees that it will not take any action, nor institute any
actions or proceedings, against any Borrower or any other obligor hereunder or
with respect to any Collateral, without the prior written consent of Requisite
Lenders.
13.03. Replacement of Lender. In the event that a Replacement Event occurs
and is continuing with respect to any Lender, the Borrowers may designate a
Replacement Lender to assume such Lender's Commitment hereunder, to purchase the
Loans and participations of such Lender and such Lender's rights hereunder and
(if such Lender is an Issuing Bank) to issue Letters of Credit in substitution
for all outstanding Letters of Credit issued by such Lender, without recourse to
or representation or warranty by, or expense to, such Lender for a purchase
price equal to the outstanding principal amount of the Loans payable to such
Lender plus any accrued but unpaid interest
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on such Loans and accrued but unpaid commitment fees and letter of credit fees
owing to such Lender, and upon such assumption, purchase and substitution, and
subject to the execution and delivery to the Administrative Agent by the
Replacement Lender of documentation satisfactory to the Administrative Agent
(pursuant to which such Replacement Lender shall assume the obligations of such
original Lender under this Agreement), the Replacement Lender shall succeed to
the rights and obligations of such Lender hereunder and such Lender shall no
longer be a party hereto or have any rights hereunder provided that the
obligations of the Borrowers to such Lender under Section 13.05 hereof with
respect to events occurring or obligations arising before such replacement shall
survive such replacement.
13.04. Expenses.
(a) Generally. The Borrowers agree upon demand to pay, or reimburse the
Administrative Agent for, all of the Administrative Agent's reasonable internal
and external audit, legal, syndication, appraisal, valuation, filing, document
duplication and reproduction and investigation expenses and for all other
out-of-pocket costs and expenses of every type and nature (including, without
limitation, the reasonable fees, expenses and disbursements of Sidley & Austin,
local legal counsel, auditors, accountants, appraisers, printers, insurance and
environmental advisers, and other consultants and agents) incurred by the
Administrative Agent in connection with (i) the preparation, negotiation, and
execution of this Agreement, the other Loan Documents and the syndication of the
financing hereunder; (ii) the interpretation of this Agreement (including,
without limitation, the satisfaction or attempted satisfaction of any of the
conditions set forth in Article V), the other Loan Documents and the making of
the Loans hereunder; (iii) the cre ation, perfection or protection of the Liens
under the Loan Documents (including, without limitation, any reasonable fees and
expenses for local counsel in various jurisdictions); (iv) the ongoing
administration of this Agreement and the Loans, including consultation with
attorneys in connection therewith and with respect to the Administrative Agent's
rights and responsibilities under this Agreement and the other Loan Documents
and the Administrative Agent's periodic audits of the Borrowers; (v) the
protection, collection or enforcement of any of the Obligations or the
enforcement of any of the Loan Documents; (vi) the
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commencement, defense or intervention in any court proceeding relating in any
way to the Obligations, the assets of any Borrower, any Borrower, any of the
other Loan Parties, this Agreement or any of the other Loan Documents; (vii) the
response to, and preparation for, any subpoena or request for document
production with which the Administrative Agent is served or deposition or other
proceeding in which the Administrative Agent is called to testify, in each case,
relating in any way to the Obligations, the assets of any Borrower, any
Borrower, any of the other Loan Parties, this Agreement or any of the other Loan
Documents; and (viii) any amendments, consents, waivers, assignments,
restatements, or supplements to any of the Loan Documents and the preparation,
negotiation, and execution of the same.
(b) After Default. The Borrowers further agree to pay or reimburse the
Administrative Agent and each Lender upon demand for all out-of-pocket costs and
expenses, including, without limitation, reasonable attorneys' fees incurred by
the Administrative Agent or such Lender after the occurrence of an Event of
Default (i) in enforcing any Loan Document or Obligation or any security
therefor or exercising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in
commencing, defending or intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleadings in any legal proceeding relating to
the Obligations, the Property, any Borrower and related to or arising out of the
transactions contemplated hereby or by any of the other Loan Documents; and (iv)
in taking any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) described in clauses (i) through (iii) above.
13.05. Indemnity. The Borrowers further agree to defend, protect,
indemnify, and hold harmless the Administrative Agent and each and all of the
Lenders and Issuing Banks and each of their respective Affiliates, and their
respective officers, directors, employees, attorneys and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article V)
(collectively, the "Indemnitees") from and against any
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and all liabilities, obligations, losses (other than loss of profits), damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature what soever (excluding any taxes and including, without
limitation, the fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), imposed
on, incurred by, or asserted against such Indemnitees in any manner relating to
or arising out of (a) this Agreement, the Notes, the other Loan Documents, or
any act, event or transaction related or attendant thereto, the making of the
Loans, the issuance of and participation in Letters of Credit hereunder, the
creation of and participation in Acceptances, the management of such Loans,
Letters of Credit or Acceptances, the use or intended use of the proceeds of the
Loans, Letters of Credit or Acceptances hereunder, or any of the other
transactions contemplated by the Loan Documents, or (b) any Liabilities and
Costs under federal, state or local environmental, health or safety laws,
regulations or common law principles arising from or in connection with the
past, present or future operations of any Borrower or any of its predecessors in
interest, or, the past, present or future environmental condition of any
respective Property of any Borrower, the presence of asbestos-containing
materials at any respective Property of any Borrower or the Release or
threatened Release of any Contaminant into the environment from any respective
Property of any Borrower (collectively, the "Indemnified Matters"); provided,
however, the Borrowers shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Matters caused by or resulting from the willful
misconduct or gross negligence of such Indemnitee, as determined by a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrowers shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees.
13.06. Change in Accounting Principles. If any change in the accounting
principles used in the preparation of the most recent financial statements
referred to in Section 7.01 are required in connection with the issuance of
shares of common stock by a newly formed corporation pursuant to an initial
public
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offering or are hereafter required or permitted by the rules, regulations,
pronouncements and opinions of the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) and are adopted by the Borrowers with the
agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the covenants,
standards or terms found in Article IX and Article X, the parties hereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such changes with the desired result that the criteria for evaluating
compliance with such covenants, standards and terms by the Bor rowers shall be
the same after such changes as if such changes had not been made; provided,
however, no change in GAAP that would affect the method of calculation of any of
the covenants, standards or terms shall be given effect in such calculations
until such provisions are amended, in a manner satisfactory to the Requisite
Lenders and the Borrowers, to so reflect such change in accounting principles.
13.07. Setoff. In addition to any Liens granted under the Loan Documents
and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, each Lender, each
Issuing Bank and any Affiliate of any Lender or Issuing Bank is hereby
authorized by each Borrower at any time or from time to time, without notice to
any Person (any such notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured (but not including trust accounts)) and any other
Indebtedness at any time held or owing by such Lender, Issuing Bank or any of
their Affiliates to or for the credit or the account of any Borrower against and
on account of the Obligations of the Borrowers to such Lender, Issuing Bank or
any of their Affiliates, including, but not limited to, all Loans, Letters of
Credit, Acceptances and all claims of any nature or description arising out of
or in con nection with this Agreement or the Notes, irrespective of whether or
not (i) such Lender or Issuing Bank shall have made any demand hereunder or (ii)
the Administrative Agent, at the request or with the consent of the Requisite
Lenders, shall have declared the principal of and interest on the Loans and
other amounts due hereunder and under the Notes to be due and payable as
permitted
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by Article XI and even though such Obligations may be contingent or unmatured.
Each Lender and each Issuing Bank agrees that it shall not, without the express
consent of the Requisite Lenders, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of the Requisite Lenders, exercise
its setoff rights hereunder against any accounts of any Borrower now or
hereafter maintained with such Lender, Issuing Bank or any Affiliate of either
of them.
13.08. Ratable Sharing. The Lenders agree among them selves that (i) with
respect to all amounts received by them which are applicable to the payment of
the Obligations (excluding the fees described in Sections 2.03(f), 3.03, 3.04,
4.01(e) and 4.02(a)) equitable adjustment will be made so that, in effect, all
such amounts will be shared among them ratably in accordance with their Pro Rata
Shares, whether received by voluntary payment, by the exercise of the right of
setoff or banker's lien, by counterclaim or cross-action or by the enforcement
of any or all of the Obligations (excluding the fees and amounts described in
Sections 2.03(f), 3.03, 3.04, 4.01(e) and 4.02(a)) or the Collateral, (ii) if
any of them shall by voluntary payment or by the exercise of any right of
counterclaim, setoff, banker's lien or otherwise, receive payment of a
proportion of the aggregate amount of the Obligations held by it, which is
greater than the amount which such Lender is entitled to receive hereunder, the
Lender receiving such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it shall be deemed to
have done simultaneously upon the receipt of such payment) in such Obligations
owed to the others so that all such recoveries with respect to such Obligations
shall be applied ratably in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to such party
to the extent necessary to adjust for such recovery, but without interest except
to the extent the purchasing party is required to pay interest in connection
with such recovery. Each Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 13.08 may, to the
fullest extent permitted by law, exercise all its rights of payment (including,
subject to Section 13.07, the right of setoff) with respect to such
participation as fully as if such
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Lender were the direct creditor of such Borrower in the amount of such
participation.
13.09. Amendments and Waivers. (a) Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement or
the Notes shall be effective without the written agreement of the Administrative
Agent, the Requisite Lenders and the Borrowers, and no termination or waiver of
any provision of this Agreement or the Notes, or consent to any departure by the
Borrowers therefrom, shall be effective without the written concurrence of the
Requisite Lenders, which the Requisite Lenders shall have the right to grant or
withhold in their sole discretion. Notwithstanding the foregoing, any amendment,
modification, termination, waiver or consent with respect to any of the
following provisions of this Agreement and the Notes shall be effective only by
a written agreement, signed by each Lender: (a) waiver of any of the conditions
specified in Sections 5.01 and 5.02 (except with respect to a condition based
upon another provision of this Agreement, the waiver of which requires only the
concurrence of the Requisite Lenders), (b) increase in the aggregate amount of
the Commitments or the Commitment of any Lender, (c) reduction of the principal
of, rate or amount of interest on the Loans, the Reimbursement Obligations, the
Acceptance Obligations or any fees or other amounts payable to such Lender
(other than by the payment or prepayment thereof), (d) postponement of the
Commitment Termination Date or any other date fixed for any payment of principal
of, or interest on, the Loans, the Reimbursement Obligations, the Acceptance
Obligations or any fees or other amounts payable to such Lender (except with
respect to any modifications of the provisions relating to prepayments of Loans
and other Obligations), (e) release of all or a portion of the Collateral with a
market value greater than $5,000,000 (except as provided in Section 12.09(b)),
(f) amendment of the definition of "Requisite Lenders", or (g) amendment of
Section 13.08 or this Section 13.09. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances. Notwithstanding anything to the contrary contained in this
Section 13.09, no amendment, modification, waiver or consent shall affect the
rights or duties of the Administrative Agent under this Agreement
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or the other Loan Documents, unless made in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action.
(b) If any Lender fails to agree in writing to any amendment,
modification, consent or waiver that requires the written agreement of each
Lender, such Lender agrees to sell, assign and transfer to any Replacement
Lender or Replacement Lenders designated by the Administrative Agent all of its
Notes and all of its rights hereunder for a purchase price in cash equal to the
outstanding principal amount of the Notes payable to such Lender plus any
accrued but unpaid interest on such Notes and accrued but unpaid commitment and
other fees, expense reimbursements and indemnities in respect of that Lender's
Commitment and the assumption by the Replacement Lender or Replacement Lenders
of all of the obligations of such Lender hereunder. Such Lender shall consummate
such sale in accordance with such terms (and, if such Lender is an Issuing Bank,
such other terms as may be reasonably necessary to compensate fully such Lender)
within a reasonable time not exceeding 15 Business Days from the date the
Administrative Agent designated a Replacement Lender, and thereupon such Lender
shall no longer be a party hereto or have any obligations or rights hereunder
(except rights which, pursuant to the provisions of this Agreement, survive the
termination of this Agreement and the repayment of the Notes), and the
Replacement Lender shall succeed to such obligations and rights.
13.10. Notices. (a) Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Administrative Agent
pursuant to Articles II, III or XII shall not be effective until received by the
Administrative Agent. For the purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
Section 13.10) shall be as set forth below each party's name on the signature
pages hereof or the signature page of any applicable Assignment and Acceptance,
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or, as to each party, at such other address as may be designated by such party
in a written notice to all of the other parties to this Agreement.
(b) Each Borrower agrees to indemnify and hold harmless each Indemnitee
from and against any and all claims, damages, liabilities, obligations, losses,
penalties, actions, judgments, suits, costs, disbursements and expenses of any
kind or nature (including, without limitation, reasonable fees and disbursements
of counsel to any such Indemnitee) which may be imposed on, incurred by or
asserted against any such Indemnitee in any manner relating to or arising out of
any action taken or omitted by such Indemnitee in good faith in reliance on any
notice or other written communication in the form of a telecopy or facsimile
purporting to be from any Borrower; provided that no Borrower shall have any
obligation under this Section 13.10(b) to an Indemnitee with respect to any
indemnified matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
13.11. Survival of Warranties and Agreements. All representations and
warranties made herein and all obligations of the Borrowers in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans, the issuance and discharge of Letters of Credit
hereunder and the termination of this Agreement and shall not be limited in any
way by the passage of time or occurrence of any event and shall expressly cover
time periods when the Administrative Agent, any of the Issuing Banks or any of
the Lenders may have come into possession or control of any assets of any
Borrower.
13.12. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of the Administrative Agent, any Lender or any Issuing Bank
in the exer cise of any power, right or privilege under this Agreement, the
Notes or any of the other Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All
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rights and remedies existing under this Agreement, the Notes and the other Loan
Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
13.13. Marshalling; Payments Set Aside. None of the Administrative Agents,
any Lender or any Issuing Bank shall be under any obligation to marshall any
assets in favor of any Borrower, any Loan Party or any other party or against or
in payment of any or all of the Obligations. To the extent that any Borrower
makes a payment or payments to the Administrative Agent, the Lenders or the
Issuing Banks or any of such Persons receives payment from the proceeds of the
Collateral or exercise their rights of setoff, and such payment or payments or
the proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, right and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
13.14. Independence of Covenants. All covenants here under shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
13.15. Severability. In case any provision in or obligation under this
Agreement, the Notes or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
13.16. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
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13.17. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
13.18. Limitation of Liability. No claim may be made by any Borrower, any
Loan Party, any Lender, any Issuing Bank, any Co-Agent, the Administrative Agent
or any other Person against the Administrative Agent, any other Co-Agent, any
other Issuing Bank or any other Lender or the Affiliates, directors, officers,
employees, attorneys or agents of any of them for any special, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement or the Notes, or any act, omission or event occurring in
connection therewith; and each Borrower, each Loan Party, each Lender, each
Issuing Bank, each Co-Agent and the Administrative Agent hereby waive, release
and agree not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
13.19. Successors and Assigns. This Agreement, the Notes and the other
Loan Documents shall be binding upon the parties thereto and their respective
successors and assigns and shall inure to the benefit of the parties thereto and
the successors and permitted assigns of the Lenders and the Issuing Banks. The
rights hereunder of the Borrowers, or any interest therein, may not be assigned
without the written consent of all Lenders.
13.20. Certain Consents and Waivers of the Borrowers.
(a) Personal Jurisdiction. (i) EACH OF THE ADMINISTRATIVE AGENT, THE
LENDERS, THE ISSUING BANKS AND THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY
COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY
ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL
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CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
EACH OF THE BORROWERS IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION, 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS ITS ADMINISTRATIVE AGENT (THE "PROCESS
AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. EACH OF THE ADMINISTRATIVE AGENTS, THE LENDERS, THE ISSUING BANKS
AND THE BORROWERS AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE BORROWERS WAIVES IN
ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE.
(ii) EACH BORROWER AGREES THAT THE ADMINISTRATIVE AGENT SHALL HAVE THE
RIGHT TO PROCEED AGAINST SUCH BORROWER OR ITS PROPERTY IN A COURT IN ANY
LOCATION TO ENABLE THE ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE LENDERS
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE
AGENT, ANY ISSUING BANK OR ANY LENDER. EACH BORROWER AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE
ADMINISTRATIVE AGENT, ANY LENDER OR ANY ISSUING BANK TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY
ISSUING BANK; PROVIDED, HOWEVER, ANY BORROWER MAY BRING IN AN ACTION IN A COURT
OF THE STATE OF NEW YORK ANY COUNTERCLAIM THAT WOULD BE A COMPULSORY
COUNTERCLAIM IF THE ACTION HAD BEEN BROUGHT IN FEDERAL DISTRICT COURT. EACH
BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE ADMINISTRATIVE AGENT, ANY ISSUING BANK OR ANY LENDER MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
(b) Service of Process. EACH BORROWER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE PROCESS AGENT OR SUCH BORROWER'S NOTICE ADDRESS SPECIFIED BELOW,
SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. EACH BORROWER
IRREVOCABLY WAIVES ANY OBJECTION
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(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT TO BRING PROCEEDINGS
AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE ADMINISTRATIVE AGENT, THE LENDERS
AND THE BORROWERS IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT.
13.21. Counterparts; Effectiveness; Inconsistencies. This Agreement and
any amendments, waivers, consents, or supple ments hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against each Borrower,
each Lender, each Issuing Bank and the Administrative Agent on the date hereof
when each such party hereto executes and delivers this Agreement. This Agreement
and each of the other Loan Documents shall be construed to the extent reasonable
to be consistent one with the other, but to the extent that the terms and
conditions hereof are actually inconsistent with the terms and conditions of any
other Loan Document, this Agreement shall govern.
13.22. Limitation on Agreements. All agreements between each Borrower, the
Administrative Agent, each Lender and each Issuing Bank in the Loan Documents
are hereby expressly limited so that in no event shall any of the Loans or other
amounts payable by the Borrowers under any of the Loan Documents be directly or
indirectly secured (within the meaning of Regulation U) by Margin Stock.
13.23. Confidentiality. Subject to Section 13.01(f), the Lenders and the
Issuing Banks shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement and identified as such by the Borrowers in
accordance with such Lender's or such Issuing Bank's customary procedures
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for handling confidential information of this nature and in accordance with safe
and sound banking practices and in any event may make disclosure reasonably
required by a bona fide offeree, transferee or participant in connection with
the contemplated transfer or participation or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process
and shall require any such offeree, transferee or participant to agree (and
require any of its offerees, transferees or participants to agree) to comply
with this Section 13.23. In no event shall any Lender or any Issuing Bank be
obligated or required to return any materials furnished by any Borrower;
provided, however, each offeree shall be required to agree that if it does not
become a transferee or participant it shall return all materials furnished to it
by such Borrower in connection with this Agreement.
13.24. Entire Agreement. This Agreement, taken together with all of the
other Loan Documents, embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings, written
and oral, relating to the subject matter hereof.
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IN WITNESS WHEREOF, this Agreement has been duly exe cuted as of the date
first above written.
THE DONNA KARAN COMPANY
By: Donna Karan International Inc.,
a general partner
By:/s/Joseph B. Parsons
-----------------------
Title: Executive Vice President,
Chief Financial Officer,
and Treasurer
Notice address:
The Donna Karan Company
240 West 40th Street
New York, New York 10018
Attention: Chief Financial Officer
With a copy to:
The Donna Karan Company
550 Seventh Avenue
New York, New York 10018
Attention: Legal Department
<PAGE>
DONNA KARAN STUDIO
By: Donna Karan International Inc.,
a general partner
By:/s/ Joseph B. Parsons
------------------------
Title: Executive Vice President,
Chief Financial Officer,
and Treasurer
Notice address:
The Donna Karan Company
240 West 40th Street
New York, New York 10018
Attention: Chief Financial Officer
With a copy to:
The Donna Karan Company
550 Seventh Avenue
New York, New York 10018
Attention: Legal Department
<PAGE>
THE DONNA KARAN COMPANY STORE, G.P.
By: Donna Karan International Inc.,
a general partner
By: /s/ Joseph B. Parsons
-------------------------
Title: Executive Vice President,
Chief Financial Officer,
and Treasurer
Notice address:
The Donna Karan Company
240 West 40th Street
New York, New York 10018
Attention: Chief Financial Officer
With a copy to:
The Donna Karan Company
550 Seventh Avenue
New York, New York 10018
Attention: Legal Department
<PAGE>
DK FOOTWEAR PARTNERS
By: Donna Karan International Inc.,
a general partner
By:/s/ Joseph B. Parsons
------------------------
Title: Executive Vice President,
Chief Finacial Officer,
and Treasurer
Notice address:
The Donna Karan Company
240 West 40th Street
New York, New York 10018
Attention: Chief Financial Officer
With a copy to:
The Donna Karan Company
550 Seventh Avenue
New York, New York 10018
Attention: Legal Department
<PAGE>
CITIBANK, N.A., as Administrative Agent
By:/s/
------------------------
Vice President
Notice address:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Brenda Cotsen
Telecopy: (212) 793-1290
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Barbara A. Vrancik, Esq.
Telecopy: (212) 906-2021
<PAGE>
LENDERS
Revolving Loan
Commitment
$37,000,000 CITIBANK, N.A.
By:/s/
------------------------
Title:
Notice address:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Brenda Cotsen
Telecopy: (212) 793-1290
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Barbara A. Vrancik, Esq.
Telecopy: (212) 906-2021
<PAGE>
Revolving Loan
Commitment
$29,000,000 THE CHASE MANHATTAN BANK
By:/s/
------------------------
Title:
Notice address:
Chase Manhattan Bank
1411 Broadway
5th Floor
New York, New York 10018
Telecopy: (212) 391-7118
<PAGE>
Revolving Loan
Commitment
$29,000,000 NATIONSBANK N.A.
By:/s/
------------------------
Title:
Notice address:
Nationsbank, N.A.
100 North Tryon Street
NC1-007-08-11
Charlotte, NC 28255
Telecopy: (704) 386-1270
<PAGE>
Revolving Loan
Commitment
$20,000,000 FIRST NATIONAL BANK OF BOSTON
By:/s/
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Title:
Notice address:
First National Bank of Boston
100 Federal Street
01-09-05
Boston, MA 02106-2016
Telecopy: (617) 434-0630
<PAGE>
Revolving Loan
Commitment
$20,000,000 MELLON BANK
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Title:
Notice address:
Mellon Bank
1 Mellon Bank Center
Pittsburgh, PA 15258
<PAGE>
Revolving Loan
Commitment
$15,000,000 UNION BANK OF CALIFORNIA
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Title:
Notice address:
Union Bank of California
445 S. Figueroa Street
16th Floor
Mail Code G16-030
Los Angeles, CA 90071
Telecopy: (213) 243-3552
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<PERIOD-END> SEP-29-1996
<FISCAL-YEAR-END> DEC-31-1996
<CASH> 18,012
<SECURITIES> 0
<RECEIVABLES> 115,773
<ALLOWANCES> (29,946)
<INVENTORY> 94,066
<CURRENT-ASSETS> 256,010
<PP&E> 55,372
<DEPRECIATION> (27,487)
<TOTAL-ASSETS> 334,263
<CURRENT-LIABILITIES> 75,068
<BONDS> 0
0
0
<COMMON> 215
<OTHER-SE> 206,671
<TOTAL-LIABILITY-AND-EQUITY> 334,263
<SALES> 450,641
<TOTAL-REVENUES> 450,641
<CGS> 305,129
<TOTAL-COSTS> 305,129
<OTHER-EXPENSES> 129,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,814
<INCOME-PRETAX> 15,701
<INCOME-TAX> (11,712)
<INCOME-CONTINUING> 27,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,413
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
