Exhibit 10.4

 

Execution Version

 

SECOND AMENDMENT TO AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT

 

 

THIS SECOND AMENDMENT TO AMENDED AND RESTATED SECOND LIEN CREDIT AGREEMENT (this
“Amendment”), is entered into as of November 4, 2015, and shall become effective
retroactively as of September 30, 2015 upon satisfaction of the closing
conditions set forth in Section 2.1, among SEQUENTIAL BRANDS GROUP, INC., a
Delaware corporation (the “Borrower”), the Guarantors; each lender from time to
time party hereto (collectively, the “Lenders” and individually, a “Lender”);
and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Administrative Agent and
Collateral Agent (collectively, with any successor thereto, the “Agent”).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Agreement (as defined below).

 

WITNESSETH

 

WHEREAS, the Borrower, certain banks and financial institutions from time to
time party thereto and Agent are parties to that certain Amended and Restated
Second Lien Credit Agreement, dated as of April 8, 2015 (as amended by that
certain Incremental Joinder Agreement, First Amendment to Amended and Restated
Second Lien Credit Agreement and Waiver, dated as of September 11, 2015, and as
may be further amended, modified, extended, restated, replaced, or supplemented
from time to time, the “Credit Agreement”);

 

WHEREAS, the Borrower has requested that the Lenders make certain amendments to
the Credit Agreement in accordance with, and subject to, the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

AMENDMENT TO CREDIT AGREEMENT

 

1.1 Amendment to Section 1.01. Section 1.01 of the Credit Agreement is hereby
amended by:

 

(a)inserting the following definition in appropriate alphabetical order:

 

“Joe’s Holdings” means Joe’s Holdings LLC, a Delaware limited liability company.

 

(b) amending the first and second paragraphs set forth in the definition of the
term “Consolidated EBITDA” by deleting such paragraphs in their entirety and
replacing them with the following in lieu thereof:

 

“Consolidated EBITDA” means, at any date of determination, an amount equal to
Consolidated Net Income of the Borrower and its Subsidiaries on a Consolidated
basis for the applicable measurement period, plus (a) the following to the
extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Interest Charges, (ii) the provision for Federal, state, local and foreign
income Taxes, (iii) depreciation and amortization expense, (iv) fees, expenses
and charges (including restructuring charges, integration costs, net cost
savings and transaction expenses) incurred in connection with (w) any Permitted
Acquisition (of the type referred to in clause (ii) of the definition thereof)
or fees in connection with any Permitted Indebtedness in an amount not to exceed
$5,000,000 in any Fiscal Year of the Borrower, (x) the Simpson Acquisition in an
amount not to exceed $4,000,000 in the aggregate for the twelve-month period
ending on the one year anniversary of the Effective Date, (y) the Galaxy
Transactions in an amount not to exceed $7,500,000 in the aggregate for the
twelve-month period ending August 15, 2016 and (z) the Joe’s Jeans Acquisition
in an amount not to exceed $2,500,000 in the aggregate for the twelve month
period ending September 11, 2016, (v) noncash compensation, (vi) other unusual
or non-recurring expenses reducing such Consolidated Net Income which do not
represent a cash item in such period or any future period, and (vii) management
fees and expenses incurred or paid to Tengram Capital Management L.P. to the
extent permitted to be paid hereunder (in each case of or by the Borrower and
its Subsidiaries for such period), minus (b) the following to the extent
included in calculating such Consolidated Net Income: (i) Federal, state, local
and foreign income tax credits and (ii) all non-cash items increasing
Consolidated Net Income (in each case of or by the Borrower and its Subsidiaries
for such period), all as determined on a Consolidated basis in accordance with
GAAP.

 

  

 

  

Notwithstanding anything to the contrary contained above, for purposes of
determining Consolidated EBITDA for the purposes of calculating the Consolidated
Total Leverage Ratio and the Consolidated Net Leverage Ratio (a) with respect to
any Fiscal Quarter which ends prior to August 15, 2016, Consolidated EBITDA with
respect to GBH for each applicable Fiscal Quarter occurring prior to August 15,
2015 shall be calculated as the greater of (i) $6,250,000 and (ii) Consolidated
EBITDA for GBH for such Fiscal Quarter (on a standalone basis without giving
effect to the Galaxy Brands Merger), (b) with respect to any Fiscal Quarter
which ends prior to April 8, 2017, Consolidated EBITDA with respect to With You
for each applicable Fiscal Quarter occurring prior to April 8, 2016 shall be
calculated as the greater of (i) $3,500,000 and (ii) Consolidated EBITDA for
With You for such Fiscal Quarter (on a standalone basis without giving effect to
the Simpson Acquisition) and (c) with respect to any Fiscal Quarter which ends
on or prior to September 30, 2016, Consolidated EBITDA with respect to Joe’s
Holdings for each applicable Fiscal Quarter occurring on or prior to September
30, 2015 shall be calculated as the greater of (i) $2,000,000 and (ii)
Consolidated EBITDA for Joe’s Holdings for such Fiscal Quarter (on a standalone
basis without giving effect to the Joe’s Jeans Acquisition). For purposes of
determining Consolidated EBITDA as a whole for each applicable Fiscal Quarter
identified in clauses (a), (b) and (c) above, such amounts determined for GBH,
With You and Joe’s Holdings in clauses (a), (b) and (c), as applicable, shall
then be added to the calculation of Consolidated EBITDA for such applicable
Fiscal Quarter for the Borrower (on a standalone basis without giving effect to
the Galaxy Brands Merger, the Simpson Acquisition and/or the Joe’s Jeans
Acquisition, as applicable).

 

1.2 Amendment to Section 7.15. Clause (b) of Section 7.15 of the Credit
Agreement is hereby amended by deleting such clause in its entirety and
replacing it with the following in lieu thereof:

 

(b) Loan to Value Ratio. Permit the Total Outstandings to be greater than 141%
of the Realizable Orderly Liquidation Value of registered Trademarks of the Loan
Parties, DVS and With You, as applicable, as determined pursuant to the most
recent appraisal conducted by or on behalf of the Agent (or the First Lien Agent
and received by the Agent) with respect to such registered Trademarks pursuant
to Section 6.10(b).

 

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ARTICLE II
CONDITIONS TO EFFECTIVENESS

 

2.1 Closing Conditions. This Amendment shall be effective as of the date each of
the following conditions have been satisfied in form and substance reasonably
acceptable to the Lenders (the “Second Amendment Effective Date”):

 

(a) Agent and the Lenders shall have received a copy of this Amendment duly
executed by the Borrower, the Guarantors, the Lenders and Agent;

 

(b) On the date hereof, and after giving effect to this Amendment, the
representations and warranties contained herein shall be true and correct as of
the date hereof and the representations and warranties contained in the Credit
Agreement and the other Loan Documents shall be true and correct in all material
respects as of the date hereof except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects on such earlier date; provided that, in each case, such materiality
qualifier shall not be applicable to any representations or warranties that
already are qualified or modified by materiality in the text thereof; and

 

(c) On the date hereof and after giving effect to this Amendment, no Default or
Event of Default will exist.

 

ARTICLE III
MISCELLANEOUS

 

3.1 Amended Terms. On and after the Second Amendment Effective Date, all
references to the Credit Agreement in each of the Loan Documents shall hereafter
mean the Credit Agreement as amended by this Amendment. Except as specifically
amended hereby or otherwise agreed, this Amendment shall not operate as a waiver
of any right, power or remedy of Agent or Lenders, nor constitute a waiver of
any provision of the Credit Agreement, or any other documents, instruments or
agreements executed and/or delivered under or in connection therewith.

 

3.2 Representations and Warranties of the Borrower. The Borrower represents and
warrants as follows:

 

(a) It has taken all necessary action to authorize the execution, delivery and
performance of this Amendment.

 

(b) This Amendment has been duly executed and delivered by such Person and
constitutes such Person’s legal, valid and binding obligation, enforceable in
accordance with its terms, except as such enforceability may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors’ rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).

 

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(c) No consent, approval, authorization or order of, or filing, registration or
qualification with, any court or governmental authority or third party is
required in connection with the execution, delivery or performance by such
Person of this Amendment.

 

(d) On the date hereof, and after giving effect to this Amendment and the other
Loan Documents the representations and warranties set forth in Article V of the
Credit Agreement are true and correct in all material respects as of the date
hereof except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects on such earlier date;
provided that, in each case, such materiality qualifier shall not be applicable
to any representations or warranties that already are qualified or modified by
materiality in the text thereof.

 

(e) On the date hereof, and after giving effect to this Amendment, no event has
occurred and is continuing which constitutes a Default or an Event of Default.

 

(f) The Security Documents continue to create a valid security interest in, and
Lien upon, the Collateral, in favor of Agent, for the benefit of the Credit
Parties, which security interests and Liens are perfected in accordance with the
terms of the Security Documents and the First Lien Intercreditor Agreement and
prior to all Liens other than Permitted Encumbrances.

 

(g) Except as specifically provided in this Amendment, the Obligations are not
reduced or modified by this Amendment and are not subject to any offsets,
defenses or counterclaims.

 

3.3 Reaffirmation of Obligations. The Borrower hereby ratifies the Loan
Documents and acknowledges and reaffirms (a) that it is bound by all terms of
the Loan Documents applicable to it and (b) that it is responsible for the
observance and full performance of its respective Obligations.

 

3.4 Loan Document. This Amendment shall constitute a Loan Document under the
terms of the Credit Agreement.

 

3.5 Expenses. The Borrower agrees to pay all reasonable costs and expenses of
Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Agent’s legal counsel.

 

3.6 Further Assurances. The Borrower agrees to promptly take such action, upon
the request of Agent, as is necessary to carry out the intent of this Amendment.

 

3.7 Entirety. This Amendment and the other Loan Documents embody the entire
agreement among the parties hereto and supersede all prior agreements and
understandings, oral or written, if any, relating to the subject matter hereof.

 

3.8 Counterparts; Telecopy. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. Delivery of an
executed counterpart to this Amendment by telecopy or other electronic means
shall be effective as an original and shall constitute a representation that an
original will be delivered.

 

3.9 No Actions, Claims, Etc. As of the date hereof, the Borrower hereby
acknowledges and confirms that it has no knowledge of any actions, causes of
action, claims, demands, damages and liabilities of whatever kind or nature, in
law or in equity, against Agent, the Lenders, or Agent’s or the Lenders’
respective officers, employees, representatives, agents, counsel or directors
arising from any action by such Persons, or failure of such Persons to act under
the Credit Agreement on or prior to the date hereof.

 

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3.10 GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS, UNLESS
OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

3.11 Successors and Assigns. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.

 

3.12 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The
jurisdiction, service of process and waiver of jury trial provisions set forth
in Sections 10.14 and 10.15 of the Credit Agreement are hereby incorporated by
reference, mutatis mutandis.

 

3.13 Agent Authorization. Each of the undersigned Lenders hereby authorizes
Agent to execute and deliver this Amendment, the amendment on its behalf and, by
its execution below, each of the undersigned Lenders agrees to be bound by the
terms and conditions of this Amendment.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly
executed on the date first above written.

 

BORROWER: SEQUENTIAL BRANDS GROUP, INC.,               By: /s/ Gary Klein  
Name: Gary Klein   Title: Chief Financial Officer

 

 

 

 

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

AGENT: WILMINGTON TRUST, NATIONAL ASSOCIATION, as Agent               By: /s/
Cora Holland-Koller   Name: Cora Holland-Koller   Title: Banking Officer

 

  

 

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

LENDERS: LOCUST STREET FUNDING LLC   By: FS Investment Corporation, as Sole
Member   By: GSO / Blackstone Debt Funds Management LLC, as Sub-Adviser        
      DARBY CREEK LLC   By: FS Investment Corporation II, as Sole Member   By:
GSO / Blackstone Debt Funds Management LLC, as Sub-Adviser               GREEN
CREEK LLC   By: FS Investment Corporation II, as Sole Member   By: GSO /
Blackstone Debt Funds Management LLC, as Sub-Adviser               LEHIGH RIVER
LLC   By: FS Investment Corporation II, as Sole Member   By: GSO / Blackstone
Debt Funds Management LLC, as Sub-Adviser               JUNIATA RIVER LLC   By:
FS Investment Corporation II, as Sole Member   By: GSO / Blackstone Debt Funds
Management LLC, as Sub-Adviser               DUNLAP FUNDING LLC   By: FS
Investment Corporation III, as Sole Member   By: GSO / Blackstone Debt Funds
Management LLC, as Sub-Adviser               FS INVESTMENT CORPORATION III   By:
GSO / Blackstone Debt Funds Management LLC, as Sub-Adviser               By: /s/
Sean Cort   Name: Sean Cort   Title: Authorized Signatory

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

  ACKNOWLEDGED AND AGREED:         GUARANTORS:         Sequential Licensing,
Inc.         By: /s/ Gary Klein         Name: Gary Klein         Title: Chief
Financial Officer         BELLA ROSE, LLC         By: /s/ Gary Klein        
Name: Gary Klein         Title: Chief Financial Officer         WILLIAM RAST
SOURCING, LLC         By: /s/ Gary Klein         Name: Gary Klein         Title:
Chief Financial Officer         WILLIAM RAST LICENSING, LLC         By: /s/ Gary
Klein         Name; Gary Klein         Title: Chief Financial Officer        
HEELYS, INC.         By: /s/ Gary Klein         Name; Gary Klein         Title:
Chief Financial Officer

 

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

  HEELING MANAGEMENT CORP.         By: /s/ Gary Klein         Name: Gary Klein  
      Title: Chief Financial Officer         HEELING HOLDING CORPORATION        
By: /s/ Gary Klein         Name; Gary Klein         Title: Chief Financial
Officer         HEELING SPORTS LIMITED   By: Heeling Management Corp., as the
General Partner         By: /s/ Gary Klein         Name: Gary Klein        
Title: Chief Financial Officer         By: Heeling Holding Corporation, as the
Limited Partner         By: /s/ Gary Klein         Name: Gary Klein        
Title: Chief Financial Officer         B®AND MATTER, LLC         By: /s/ Gary
Klein         Name: Gary Klein         Title: Chief Financial Officer

 

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

  SBG Revo Holdings, LLC         By: /s/ Gary Klein         Name: Gary Klein    
    Title: Chief Financial Officer         SBG FM, LLC         By: /s/ Gary
Klein         Name; Gary Klein         Title: Chief Financial Officer        
SBG UNIVERSE BRANDS, LLC         By: /s/ Gary Klein         Name: Gary Klein    
    Title: Chief Financial Officer         Galaxy Brands LLC         By: /s/
Gary Klein         Name: Gary Klein         Title: Chief Financial Officer      
  The Basketball Marketing Company, Inc.         By: /s/ Gary Klein        
Name: Gary Klein         Title: Chief Financial Officer         American
Sporting Goods Corporation         By: /s/ Gary Klein         Name: Gary Klein  
      Title: Chief Financial Officer

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]

 

  

 

 

  LNT Brands LLC         By: /s/ Gary Klein         Name: Gary Klein        
Title: Chief Financial Officer         joe’s holdings llc         By: /s/ Gary
Klein         Name; Gary Klein         Title: Chief Financial Officer

 

 

 

[Signature Page to Second Amendment to Amended and Restated Second Lien Credit
Agreement]