EXHIBIT 10.27

 

AMENDMENT NO. 2

 

TO

 

FINANCING AGREEMENT

 

THIS AMENDMENT NO. 2 (this “Amendment”) is entered into effective as of
December 31, 2006, by and among RAFAELLA APPAREL GROUP, INC., a Delaware
corporation (“Borrower”), VERRAZANO, INC., a New York corporation (“Verrazano”),
HSBC BANK USA, NATIONAL ASSOCIATION (“HSBC”) and the other financial
institutions which are now or which hereafter become a party hereto (each a
“Lender” and collectively, the “Lenders”) and HSBC, as agent for the Lenders (in
such capacity, the “Agent”).

 

BACKGROUND

 

Borrower, Verrazano, Agent and Lenders are parties to a Financing Agreement
dated June 20, 2005 (as amended by Amendment No. 1 to Financing Agreement dated
as of March     , 2006, and as hereafter further amended, restated, supplemented
or otherwise modified from time to time, the “Financing Agreement”) pursuant to
which Agent and Lenders provide Borrower with certain financial accommodations.

 

Borrower has requested that Agent and Lenders amend certain financial covenants
contained in the Financing Agreement, and Agent and Lenders are willing to do so
on the terms and conditions hereafter set forth.

 

NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrower by Agent and
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1.             Definitions.  All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Financing Agreement.

 

2.             Amendment to Financing Agreement.  Subject to satisfaction of the
conditions precedent set forth in Section 3 below, Section 6.8(b) of the
Financing Agreement is hereby amended and restated in its entirety as follows:

 

“(b) Net Income.  Maintain (i) Net Income in excess of $0 during each fiscal
quarter ending on or after September 30, 2005 through and including
September 30, 2006, (ii) Net Income during each fiscal quarter ending on or
after December 31, 2006 in excess of ($3,000,000) (i.e. not suffer a loss of
greater than $3,000,000 in any fiscal quarter) and (iii) Net Income in excess of
$0 during each period of two consecutive fiscal quarters (on a rolling basis)
ending on or after December 31, 2006.”

 

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3.             Condition of Effectiveness.  This Amendment shall become
effective upon receipt by Agent of four (4) copies of this Amendment executed by
Borrower, Verrazano, Agent and Lenders.

 

4.             Representations and Warranties.  Borrower and Verrazano each
hereby represents and warrants as follows:

 

(a)           This Amendment and the Financing Agreement, as amended hereby,
constitute its legal, valid and binding obligations and are enforceable against
it in accordance with their respective terms.

 

(b)           Upon the effectiveness of this Amendment, it hereby reaffirms, in
all material respects, all representations, warranties and covenants made in the
Financing Agreement on and as of the date hereof except:  (i) to the extent such
representation, warranties or covenants are limited by their terms to a specific
date in which case they shall be true and correct in all material respects as of
such date or (ii) for changes in the nature of its business or operations that
may occur after the Closing Date in the ordinary course of business so long as
Agent has consented to such changes or such changes are not in violation of any
provision of the Financing Agreement or any Other Document.

 

(c)           No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment.

 

(d)           It does not have any defense, counterclaim or offset with respect
to the Financing Agreement.

 

5.             Effect on the Financing Agreement.

 

(a)           Upon the effectiveness of Section 2 hereof, each reference in the
Financing Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or
words of like import shall mean and be a reference to the Financing Agreement as
amended hereby.

 

(b)           Except as specifically amended herein, the Financing Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.

 

(c)           The execution, delivery and effectiveness of 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 Financing Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.

 

6.             Governing Law.  This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York.

 

7.             Headings.  Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

 

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8.             Counterparts; Facsimile.  This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed an
original and all of which when taken together shall constitute one and the same
agreement.  Any signature delivered by a party by facsimile or electronic
transmission, including via “pdf” format, shall be deemed to be an original
signature hereto.

 

[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year
first written above.

 

 

RAFAELLA APPAREL GROUP, as a Borrower

 

 

 

 

 

 

 

By:

/s/ Chad J. Spooner

 

 

Name: Chad J. Spooner

 

 

Title: CFO

 

 

 

 

 

 

 

VERRAZANO, INC., as Guarantor

 

 

 

 

By: :

/s/ Chad J. Spooner

 

 

Name: Chad J. Spooner

 

 

Title: Vice President

 

 

 

 

 

 

 

HSBC BANK USA, N.A., as Agent and a Lender

 

 

 

 

By:

/s/ Lisa Augustus

 

 

Name: Lisa Augustus

 

 

Title: Vice President

 

 

 

 

 

 

 

ISRAEL DISCOUNT BANK OF NEW YORK, as

 

a Lender

 

 

 

 

By:

/s/ Matilde Reyes

 

 

Name: Matilde Reyes

 

 

Title: First Vice President

 

 

 

 

 

 

 

 

 

By:

/s/ Dina Tourloukis

 

 

Name: Dina Tourloukis

 

 

Title: Assistant Vice President

 

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