Exhibit 10.28


 


AMENDMENT NO. 6


 


TO


 


FINANCING AGREEMENT


 


THIS AMENDMENT NO. 6 (this “Amendment”)
is entered into as of September 30, 2008, 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 31,
2006, Amendment No. 2 to Financing Agreement effective as of December 31,
2006, Consent and Amendment No. 3 dated as of March 4, 2008,
Amendment No. 4 dated as of March 28, 2008, and Amendment No. 5
to Financing Agreement dated as of May 14, 2008, 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 provisions of 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.             Amendments to
Financing Agreement.  Subject to
satisfaction of the conditions precedent set forth in Section 3 below, the
Financing Agreement is hereby amended effective as of September 30, 2008
as follows:


 


(a)           The definitions
of the terms “Availability Reserve”, “Base Rate”, “Inventory Advance Cap”, “Maximum
Direct Debt Sublimit”, “Maximum Loan Amount” and “Revolving Interest Rate”
appearing in Section 1.2 of the Financing Agreement are hereby amended and
restated in their entireties as follows:


 


“Availability Reserve”
shall mean (a) $5,000,000 from April 1, 2006 through May 31,
2008, (b) $10,000,000 from June 1, 2008 through October 31,
2008, (c) $7,500,000 from November 1, 2008 through


 

















 


September 30, 2009 and (d) $10,000,000
from October 1, 2009 through June 20, 2010.


 


“Base Rate” shall
mean, on any date, a variable rate of interest per annum equal to the greater
of (a) the highest of the “prime rate,” “reference rate,” “base rate” or
other similar rate as determined by Agent (or any successor to Agent) announced
from time to time by HSBC (or any successor to HSBC) (with the understanding
that any such rate may merely be a reference rate and may not necessarily
represent the lowest or best rate actually charged to any customer by such
bank), (b) the Federal Funds Rate plus 1⁄2 of 1% and (c) the equivalent
of the Eurodollar Rate for a one month period plus 100 basis points (1%) (for
the avoidance of doubt, with such Eurodollar Rate under this clause (c) being
determined pursuant to the definitions of “Eurodollar Rate” and “Adjusted LIBO
Rate”, each as set forth in this Agreement, with respect to a Eurodollar Rate
Loan and an Interest Period beginning on such date).


 


“Inventory Advance Cap”
shall mean $20,000,000.


 


“Maximum Direct Debt
Sublimit” shall mean $20,000,000.


 


“Maximum Loan Amount”
shall mean $45,000,000.


 


“Revolving Interest Rate”
shall mean an interest rate per annum equal to (a) the Base Rate with
respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus
two and three quarters percent (2.75%) per annum with respect to Eurodollar
Rate Loans.


 


(b)           Section 1.2
of the Financing Agreement is hereby further amended by inserting a definition
of the term “Direct Debt Overadvance Amount” in appropriate alphabetical order
to read as follows:


 


“Direct Debt Overadvance
Amount” shall mean (a) $0 from April 1, 2006 through November 30,
2008, (b) $5,000,000 from December 1, 2008 through February 28,
2009 and (c) $0 from March 1, 2009 through June 20, 2010.


 


(c)           Section 2.1(a) of
the Financing Agreement is hereby amended by deleting the phrase “such Lender’s
Commitment Percentage of the Maximum Direct Debt Sublimit” appearing at the end
of the first sentence thereof and by inserting, in lieu thereof, the following:


 


such Lender’s Commitment Percentage of an amount equal to the lesser of
(x) the Maximum Direct Debt Sublimit and (y) an amount equal to the
sum of (i) the Direct Debt Overadvance Amount plus (ii) the sum,
subject to the provisions of Section 2.1(c), of 85% of Eligible
Receivables.


 


(d)           Section 3.2(a) of
the Financing Agreement is hereby amended (i) by deleting the phrase “multiplied
by two and one-quarter percent (2.25%) per annum” and by


 


2

















 


inserting “multiplied by two and
three-quarters percent (2.75%) per annum” in lieu thereof and (ii) by
deleting the phrase “a fee of $75 for each Air Release/Steamship Guarantee
issued” and by inserting “a fee of $95 for each Air Release/Steamship Guarantee
issued or cancelled” in lieu thereof.


 


(e)           Section 6.8(a) of
the Financing Agreement is hereby amended and restated in its entirety as
follows:


 


(a)           Minimum Working
Capital.  Maintain at all times on and
after September 30, 2008 Working Capital in an amount of not less than
$25,000,000.


 


(f)            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 period of two consecutive fiscal quarters (on a rolling basis)
ending on or after September 30, 2008; provided, further, for each period
of two consecutive fiscal quarters (on a rolling basis) ending on or after September 30,
2008, for purposes of determining compliance with this Section 6.8(b), Net
Income shall be calculated so that, to the extent in calculating Net Income for
such period Net Income was decreased by noncash expenses consisting of (i) amortization
for customer relationships and non-compete agreements, (ii) original issue
discount on the Senior Secured Notes, (iii) deferred financing costs, and (iv) reduction
in value of intangible assets, the amounts which were deducted in calculating
Net Income for such period for the items described in clauses (i) through (iv) above
shall be added back to Net Income as calculated in accordance with GAAP.


 


(g)           The first
sentence of Section 9.12 of the Financing Agreement is hereby amended and
restated in its entirety as follows:


 


Furnish Agent, no later than May 31 of each year, a month by month
projected operating budget and cash flow of Loan Parties on a Consolidated
Basis for the fiscal year to commence on the succeeding July 1 (including
an income statement for each month and a balance sheet as at the end of the
last month in each fiscal quarter and proposed business plan for such fiscal
year including, without limitation, Letter of Credit anticipated to be required
during each such period), such projections to be accompanied by a certificate
signed by the President or Chief Financial Officer of each Loan Party to the
effect that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and
that such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.


 


3

















 


(h)           Section 16.9(b) of
the Financing Agreement is hereby amended by deleting the phrase “limited to
two (2) such field examinations in any calendar year” and by inserting “limited
to one (1) such field examination in any calendar year” in lieu thereof.


 


3.             Condition of
Effectiveness.  This
Amendment shall become effective upon satisfaction of the following conditions
precedent:


 


(a)           Agent shall
have received four (4) copies of this Amendment executed by Borrower,
Verrazano, Agent and Lenders.


 


(b)           Agent shall
have received an administrative fee equal to $50,000 which shall be charged by
Agent to Borrower’s Account and shall be shared pro rata by Lenders based upon
their respective Commitment Percentages.


 


(c)           Agent shall
have received the projections required under Section 9.12 for the fiscal
year of Borrower ending June 30, 2009 and such projections shall be
determined by Agent to be satisfactory in all respects.


 


(d)           All reasonable
out-of-pocket costs and expenses incurred by Agent in connection with this
Amendment or with the Financing Agreement, including without limitation
attorneys fees and disbursements, shall have been paid by Borrower.


 


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.


 


4

















 


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.


 


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.


 


5

















 


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


 


	
   

  	
  RAFAELLA APPAREL GROUP, INC., as

  Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERRAZANO, INC., as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL ASSOCIATION,

  as Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ISRAEL DISCOUNT BANK OF NEW YORK, as

  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title: