EXHIBIT 99.2
IMAGINE INVESTMENTS, INC.
0000 XXXXX XXXXXXX XXXXXXXXXX
XXXXX 0000
XXXXXX, XXXXX 00000
December 8, 2003
Wickes Inc.
000 X. Xxxxxxxx Xxxxx,
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attn: President and Board of Directors
Amended and Restated Letter Agreement
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Gentlemen:
This letter agreement amends and restates the letter agreement dated
October 1, 2003 between Imagine Investments, Inc. ("Imagine") and Wickes Inc.
("Wickes") regarding the obligation of Imagine to provide up to $10.5 million of
financing to Wickes. The parties have determined to modify the financing
proposal set forth in the October 1, 2003 letter from Imagine to Wickes (the
"Original Letter") to a loan participation arrangement pursuant to which Imagine
will purchase a 100% participation interest from Xxxxxxx Xxxxx Capital, a
division of Xxxxxxx Xxxxx Business Financial Services, Inc. ("Xxxxxxx") in an
additional term loan of up to $10.5 million (the "Additional Term Loan") to be
made by Xxxxxxx, as a lender, to Wickes under the terms of the Credit Agreement
dated February 26, 2003 (as heretofore or hereafter amended, modified and
supplemented from time to time, the "Credit Agreement"). The terms and
conditions of this letter agreement govern Imagine's obligation to purchase a
participation interest in the Additional Term Loan (the "Participation
Interest"), including Wickes' issuance of a warrant (as provided for in
Paragraph 6 hereof) to Imagine as inducement to acquire the Participation
Interest. Capitalized terms used herein which are not otherwise defined shall
have the meanings given such terms in the Credit Agreement.
1. Amount and Nature of Additional Term Loan. The amount of the Additional
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Term Loan shall not exceed $10.5 million and the amount of the Additional Term
Loan shall be limited to the amount necessary to fund the cash portion of the
Offer to Exchange described in that certain Offering Memorandum issued by Wickes
dated November 4, 2003 (the "Offer"). The purchase price for the Participation
Interest shall equal the principal amount of the Additional Term Loan. The
Additional Term Loan shall be a last-out, subordinated loan, the repayment of
which is subject to payment in full of all other Loans under the Credit
Agreement; provided, however, that payment of interest on the Additional Term
Loan and reimbursement of ordinary course, pre-default expenses to Imagine shall
be permitted to be made to Imagine on a current basis.
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2. Term. The Additional Term Loan shall come due on the earlier of (a)
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February 26, 2007, or (b) the date on which Agent or the Required Lenders elect
to terminate the Revolving Loan Commitment pursuant to Section 9.2 of the Credit
Agreement. The Additional Term Loan may not be prepaid without the consent of
all the Lenders unless all Obligations under the Credit Agreement (other than
the Additional Term Loan) have been paid in full and all commitments to lend
thereunder have been terminated. Notwithstanding the foregoing, Imagine may
effect a repayment of all or any portion of the balance (including accrued
interest) of the Additional Term Loan, on a dollar-for-dollar basis, by offset
against the exercise price of the "Warrant" described in Paragraph 6 hereof as
long as Imagine holds all right, title and interest in and to such Warrant and
Imagine will be authorized by Xxxxxxx to exercise such offsets as if Imagine was
the direct Lender of the Additional Term Loan under the Credit Agreement.
3. Interest Rate. The Additional Term Loan shall bear interest at the rate
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of 10% per annum, payable monthly.
4. Security. The Additional Term Loan shall be secured by a lien on all the
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same collateral that presently secures the other Loans under the Credit
Agreement, including a mortgage lien on all real estate and a security interest
in all accounts receivable, inventory, general intangibles, machinery,
equipment, deposit accounts, intellectual property and all other tangible and
intangible personal property of Wickes and its subsidiaries. Imagine shall not
have any obligation to make the Additional Term Loan unless (i) the value, as of
the closing of the Additional Term Loan, of Wickes' Eligible Accounts plus
Wickes' Eligible Inventory exceeds the sum of (a) the Revolving Loan
Outstandings plus (b) the outstanding balance of the Term Loan, by at least
$22,000,000; and (ii) the value of Wickes' "good and current" inventory and
accounts receivable, as calculated using generally accepted accounting
principles using the most recent information reasonably available, exceeds the
sum of (a) the Revolving Loan Outstandings plus (b) the outstanding balance of
the Term Loan, by at least $30,000,000 as of the date of closing. The definition
of "Borrowing Base" in the Credit Agreement shall be amended such that in no
event will the Borrowing Base exceed amount by which (a) the "Indenture Limit"
exceeds (b) the then outstanding principal balance of the Additional Term Loan,
where the "Indenture Limit" is a dollar amount equal to the sum of (i) 95% of
the net book value of Borrower's Accounts plus (ii) 75% of Borrower's Inventory.
Wickes represents and warrants to Imagine that, as of December 2, 2003, the
value of Wickes' Eligible Inventory and Eligible Accounts is approximately $98
million, that the value of its "good and current" inventory and accounts
receivable, as calculated using generally accepted accounting principles using
the most recent information reasonably available, is approximately $106 million,
and that the sum of the Revolving Loan Outstandings plus the outstanding balance
of the Term Loan is $61,193,730.88.
5. Covenants. The Additional Term Loan and the acquisition of the
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Participation Interest shall be documented in a manner consistent with
commercial loans and participations of this size and nature. As part of such
documentation (i.e. pursuant to the Amended Credit Agreement, as defined in
Paragraph 8 hereof), Wickes and its subsidiaries shall restate all the
representations and warranties contained in the Credit Agreement as of the
closing of the Additional Term Loan, and Wickes agrees in advance that Imagine
may rely on such representations and warranties. The loan documents and
documentation pertaining to the Participation Interest shall contain numerous
affirmative and negative covenants, all of which must be satisfactory to
Imagine.
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6. Warrant. In consideration of Imagine's agreement to purchase the
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Participation Interest, Wickes shall issue to Imagine a warrant (the "Warrant")
to purchase, at an exercise price of $1.00 per share, a number of shares of
common stock of Wickes equal to the principal amount of the Additional Term
Loan, upon the closing of the acquisition of the Participation Interest. The
Warrant shall terminate on the later of (a) thirty days after receipt by Imagine
of written notice from Wickes that the Additional Term Loan has been paid in
full (provided it has, in fact, been paid in full), or (b) February 26, 2008.
Wickes shall authorize the creation of a sufficient number of common shares and
shall agree to reserve such shares for the potential exercise of the Warrant
into shares of common stock of Wickes. Imagine shall not have any obligation
whatsoever to exercise the Warrant. If, prior to the exercise of the Warrant,
Wickes issues any other shares of its common stock, or any instrument
convertible into shares of its common stock, or any options, warrants, preferred
shares, rights or the like to purchase shares of common stock of Wickes (except
for the grant of options to officers, directors and employees of Wickes to
purchase up to 1,000,000 shares of common stock, and the exercise of such
options by, officers, directors or employees of Wickes; provided, however, that
such options may not be exercised if and to the extent the exercise thereof
would result in a reduction of Imagine's, Consolidated National Corporation's,
and Xxxxxx X. Xxxx'x collective beneficial ownership interest of the outstanding
common stock of Wickes to less than 50.1% (excluding all warrants), unless
Imagine agrees otherwise in writing), at a price of less than $2.00 per common
share of Wickes (excluding the issuance of (a) convertible debt in exchange for
Subordinated Notes pursuant to the "Offer" referenced in Paragraph 7 hereof, and
(b) rights, pursuant to a rights offering to the then existing shareholders of
Wickes, to purchase shares of Wickes on an adjusted basis for $1.00 or more per
share, as adjusted, which rights must be issued and exercised between the date
hereof and December 15, 2004), the exercise price shall be automatically reduced
and the number of shares of common stock of Imagine issued upon exercise of the
Warrant shall be automatically increased so that the number of shares of common
stock issuable to Imagine upon exercise of the Warrant shall represent the same
percentage of issued and outstanding shares of common stock, and for the same
aggregate consideration, that would have been issuable to Imagine (calculated on
a fully diluted basis) if such shares, convertible debt, options, warrants,
preferred shares, rights or the like to purchase shares of common stock had not
been issued at a price of less than $2.00 per share. Wickes shall grant Imagine
customary demand and piggyback registration rights with respect to all of the
shares of Wickes common stock issued pursuant to the exercise of the Warrant, if
it should occur, as well as all other shares of common stock of Wickes owned by
Imagine. In addition to the anti-dilution provisions described above, the
agreements pertaining to the Warrant shall contain standard anti-dilution
provisions with respect to such Wickes shares.
7. Use of Proceeds. The Additional Term Loan proceeds shall not be advanced
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until, and shall be used solely for the purpose of funding, the cash portion of
the Offer to Exchange described in the Offer. It shall be an additional
condition to Imagine's obligation to acquire the Participation Interest that at
least 95% of the Subordinated Notes (by dollar amount) shall have been
reacquired by Wickes and cancelled, simultaneously with the funding of the
Additional Term Loan. It shall be within the sole discretion of Imagine whether
to waive this condition and any other of the conditions with respect to the
acquisition of the Participation Interest. Imagine's obligation to acquire the
Participation Interest is further conditioned on there being no change in the
terms of the Offer after the date hereof without the written consent of Imagine,
which consent may be withheld for any reason.
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8. Conditions. In addition to other conditions referenced herein, the
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occurrence of each of the following shall be a condition to Imagine's obligation
to acquire the Participation Interest: (a) Imagine shall have reviewed and shall
be satisfied in all respects with Wickes' financial condition and that no
material adverse change shall have occurred with respect to Wickes since the
date of the most recent financial statements issued prior to the Original
Letter; (b) Imagine shall be satisfied that Section 203 (and the other
provisions) of the Delaware Corporation Laws does not prohibit or adversely
affect the ability of Imagine, Xxxxxx X. Xxxx, or their affiliates to vote any
shares of Wickes that may be currently held by any of them or the shares of
Wickes that they may acquire upon exercise of the Warrant with respect to all
matters whatsoever, including the receipt of a legal opinion from counsel to
Wickes acceptable to Imagine in connection with such matter; (c) Wickes shall
have obtained all necessary consents and approvals, including but not limited to
the consent of the Agent and the Lenders, in form and substance satisfactory to
Imagine; (d) Wickes shall have supplied all its financial information and other
data to Imagine promptly upon request and Imagine shall have approved the same
in its sole discretion; (e) Wickes, Agent and the Lenders shall have executed
and delivered an "Amended and Restated Credit Agreement," in form and substance
satisfactory to Imagine ("Amended Credit Agreement"), that provides for the
Additional Term Loan in a manner that is consistent with all the terms and
conditions set forth in this letter agreement; (f) all the terms and conditions
of the documentation for the acquisition of the Participation Interest and the
making of the Additional Term Loan, including but not limited to the terms of
the Amended Credit Agreement and a "Subordinated, Last-Out Participation
Agreement" between Xxxxxxx and Imagine, shall be consistent with the terms and
conditions set forth in this letter agreement and shall otherwise be acceptable
to Imagine in its sole discretion; (g) all title insurance policies and
down-date endorsements, UCC financing statements, and mortgages and other
collateral agreements and instruments securing the Additional Term Loan must be
sufficient, in Imagine's sole judgment, to secure adequately the Additional Term
Loan in a manner consistent with secured commercial loans of this size and
nature; (h) counsel to Wickes shall have furnished an opinion letter to Agent
and the Lenders containing opinions on corporate matters, enforceability of loan
documents and such other matters as Imagine reasonably requires, which opinion
letter shall contain language authorizing reliance thereon by Imagine; and (i)
the Additional Term Loan must be funded by Xxxxxxx no later than December 15,
2003; otherwise Imagine may cancel this commitment without liability to Wickes
or anyone else.
9. Loan Documentation; Imagine's Costs and Expenses. Wickes agrees to
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promptly pay the fees and expenses incurred by Imagine (including Imagine's,
Agent's and Lenders' attorneys' fees and expenses) in conjunction with (a)
negotiating and documenting the Additional Term Loan, the acquisition of the
Participation Interest, and the issuance of the Warrant, whether or not the
Additional Term Loan is ever funded or the Participation Interest is acquired by
Imagine; (b) the continued administration of the Additional Term Loan, the
Participation Interest, the Warrant and all documents related thereto, including
any amendments, modifications, consents and waivers to and/or under any and all
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such documents; and (c) all costs and expenses of Imagine in connection with any
workout, collection, bankruptcy, insolvency and other enforcement proceedings
under the Financing Documents or the documents governing the Participation
Interest. On the closing date for the Additional Term Loan, and on a current
basis before such closing date, as a condition to Imagine's obligations
hereunder, Wickes shall have paid and shall pay all fees and expenses of Imagine
(including attorneys' fees and expenses) incurred through the closing date and
shall sign a letter agreement substantially in the form attached hereto as
Exhibit A and incorporated herein by reference.
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10. Confidentiality and Public Announcements. Except as required by
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applicable law or the rules of any stock exchange or Nasdaq, neither party
hereto shall disclose or permit their respective officers, directors,
representatives, agents or employees to disclose the terms of this letter to any
third party without the prior written consent of the other party hereto;
provided, however, Imagine may make such disclosure to any of its affiliates and
to Consolidated National Corporation and its affiliates; and further provided,
that both parties hereto may make such disclosure to their respective lawyers,
accountants and consultants and to Xxxxxxx and the Lenders.
11. Applicable Law. This letter agreement shall be governed by and
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construed and enforced in accordance with the internal laws of the State of
Illinois without giving effect to the principles of conflicts of law thereof.
12. Entire Agreement; Modification. This letter agreement contains the
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entire understanding between the parties with respect to the subject matter
hereof and supercedes the Original Letter and any prior or contemporaneous
understanding or written or oral agreements between them respecting such subject
matter. No amendment or modification hereto shall be effective unless made in
pursuant to a writing signed by both parties hereto.
If Wickes desires to accept this commitment for Imagine to acquire the
Participation Interest as outlined in this letter agreement, please countersign
a copy of this letter where indicated below and return it to me at the address
set forth above by no later than December 8, 2003.
We look forward to hearing from you regarding this matter.
Very truly yours,
Imagine Investments, Inc.
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, President
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Wickes hereby accepts this commitment for Imagine to acquire the
Participation Interest as outlined in this letter and agrees that it is legally
bound by the terms of this letter.
Wickes Inc.
By: /s/ Xxxxx X'Xxxxx
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Xxxxx X'Xxxxx
Title: President
Date: December 10, 2003
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EXHIBIT A
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Side Letter
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IMAGINE INVESTMENTS, INC.
Suite 1901
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxx, Xxxxx 00000
December __, 2003
Wickes Inc.
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Side Letter
Re: Imagine's participation in Wickes' $10,500,000 loan from Xxxxxxx Xxxxx
Capital
Gentlemen:
On the date hereof, Imagine Investments, Inc. ("Imagine") has entered into
that certain Subordinated, Last-Out Participation Agreement (the "Participation
Agreement") with Xxxxxxx Xxxxx Capital, a division of Xxxxxxx Xxxxx Business
Financial Services Inc. ("Xxxxxxx") and has agreed to advance, through a
participation structure described therein, the amount of up to $10,500,000,
which funds are to be used by Wickes Inc. ("Wickes") solely in connection with
its exchange offer relating to the 10% Convertible Notes due 2007 (the "New Swap
Transaction" as defined in the Participation Agreement). Xxxxxxx has agreed to
lend such amount as an advance under Wickes' existing senior credit facility,
pursuant to the terms of that certain Amended and Restated Credit Agreement,
dated as of the date hereof, among Xxxxxxx, Wickes and the Lenders (the "Amended
Credit Agreement"). Capitalized terms used herein which are not otherwise
defined shall have the meanings given such terms in the Amended Credit
Agreement.
In consideration for Imagine's agreeing to advance said funds for Wickes'
benefit pursuant to the terms of the Participation Agreement and the Amended
Credit Agreement and for other good and valuable consideration, Wickes hereby
agrees as follows:
1. Imagine's Consent Required for Certain Actions. Without the prior
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written consent of Imagine, (a) so long as Imagine, Xxxxxx X. Xxxx, Consolidated
National Corporation and/or each of their affiliates collectively beneficially
own in excess of [40%] of the voting capital stock of Wickes, neither Wickes nor
its subsidiaries shall enter into any material modification or amendment of the
Amended Credit Agreement or any of the Financing Documents that would materially
and adversely affect Imagine's rights as a participant under the Amended Credit
Agreement; and (b) neither Wickes nor its subsidiaries shall obtain any loans,
advances or other extensions of credit from the Agent, the Lenders or any other
person, other than those expressly permitted by the terms of the Amended Credit
Agreement (without giving effect to any amendments thereof) and other than loans
that are not secured by any of the Collateral or, if secured by any of the
Collateral, are fully subordinate (both as to repayment and collateral ranking)
to the Additional Term Loan.
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2. Costs and Expenses. Wickes hereby agrees to promptly pay:
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1. all reasonable costs and expenses of Imagine (including, but
not limited to, legal and accounting costs and expenses) in connection
with the examination, review, due diligence investigation,
documentation, negotiation and closing of the transactions
contemplated by the Warrant Agreement, Registration Rights Agreement,
Participation Agreement, the Amended Credit Agreement and the
Financing Documents (collectively, the "Loan Documents"), and in
connection with the continued administration of the Loan Documents,
including any amendments, modifications, consents and waivers to
and/or under any and all Loan Documents; and
2. all costs and expenses of Imagine (including, but not limited
to, legal and accounting costs and expenses) in connection with any
workout, collection, bankruptcy, insolvency and other enforcement
proceedings under any and all Loan Documents and the Participation
Agreement.
3. Indemnification. Wickes hereby agrees to indemnify, pay and hold
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harmless Imagine and the officers, directors, employees and counsel of Imagine
(collectively, the "Indemnitees") from and against any and all liabilities,
obligations, losses, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever (including the fees
and disbursements of counsel and accountants for such Indemnitee) in connection
with any investigative, administrative or judicial proceeding, whether or not
such Indemnitee shall be designated a party thereto and including any such
proceeding initiated by or on behalf of Wickes, and the reasonable expenses of
investigation by engineers, environmental consultants and similar technical
personnel and any commission, fee or compensation claimed by any broker (other
than any broker retained by Imagine) asserting any right to payment for the
transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the Operative Documents or the Loan
Documents (including (i)(A) as a direct or indirect result of the presence on or
under, or escape, seepage, leakage, spillage, discharge, emission or release
from, any property now or previously owned, leased or operated by Wickes, any
Subsidiary or any other Person of any Hazardous Materials or any Hazardous
Materials Contamination, (B) arising out of or relating to the offsite disposal
of any materials generated or present on any such property or (C) arising out of
or resulting from the environmental condition of any such property or the
applicability of any governmental requirements relating to Hazardous Materials,
whether or not occasioned wholly or in part by any condition, accident or event
caused by any act or omission of Wickes or any Subsidiary, and (ii) proposed and
actual extensions of credit under the Amended Credit Agreement) and the use or
intended use of the proceeds of the Additional Term Loan, except that Wickes
shall have no obligation hereunder to an Indemnitee with respect to any
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liability resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by final order by a court of competent jurisdiction.
To the extent that the undertaking set forth in the immediately preceding
sentence may be unenforceable, Wickes shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all such indemnified liabilities incurred by the Indemnitees or
any of them.
4. Representations and Warranties. Wickes hereby represents and warrants to
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Imagine that, as of the date hereof, each of the representations and warranties
made in the Operative Documents by each Credit Party is true and correct, and
such representations and warranties are hereby incorporated herein by reference
with the same effect as though set forth in their entirety herein, as qualified
therein, except to the extent that such representation or warranty relates to a
specific date, in which case Wickes hereby represents and warrants that such
representation and warranty was true as of such earlier date. Wickes
acknowledges that Imagine is relying on such representations and warranties in
making its decision to acquire the Participation Interest.
5. Additional Covenant. From the date on which all Obligations under the
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Amended Credit Agreement (other than the Additional Term Loan) have been paid in
full and all commitments to lend thereunder have been terminated, until the
repayment in full of the Additional Term Loan (the "Covenant Period"), Wickes
shall not permit the sum of its Eligible Accounts and Eligible Inventory to be
reduced to an amount less than $22,000,000 and shall not permit the value of its
"good and current" inventory and accounts receivable to be reduced to an amount
less than $30,000,000. Violation of this covenant during the Covenant Period
shall be an "Event of Default" under the Amended Credit Agreement.
6. Section 203. Wickes acknowledges that Section~203 of the Delaware
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Corporation Laws (together with any successor statute, "Section 203") could
affect the rights of persons who have acquired or seek to acquire shares from
Imagine, Consolidated National Corporation, Xxxxxx X. Xxxx, or any of their
respective affiliates in the future ("Transferees," which term shall not be read
to exclude Imagine, Consolidated National Corporation, Xxxxxx X. Xxxx or any of
their respective affiliates). Wickes agrees not to take any action that would
cause the provisions of subsection (a) of Section 203 to apply to any shares now
owned or hereafter acquired by any Transferee without the written consent of
Imagine. In addition, Wickes agrees, upon written request of Imagine, to take
any reasonable action necessary to cause subsection (a) of Section 203 to not
affect the rights of Transferees, including but not limited to causing and
facilitating the adoption and filing of an amendment to the certificate of
incorporation or bylaws to be submitted for shareholder approval, which
amendment shall expressly elect for Wickes not to be governed by Section 203,
and the substance of which amendment must be reasonably acceptable to Imagine.
The fees and expenses relating to such amendments shall be paid for by Wickes.
Wickes' obligations under this Section 6 shall expire on the later of (a)
February 26, 2008, or (b) the date on which Imagine, Consolidated National
Corporation, and Xxxxxx X. Xxxx cease to have, collectively, beneficial
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ownership of at least 15% of the outstanding common stock of Wickes; provided,
that Wickes' obligations under this Section 6 shall never expire with respect to
any proposed transfer between Imagine and Consolidated National Corporation.
7. Notices. Wickes agrees to promptly forward Imagine a copy of (a) any
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written notice Wickes receives under the Amended Credit Agreement, (b) any
written notice, report or other document delivered to Agent or the Lenders
pursuant to subsections g, h, i, k, r, s, or t of Section 4.1 of the Amended
Credit Agreement, and (c) such other notices, reports, financial statements,
information and data as Imagine may reasonably request from time to time.
The terms of this letter may be modified only by a written instrument
signed by the parties hereto.
