Exhibit 10.3
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Third Amendment")
is made as of the 31st day of July, 2003 by and among Home Products
International-North America, Inc. ("Borrower"), the lenders who are
signatories hereto ("Lenders"), and Fleet Capital Corporation, a Rhode
Island corporation ("FCC"), as agent for Lenders hereunder (FCC, in such
capacity, being "Agent").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders entered into a certain Loan and
Security Agreement dated as of October 31, 2001 as amended by that certain
First Amendment to Loan and Security Agreement dated June 1, 2003 by and
among Borrower, Agent and Lenders and by that certain Second Amendment to
Loan and Security Agreement dated July 31, 2003 by and among Borrower, Agent
and Lenders (said Loan and Security Agreement, as so amended, is hereinafter
referred to as the "Loan Agreement"); and
WHEREAS, Borrower desires to amend and modify certain provisions of the
Loan Agreement and, subject to the terms hereof, Agent and Lenders are
willing to agree to such amendments and modifications;
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements herein contained, and any extension of credit heretofore, now
or hereafter made by Agent and Lenders to Borrowers, the parties hereto
hereby agree as follows:
1. Definitions. Except as otherwise provided for herein, all
capitalized terms used herein without definition shall have the meaning
given to them in the Loan Agreement.
2. Amended and Additional Definitions. The definition of "Fixed Asset
Component" contained in Appendix A to the Loan Agreement is hereby deleted
and the following is inserted in its stead. The definitions of "Derivative
Obligations," "Fixed Charge Coverage Ratio," "Product Obligations," "Reload
Date," "Reload Option" and "Third Amendment Effective Date," are hereby
inserted in Appendix A to the Loan Agreement.
"Derivative Obligations - every obligation of a Person under
any forward contract, futures contract, exchange contract, swap,
option or other financing agreement or arrangement (including,
without limitation, caps, floors, collars and similar agreement),
the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices.
* * *
Fixed Asset Component _ as of any date Fifteen Million
Dollars ($15,000,000) reduced by Three Hundred Thousand Dollars
($300,000) on each November 1, February 1, May 1 and August 1
occurring from the later of the Third Amendment Effective Date or,
if a Reload Date has occurred, the most recent Reload Date.
* * *
Fixed Charge Coverage Ratio - as defined in Exhibit 8.3 to
the Agreement (as such Exhibit is amended pursuant to the terms of
the Third Amendment).
* * *
Product Obligations - every obligation of Borrower under and
in respect of any one or more of the following types of services
or facilities extended to Borrower by Bank, Agent, any Lender or
any Affiliate of Bank or Agent: (i) credit cards, (ii) cash
management or related services including the automatic clearing
house transfer of funds for the account of Borrower pursuant to
agreement or overdraft, (iii) cash management, including
controlled disbursement services and (iv) Derivative Obligations.
* * *
Reload Date - The date on which Borrower exercises its
"Reload Option" as provided for in Section 4 of the Third
Amendment.
* * *
Reload Option - as defined in Section 4 of the Third
Amendment.
* * *
Third Amendment Effective Date - as defined in Section 9 of
the Third Amendment."
3. Total Credit Facility and Loan and Reserves. Section 1.1.1 of the
Agreement is hereby deleted and the following is inserted in its stead:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. The aggregate amount of the
Revolving Credit Loans to be made by each Lender (such Lender's
"Revolving Credit Loan Commitment"), pursuant to the terms hereof,
shall be the amount set below such Lender's name on the signature
pages hereof. The aggregate principal amount of the Revolving
Credit Loan Commitments is Fifty Million Dollars ($50,000,000).
The percentage equal to the quotient of (x) each Lender's
Revolving Credit Loan Commitment, divided by (y) the aggregate of
all Revolving Credit Loan Commitments, is that Lender's "Revolving
Credit Percentage". Subject to all of the terms and conditions of
this Agreement, each Lender agrees, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to
Borrower from time to time, as requested by Borrower in the manner
set forth in subsection 3.1.1 hereof, up to a maximum principal
amount at any time outstanding equal to the product of (A) the
Borrowing Base at such time minus the LC Amount and reserves, if
any, multiplied by (B) such Lender's Revolving Credit Percentage.
Agent shall have the right to establish reserves in such amounts,
and with respect to such matters, as Agent shall deem necessary or
appropriate, against the amount of Revolving Credit Loans which
Borrower may otherwise request under this subsection 1.1.1,
including, without limitation, with respect to: (i) price
adjustments, rebates, damages, unearned discounts, returned
products or other matters for which credit memoranda are issued in
the ordinary course of Borrower's business; (ii) shrinkage,
spoilage and obsolescence of Inventory; (iii) slow moving
Inventory; (iv) other sums chargeable against Borrower's Loan
Account as Revolving Credit Loans under any section of this
Agreement; (v) amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any Property of
Borrower (other than a Permitted Lien); (vi) amounts owing by
Borrower in connection with Product Obligations; and (vii) such
other matters, events, conditions or contingencies as to which
Agent, in its sole credit judgment, determines reserves should be
established from time to time hereunder. In the event that Agent
establishes any such reserve, Agent shall notify Borrower of such
event and shall discuss with Borrower the facts and circumstances
giving rise to the establishment of any such reserve."
4. Reload Option. Once within each calendar year, Borrower shall have
the option (the "Reload Option") to increase the Fixed Asset Component back
to Fifteen Million Dollars ($15,000,000) by delivering to Agent a written
notice of its election to exercise such option; provided, however, that
Borrower shall not be eligible to exercise the Reload Option unless
(x) Borrower's Fixed Charge Coverage Ratio for the most recently ended
twelve month period equals or exceeds 1.10 to 1; and (y) Borrower has
delivered to Agent a reappraisal of Borrower's Equipment and real Property
evidencing that the net orderly liquidation value of Borrower's Equipment
equals or exceeds Eight Million Dollars ($8,000,000) and that the fair
market value of Borrower's real Property equals or exceeds Ten Million
Dollars ($10,000,000). Said reappraisal must be dated not earlier than 30
days prior to the proposed Reload Date, must be in form and substance
reasonably acceptable to Agent and must be conducted by an appraisal firm
reasonably acceptable to Agent.
5. KMart. Borrower acknowledges and agrees that unless otherwise
consented to by Agent in writing, the maximum amount of Accounts with
respect to which KMart or its Subsidiaries is the Account Debtor included
within Eligible Accounts shall be Fifteen Million Dollars ($15,000,000).
6. Exhibit 8.3. Exhibit 8.3 to the Loan Agreement is hereby deleted
and Exhibit 8.3 attached hereto is inserted in its stead.
7. Consent Fee. In order to induce Agent and Lenders to consent to
increase the Fixed Asset Component to Fifteen Million Dollars ($15,000,000)
as of the Third Amendment Effective Date, Borrower shall pay to Agent for
the ratable benefit of Lenders a consent fee of One Hundred Fifty Thousand
Dollars ($150,000), which consent fee shall be earned and due and payable on
the date hereof.
8. Execution in Counterparts. This Third Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9. Conditions Precedent. This Third Amendment shall become effective
on the satisfaction of each of the following conditions precedent:
(a) Borrower, Agent and Lenders shall have executed and delivered
to each other this Third Amendment; and
(b) Borrower shall have paid to Agent, for the ratable benefit of
Lenders, the One Hundred Fifty Thousand Dollar ($150,000) consent fee.
The date on which all of the conditions precedent to the
effectiveness of this Third Amendment have been satisfied or waived is
hereinafter referred to as the "Third Amendment Effective Date."
10. Notices. Section 12.8 of the Loan Agreement is hereby amended so
that the notice provision for Much Shelist Freed Xxxxxxxxx Xxxxx &
Xxxxxxxxxx PC reads as follows:
Much Shelist Freed Xxxxxxxxx Xxxxx & Xxxxxxxxxx PC
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Facsimile No.: 000-00-0000
11. Continuing Effect. Except as otherwise specifically set out herein,
the provisions of the Loan Agreement shall remain in full force and effect.
(Signature Page Follows)
(Signature Page to Third Amendment to Loan and Security Agreement)
IN WITNESS WHEREOF, this Third Amendment has been duly executed as of
the day and year specified at the beginning hereof.
HOME PRODUCTS INTERNATIONAL-NORTH
AMERICA, INC. ("Borrower")
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive V.P. & CFO
FLEET CAPITAL CORPORATION,
("Agent" and a "Lender")
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: SVP
CONSENTED AND AGREED TO
this 31st day of July, 2003.
HOME PRODUCTS INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive V.P. & CFO
EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
Consolidated Net Income - with respect to any fiscal period, the net
income (or loss) of Borrower determined in accordance with GAAP on a
Consolidated basis; provided, however, Consolidated Net Income shall not
include: (a) the income (or loss) of any Person (other than a subsidiary of
Borrower) in which Borrower or any of its wholly-owned subsidiaries has an
ownership interest unless received in a cash distribution or requiring the
payment of cash; (b) the income (or loss) of any Person accrued prior to the
date it became a Subsidiary of Borrower or is merged into or consolidated
with Borrower; (c) all amounts included in determining net income (or loss)
in respect of the write-up of assets on or after the Closing Date, including
the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP and extraordinary
losses pursuant to the extinguishment of debt, net of the related tax
effects; and (e) gains (or losses) from asset dispositions (other than sales
of inventory).
Consolidated EBITDA - for any period, Consolidated Net Income for such
period plus, without duplication and to the extent reflected as a charge in
the statement of such Consolidated Net Income for such period, the sum of
(a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount and debt issuance costs and commissions, discounts and other
fees and charges associated with Money Borrowed (including the Loans), (c)
depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including,
whether or not otherwise includable as a separate item in the statement of
such Consolidated Net Income for such period, non-cash losses on sales of
assets outside of the ordinary course of business), (f) any other non-cash
charges (including, without limitation, the amount of any non-cash deduction
to Consolidated Net Income as a result of any grant to members of management
of any capital stock of the Borrower), and (g) to the extent not included in
item (e) above, charges or expenses incurred as a result of plant or
facility closures, and minus to the extent included in the statement of such
Consolidated Net Income for such period, the sum of (a) any extraordinary,
unusual or non-recurring income or gains (including, whether or not
otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets
outside of the ordinary course of business), and (b) any other non-cash
income, all as determined on a consolidated basis.
Cash Interest Coverage Ratio - with respect to any fiscal period, the
ratio of (i) Consolidated EBITDA for such period to (ii) Cash Interest
Expense, all as determined in accordance with GAAP.
Cash Interest Expense - with respect to any fiscal period, that portion
of the interest expense incurred for such period payable in cash, as
determined in accordance with GAAP.
Fixed Charge Coverage Ratio - with respect to any period, the ratio of
(i) Consolidated EBITDA for such period minus the sum of (a) any provision
for income taxes payable in cash and included in the determination of net
earnings for such period plus (b) non-financed Capital Expenditures during
such period, to (ii) Fixed Charges for such period, all as determined on a
Consolidated basis and in accordance with GAAP.
Fixed Charges - with respect to any period, the sum of: (i) scheduled
principal payments required to be made during such period in respect to
Indebtedness for Money Borrowed (including the principal portion of
Capitalized Lease Obligations and scheduled principal payments on the Senior
Subordinated Notes), plus (ii) Cash Interest Expense for such period, plus
(iii) Distributions made by Borrower within such period, plus (iii)
$1,200,000, all as determined for Borrower and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.
COVENANTS
Gross Availability - Borrower shall maintain at all times Gross
Availability of at least Five Million Dollars ($5,000,000); provided that if
on January 31, 2004 Borrower, either directly or indirectly through Parent,
has repurchased, redeemed or otherwise retired less than Ten Million Dollars
($10,000,000) in principal of Senior Subordinated Notes, then Borrower shall
maintain at all times after February 1, 2004 Gross Availability of at least
the lesser of (i) Ten Million Dollars ($10,000,000) and (ii) Five Million
Dollars ($5,000,000) plus 50% of the excess of Ten Million Dollars
($10,000,000) over the aggregate amount paid in connection with the
repurchase, redemption or other retirement of Senior Subordinated Notes by
Borrower (either directly or indirectly through Parent) between the Second
Amendment Effective Date and January 31, 2004.
Cash Interest Coverage Ratio - Borrower shall not permit the Cash
Interest Coverage Ratio for any fiscal period listed below to be less than
the ratio set forth opposite such fiscal period in the following schedule:
Fiscal Period Cash Interest Coverage Ratio
------------- ----------------------------
October 1, 2001 to December 31, 2001 0.8 to 1
October 1, 2001 to March 31, 2002 0.9 to 1
October 1, 2001 to June 30, 2002 1.05 to 1
October 1, 2001 to September 30, 2002 1.25 to 1
and each four consecutive fiscal
quarters ending on any December 31,
March 31, June 30 or September 30
thereafter
