EXHIBIT 10.27
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Second Amendment to Credit and Security Agreement is made and
entered into as of this 25th day of March, 1998, by and between DAKOTAH,
INCORPORATED, a South Dakota corporation (herein called "Borrower"), and
Diversified Business Credit, Inc., a Minnesota corporation (herein called
"Lender").
RECITALS
A. Borrower executed and delivered to Lender a Credit and Security
Agreement on June 30, 1997 (the "Credit Agreement").
B. Borrower executed and delivered to Lender the First Amendment to
the Credit and Security Agreement dated as of July 7, 1997 (the "First
Amendment").
C. Borrower and Lender desire to alter, amend and modify the Credit
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. Paragraph 1(d) of the Credit Agreement, as amended, is hereby
deleted therefrom in its entirety and the following is hereby inserted in lieu
thereof as an amendment thereto:
(d) Borrower will pay interest on all outstanding loans advanced
against Borrower's eligible accounts receivable or eligible machinery and
equipment as determined by Lender under this Agreement ("Accounts/Equipment
Loans") at an annual rate (computed on the basis of actual days elapsed in a
360-day year) which shall at all times be equal to the greater of (i) seven and
one-half percent (7.5%) per annum or (ii) one percent (1%) above the rate of
interest publicly announced by National City Bank of Minneapolis from time to
time as its base rate or any similar successor rate (the "Base Rate"). Borrower
will pay interest on all outstanding loans advanced against Borrower's eligible
inventory as determined by Lender under this Agreement ("Inventory Loans") at an
annual rate (computed on the basis of actual days elapsed in a 360-day year)
which shall at all times be equal to the greater of (i) eight and one half
percent (8.5%) per annum, or (ii) three percent (3%) above the Base Rate.
Borrower will pay interest on all outstanding loans under this Agreement other
than Accounts/Equipment Loans or Inventory Loans at an annual rate (computed on
the basis of actual days elapsed in a 360-day year) which shall at all times be
equal to the greater of (i) nine and one-half percent (9.5%) per annum or (ii)
four percent (4%) above the Base Rate. Each change in the interest rate to take
effect simultaneously with the corresponding change in the designated bank's
base rate or any similar successor rate. In no event shall the Borrower pay
interest at a rate greater than the highest rate permitted by law. All interest
shall accrue on the principal balance outstanding from time to time and shall be
payable on the first day of the next month in which accrued and in any event on
demand. Borrower agrees that Lender may at any time or from time to time,
without further request by
Borrower, make a loan to Borrower, or apply the proceeds of any loans, for the
purpose of paying all such interest promptly when due. In the computation of
interest, Lender may allow two (2) banking days for the collection of
uncollected funds.
2. Paragraph 5(h) of the Credit Agreement, as amended, is hereby deleted
therefrom in its entirety and the following is hereby inserted in lieu thereof
as an amendment thereto:
"Earn net income of not less than $100,000.00 for the third fiscal
quarter of each fiscal year, and $100,000.00 for the fourth fiscal quarter of
each fiscal year."
3. Paragraph 5(i) of the Credit Agreement, as amended, is hereby deleted
therefrom in its entirety and the following is hereby inserted in lieu thereof
as an amendment thereto:
"From January 1, 1998 through March 31, 1998, maintain Borrower's book
net worth at amounts in excess of $7,800,000.00 and maintain Borrower's tangible
net worth (excluding all intangible assets designated by Lender) at amounts in
excess of $5,300,000.00.
Beginning April 1, 1998 through June 30, 1998, maintain Borrower's
book net worth at amounts in excess of $7,000,000.00 and maintain Borrower's
tangible net worth (excluding all intangible assets designated by Lender) at
amounts in excess of $4,800,000.00.
Beginning July 1, 1998 through September 30, 1998, maintain Borrower's
book net worth at amounts in excess of $6,900,000.00 and maintain Borrower's
tangible net worth (excluding all intangible assets designated by Lender) at
amounts in excess of $4,900,000.00.
Beginning October 1, 1998, and at all times thereafter, maintain
Borrower's book net worth at amounts in excess of $7,300,000.00 and maintain
Borrower's tangible net worth (excluding all intangible assets designated by
Lender) at amounts in excess of $5,500,000.00.
For the purposes of calculating book net worth and tangible net worth,
debt which has been subordinated to Lender on terms acceptable to Lender shall
be deemed to be equity."
4. Paragraph 6(c) of the Credit Agreement, as amended, is hereby
deleted therefrom in its entirety and the following is hereby inserted in lieu
thereof as an amendment thereto:
"Expend or contract to expend in any one calendar year, more than
$200,000.00 in the aggregate, or more than $100,000.00 in any one transaction,
for the lease, purchase, or other acquisition of any capital asset, or for the
lease of any other asset, whether payable currently or in the future."
5. Except as expressly amended hereby, the Credit Agreement and the
Security Documents (as defined in the Credit Agreement) shall remain in full
force and effect in accordance with their original terms and binding upon and
enforceable against Borrower, and not subject to any defense, counterclaim or
right of setoff.
IN WITNESS WHEREOF, the parties have executed and delivered this
Second Amendment to Credit and Security Agreement as of the day and year first
above written.
DAKOTAH, INCORPORATED
By_____________________________________
Its Chief Financial Officer
DIVERSIFIED BUSINESS CREDIT, INC.
By_____________________________________
Its Vice President
