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EXHIBIT 10.1
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of April 17, 2001, is made by and between The
Sportsman's Guide, Inc., a Minnesota corporation (the "Borrower"), and Xxxxx
Fargo Bank Minnesota, National Association, f/k/a Norwest Bank Minnesota,
National Association, a national banking association (the "Lender").
Recitals
The Borrower and the Lender have entered into Credit and Security Agreement
dated as of December 27, 1999, as amended by a First Amendment to Credit and
Security Agreement dated as of May 12, 2000, a Second Amendment to Credit
Agreement dated as of August 2, 2000, and a Third Amendment to Credit Agreement
and Waiver of Defaults dated as of March 7, 2001 (the "Credit Agreement").
Capitalized terms used in these recitals have the meanings given to them in the
Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the Credit
Agreement. The Lender is willing to grant the Borrower's request subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined
therein, unless otherwise defined herein. In addition, Section 1.1 of the
Credit Agreement is amended by amending the following definition:
"`Inventory Days' as of any date means the product of (A) the
number of days that have elapsed in the fiscal year as of such date
times (B) the ratio of (i) Inventory at the lower of cost or market
value as of such date to (ii) the fiscal year-to-date cost of goods
sold."
2. Financial Covenants. Sections 6.13, 6.14, 6.15, 6.16, and 7.11 of
the Credit Agreement are hereby amended in their entirety to read as
follows:
"Section 6.13 Maximum Debt to Book Net Worth Ratio. The Borrower
will maintain the ratio of its Debt to its Book Net Worth, determined
as at the end of each Accounting Period ending on or about the dates
listed below, at not more than the ratio set forth opposite such
period:
DATE MAXIMUM DEBT TO BOOK NET WORTH RATIO
---------- ------------------------------------
3/31/2001 2.00 to 1.00
4/30/2001 2.00 to 1.00
5/31/2001 2.00 to 1.00
6/30/2001 2.00 to 1.00
7/31/2001 2.50 to 1.00
8/31/2001 2.50 to 1.00
9/30/2001 2.50 to 1.00
10/31/2001 2.90 to 1.00
11/30/2001 2.25 to 1.00
12/31/2001 2.00 to 1.00
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"Section 6.14 Minimum Month-End Net Income. The Borrower will
achieve, during each Accounting Period, Net Income for such Accounting
Period of not less than (a) $(500,000) for August through June of each
year and (b) $(600,000) for July of each year."
"Section 6.15 Minimum Fiscal Year-To-Date Net Income. The
Borrower will achieve fiscal year-to-date Net Income, determined as of
the end of each Accounting Period ending on or about the dates listed
below, of not less than the amount set forth opposite such date:
DATE MINIMUM FISCAL YEAR-TO-DATE NET INCOME
----------- --------------------------------------
3/31/2001 $(600,000)
4/30/2001 $(800,000)
5/31/2001 $(970,000)
6/30/2001 $(1,175,000)
7/31/2001 $(1,650,000)
8/31/2001 $(1,775,000)
9/30/2001 $(1,675,000)
10/31/2001 $(1,475,000)
11/30/2001 $(100,000)
12/31/2001 $600,000
"Section 6.16 Maximum Inventory Days. The Borrower shall maintain
an Inventory level, determined as of the end of each Accounting Period
ending on or about the dates listed below, of not more than the number
of Inventory Days set forth opposite such date:
Fourth Amendment -2-
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DATE MAXIMUM INVENTORY DAYS
---------- ----------------------
3/31/2001 125
4/30/2001 130
5/31/2001 130
6/30/2001 135
7/31/2001 145
8/31/2001 145
9/30/2001 145
10/31/2001 170
11/30/2001 110
12/31/2001 110
"Section 7.11 Capital Expenditures. The Borrower will not incur
or contract to incur Capital Expenditures of more than $660,000 in the
aggregate in the year 2001."
3. New Covenant Levels. Section 6.17 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"Section 6.17 New Covenants. On or before the end of each fiscal
year of the Borrower, the Borrower and the Lender shall agree on new
covenant levels for Sections 6.13, 6.14, 6.15, 6.16, 6.18 and 7.11 for
periods after such date. The new covenant levels will be based on the
Borrower's projections for such periods and shall be no less stringent
than the present levels."
4. New Financial Covenant. A new Section 6.18 of the Credit Agreement
is hereby added immediately following 6.17 of the Credit Agreement to read
as follows:
"Section 6.18 Minimum Book Net Worth. The Borrower will maintain
its Book Net Worth, determined as of the end of each Accounting Period
ending on or about the dates listed below, of not less than the amount
set forth opposite such date:
DATE MINIMUM BOOK NET WORTH
---------- ----------------------
3/31/2001 $13,000,000
4/30/2001 $12,800,000
5/31/2001 $12,625,000
6/30/2001 $12,425,000
7/31/2001 $11,950,000
8/31/2001 $11,825,000
9/30/2001 $11,925,000
10/31/2001 $12,125,000
11/30/2001 $13,500,000
12/31/2001 $14,200,000
Fourth Amendment -3-
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5. New Compliance Certificate. Exhibit B to the Credit Agreement is
amended to read as Exhibit A attached hereto.
6. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in
full force and effect and shall apply to any advance or letter of credit
thereunder.
7. Conditions Precedent. This Amendment shall be effective when the
Lender shall have received an executed original hereof and such other
matters as the Lender may require.
8. Representations and Warranties. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and
this Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval
by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of
any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to the Borrower, or
the articles of incorporation or by-laws of the Borrower, or (iii)
result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease or instrument
to which the Borrower is a party or by which it or its properties may
be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent
that such representations and warranties relate solely to an earlier
date.
9. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended
hereby; and any and all references in the Security Documents to the Credit
Agreement shall be deemed to refer to the Credit Agreement as amended
hereby.
Fourth Amendment -4-
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10. No Waiver. The execution of this Amendment and acceptance of any
documents related hereto shall not be deemed to be a waiver of any Default
or Event of Default under the Credit Agreement or breach, default or event
of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on
the date of this Amendment.
11. Release. The Borrower hereby absolutely and unconditionally
releases and forever discharges the Lender, and any and all participants,
parent corporations, subsidiary corporations, affiliated corporations,
insurers, indemnitors, successors and assigns thereof, together with all of
the present and former directors, officers, agents and employees of any of
the foregoing, from any and all claims, demands or causes of action of any
kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such person
for or by reason of any act, omission, matter, cause or thing whatsoever
arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
12. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated
thereby, including without limitation all reasonable fees and disbursements
of legal counsel. Without limiting the generality of the foregoing, the
Borrower specifically agrees to pay all fees and disbursements of counsel
to the Lender for the services performed by such counsel in connection with
the preparation of this Amendment and the documents and instruments
incidental hereto.
13. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
an original and all of which counterparts, taken together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
XXXXX FARGO BANK MINNESOTA, THE SPORTSMAN'S GUIDE, INC.
NATIONAL ASSOCIATION
By /s/ Xxxxx Xxxxxxxxxxx By /s/ Xxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxx X. Xxxxxx
Its Vice President Its Chief Financial Officer
Fourth Amendment -5-
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EXHIBIT A TO FOURTH AMENDMENT
TO CREDIT AND SECURITY AGREEMENT
COMPLIANCE CERTIFICATE
To: Xxxxx Xxxxxxxxxxx
Xxxxx Fargo Bank Minnesota, National Association
Date: __________________, 200_
Subject: The Sportsman's Guide, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as of December
27, 1999 (as amended, the "Credit Agreement"), attached are the financial
statements of The Sportsman's Guide, Inc. (the "Borrower") as of and for
________________, 200__ (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and fairly present the Borrower's
financial condition and the results of its operations as of the Reporting Date.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement and attached hereto is a statement of
the facts with respect to thereto. The Borrower acknowledges that pursuant
to Section 2.7(d) the Lender may impose the Default Rate at any time during
the resulting Default Period.
Financial Covenants. I further hereby certify as follows:
1. Maximum Debt to Book Net Worth Ratio. Pursuant to Section 6.13 of the
Credit Agreement, the ratio of the Borrower's Debt to its Book Net Worth , as of
the Reporting Date was _____ to 1.00 which [ ] satisfies [ ] does not satisfy
the requirement that such ratio be not more than ______ to 1.00 on the Reporting
Date as set forth in the table below:
DATE MAXIMUM DEBT TO BOOK NET WORTH RATIO
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3/31/2001 2.00 to 1.00
4/30/2001 2.00 to 1.00
5/31/2001 2.00 to 1.00
6/30/2001 2.00 to 1.00
7/31/2001 2.50 to 1.00
8/31/2001 2.50 to 1.00
9/30/2001 2.50 to 1.00
10/31/2001 2.90 to 1.00
11/30/2001 2.25 to 1.00
12/31/2001 2.00 to 1.00
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2. Minimum Net Income. Pursuant to Section 6.14 of the Credit Agreement,
the Borrower's Net Income during the Accounting Period ending on the Reporting
Date was $___________, which [ ] satisfies [ ] does not satisfy the requirement
that such amount be not less than (a) $(500,000) during August through June of
each year and (b) $(600,000) during July of each year.
3. Minimum Fiscal Year-To-Date Net Income. Pursuant to Section 6.15 of the
Credit Agreement, the Borrower's fiscal year-to-date Net Income as of the
Reporting Date was $____________, which [ ] satisfies [ ] does not satisfy the
requirement that such amount be not less than $_____________ on the Reporting
Date as set forth in the table below:
DATE MINIMUM FISCAL YEAR-TO-DATE NET INCOME
---------- --------------------------------------
3/31/2001 $(600,000)
4/30/2001 $(800,000)
5/31/2001 $(970,000)
6/30/2001 $(1,175,000)
7/31/2001 $(1,650,000)
8/31/2001 $(1,775,000)
9/30/2001 $(1,675,000)
10/31/2001 $(1,475,000)
11/30/2001 $(100,000)
12/31/2001 $600,000
4. Maximum Inventory Days. Pursuant to Section 6.16 of the Credit
Agreement, the turnover rate for Inventory as of the end of the Reporting Date
was
Compliance Certificate A-2
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________ Inventory Days which [ ] satisfies [ ] does not satisfy the
requirement that such amount be not more than _____ on the Reporting Date as set
forth in the table below:
DATE MAXIMUM INVENTORY DAYS
---------- ----------------------
3/31/2001 125
4/30/2001 130
5/31/2001 130
6/30/2001 135
7/31/2001 145
8/31/2001 145
9/30/2001 145
10/31/2001 170
11/30/2001 110
12/31/2001 110
5. Pursuant to Section 6.18 of the Credit Agreement, the Borrower's Book
Net Worth as of the Reporting Date was $_____________, which [ ] satisfies [ ]
does not satisfy the requirement that such amount be not less than $__________
on the Reporting Date as set forth in the table below:
DATE MINIMUM BOOK NET WORTH
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3/31/2001 $13,000,000
4/30/2001 $12,800,000
5/31/2001 $12,625,000
6/30/2001 $12,425,000
7/31/2001 $11,950,000
8/31/2001 $11,825,000
9/30/2001 $11,925,000
10/31/2001 $12,125,000
11/30/2001 $13,500,000
12/31/2001 $14,200,000
6. Capital Expenditures. Pursuant to Section 7.11 of the Credit Agreement,
for the year-to-date period ending on the Reporting Date, the Borrower has
expended or contracted to expend, for Capital Expenditures, $__________________
in the
Compliance Certificate A-3
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aggregate, which [ ] satisfies [ ] does not satisfy the requirement that such
expenditures not exceed $660,000 in the aggregate during such year.
7. Salaries. As of the Reporting Date, the Borrower |_| is |_| is not in
compliance with Section 7.18 of the Credit Agreement concerning salaries.
Attached hereto are all relevant facts in reasonable detail to evidence,
and the computations of the financial covenants referred to above. These
computations were made in accordance with GAAP.
THE SPORTSMAN'S GUIDE, INC.
By ______________________________________
Its _____________________________________
Compliance Certificate A-4
