EXHIBIT 10.56
February 5, 1997
Empire Industries, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx
RE: CONSENT AND SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Gentlemen:
Reference is made to that certain Loan and Security Agreement
(as amended, the "Loan Agreement") dated as of May 29, 1996 among Empire
Industries, Inc., LaSalle National Bank as collateral agent ("Collateral Agent")
for itself ("LaSalle"), BT Commercial Corporation, as a lender ("BTCC") and each
other lender now or hereafter a party to the Loan Agreement (LaSalle, BTCC and
each such other lender are sometimes collectively referred to as "Lenders"),
BTCC as administrative agent for all Lenders ("Administrative Agent") and all
other Lenders. Borrower has requested that (i) Collateral Agent, Administrative
Agent and Lenders consent to the sale of certain molds listed on Exhibit A
hereto (the "Molds") on the terms set forth in a letter agreement between
Borrower and American Plastic Equipment, Inc. dated as of January 14, 1997 in
the form attached hereto as Exhibit B (the "Letter Agreement") and (ii)
Collateral Agent, Administrative Agent and Lenders agree to amend the Loan
Agreement in certain respects. Agents and Lenders are willing to do so on the
terms and subject to the conditions set forth herein. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Notwithstanding the provisions of Paragraph 12(k) of the
Loan Agreement, Agents and Lenders hereby consent to the sale of the Molds on
terms and conditions set forth in the Letter Agreement; provided, that (i) all
proceeds of the sale of the Molds shall be paid directly to Collateral Agent for
application to the Liabilities in accordance with the terms of the Loan
Agreement, (ii) all notes and security agreements delivered as part of the
purchase price shall be endorsed by Borrower in favor of Collateral Agent and
delivered to Collateral Agent as security for the Liabilities, and (iii) all UCC
financing statements filed by Borrower with respect to the Molds against the
purchaser thereof shall be assigned to Collateral Agent for the benefit of
Agents and Lenders.
2. The covenant contained in Paragraph 12(r) of the Loan
Agreement is hereby waived for Borrower's fiscal year ending December 31, 1996.
The covenants contained in Paragraphs 12(o) and 12(p) of the Loan Agreement are
hereby suspended for the period from October 1, 1996 through April 30, 1997.
Commencing in April, Borrower, Agents and Lenders shall negotiate in good faith
to set new covenant levels for Paragraphs 12(o) and 12(p) beginning
May 1, 1997. In the event that such good faith negotiations do not result in an
agreement of the parties, commencing May 1, 1997 the covenants currently
contained in Paragraphs 12(o) and 12(p) shall be reinstated until such time as
the parties agree to reset such covenants.
3. The Loan Agreement is hereby further amended as follows:
(a) Subparagraph 12(k)(ii) is hereby amended and restated in
its entirety, as follows:
"(ii) sell lease or dispose of any of its assets other than in
the ordinary course of business, provided, that any out of season
close-out sales of Inventory involving Inventory with a cost in excess
of $100,000, sold below Borrower's cost for such Inventory, shall
require the consent of Collateral Agent,"
(b) Paragraph 12 of the Loan Agreement is hereby amended
to add new subparagraphs (s) and (t), as follows:
"(s) As of Sunday of each week, commencing with the week
ending January 19, 1997 through the week ending April 13, 1997 (i) the
total of Borrower's (x) net sales, plus (y) cash receipts, minus (z)
cash disbursements, for the period from January 13, 1996 through such
date, divided by (ii) the number of weeks from the week beginning
January 13, 1997 through such week, shall not be less than the minimum
requirement set forth for such week in the Schedule entitled
"Consolidated Cash Flow Covenant" which was included with the thirteen
(13) week projections delivered by Borrower to Collateral Agent by
letter dated February 4, 1997 (the "13 Week Projections") for such
week;
(t) For each period commencing February 1, 1997 and ending on
the last day of each of February, March and April, respectively, of
1997, Borrower's "Operating Income" shall not be less than the
Operating Income projected for such periods in the one-year projections
delivered by Borrower to Collateral Agent by letter dated February 4,
1997 (the "1 Year Projections") by more than $1,000,000 in the
aggregate at any time plus the amount of any losses from out of season
close-out sales consented to by Collateral Agent; "Operating Income"
being defined as Borrower's Net Income before provision for taxes, plus
Interest Expense during such period."
(c) Paragraph (1) of Exhibit A to the Loan Agreement is
hereby amended and restated in its entirety, as follows:
"(1) LOAN LIMIT: Each Lender, severally and not jointly, agrees to
make its Pro Rata Share of such Loans as Borrower shall
request from time to time from the date hereof, subject to the
terms and conditions set forth in this Agreement, up to the
sum of the following sublimits (the "Loan Limit"):
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(a) Up to eighty-five percent (85%) of the face amount
(less maximum discounts, credits and allowances which
may be taken by or granted to Account Debtors in
connection therewith) of Borrower's Eligible
Accounts; plus
(b) Up to sixty-five percent (65%) of the lower of the
cost or market value of Borrower's Eligible Inventory
consisting solely of finished goods (other than
finished goods which are in transit); plus
(c) Up to fifty percent (50%) of the lower of the cost or
market value of Borrower's Eligible Inventory
consisting solely of finished goods or finished
components of goods which are in transit or Five
Hundred Thousand Dollars ($500,000), whichever is
less; plus
(d) Up to (i) for the period from November 15, 1996
through April 30, 1997, sixty percent (60%) and (ii)
at all other times fifty percent (50%), of the lower
of the costs or market value of Borrower's Eligible
Inventory consisting solely of raw materials less
than one (1) year old; plus
(e) Up to forty percent (40%) of the lower of the cost or
market value of Borrower's Eligible Inventory
consisting solely of work-in-process or Two Million
Dollars ($2,000,000), whichever is less; plus
(f) Subject to Paragraph (2) of this Exhibit A, up to
fifty percent (50%) against the face amount of
commercial Letters of Credit issued by Issuing Bank
for the purpose of purchasing Inventory, provided
that such commercial Letters of Credit are in form
and substance satisfactory to Collateral Agent; plus
(g) Subject to Paragraphs (3)(a) and (3)(c) hereof, up to
Nine Million One Hundred Thousand Dollars
($9,100,000) with respect to Borrower's Equipment;
plus
(h) Subject to Paragraphs (3)(b) and (3)(d) hereof, up to
Three Million Dollars ($3,000,000) with respect to
Borrower's real property located at 000 Xxxxxx
Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx; plus
(i) Subject to Paragraph (3)(f) hereof, up to Eight
Million Five Hundred Thousand Dollars ($8,500,000) as
a special accommodation with respect to the tax
refund owing to Borrower or its Parent; minus
(j) Such reserves as Collateral Agent elects, in its
reasonable discretion, to establish from time to
time, including, without
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limitation, a reserve to pay royalties or other
licensee fees with respect to patents, trademarks and
copyrights licensed by Borrower in connection with
the production or sale of Inventory, in the event
that Collateral Agent becomes aware that such license
fees or royalties are not being paid in a timely
fashion or following the occurrence and during the
continuance of an Event of Default;
provided that the advances at subparagraphs (b), (c), (d), (e)
and (f) above shall in no event exceed the aggregate amount of
Twenty-Five Million Dollars ($25,000,000); and
further provided, that the aggregate amount of Loans
outstanding at any time shall in no event exceed Seventy-Five
Million Dollars ($75,000,000) (the "Loan Limit")."
(d) Paragraph (3) of Exhibit A to the Loan Agreement is hereby
amended and restate subparagraphs (e) and (f) in their entirety, as follows:
"(e) The availability reductions set forth in Paragraphs
(3)(a), (3)(b), (3)(c) and (3)(d) above shall not reduce the Maximum
Loan Amount of any Lender or reduce the aggregate Loan Limit of
Seventy-Five Million Dollars ($75,000,000) set forth in Paragraph (1)
of this Exhibit A.
(f) The availability described in Paragraph (1)(i) above shall
be automatically curtailed by (i) the amount by which Borrower's or its
Parent's tax return prepared by Deloitte & Touche for 1996 evidences a
tax refund to be owing to Borrower or Parent of less than Eight Million
Five Hundred Thousand Dollars ($8,500,000), (ii) the amount of any
proceeds received by Borrower from the refinancing of Borrower's real
property located at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx in
excess of the amount of Borrower's then remaining availability pursuant
to Paragraph (1)(h) above, and (iii) the amount of the net cash
proceeds of any equity contribution received by Borrower or its Parent,
on a dollar-for-dollar basis (or such lesser amount as determined by
Agents and Lenders in their sole discretion); provided, that if such
availability is not reduced to $0 prior to such date as a result of the
foregoing, such availability shall be reduced to $0 on the earlier to
occur of (x) the date any proceeds of the tax refund are received by
Borrower or its Parent and (y) April 30, 1997, and at all times
thereafter. The availability reductions described in this Paragraph
(3)(f) shall not reduce the Maximum Loan Amount of any Lender or reduce
the aggregate Loan Limit of Seventy-Five Million Dollars ($75,000,000)
set forth in Paragraph (1) of this Exhibit A."
(e) Paragraph (6)(a) of Exhibit A is hereby amended and
restated in its entirety, as follows:
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"(a) Unused Line Fee: Borrower shall pay to Collateral Agent,
for the benefit of Lenders, an unused line fee equal to one-half of one
percent (0.50%) per annum, based on a three hundred sixty (360) day
year, of the difference between Seventy-Five Million and No/100 Dollars
($75,000,000) and the average daily loan balance plus the average daily
outstanding face amount of all Letters of Credit. Such fee shall be
fully earned by Lenders and paid to Collateral Agent monthly in arrears
on the last Business Day of each month."
(f) Paragraph (6) of Exhibit A is hereby amended to add a new
subparagraph (d), as follows:
"(d) Restructuring Fee: Borrower shall pay to Collateral
Agent, for the benefit of Lenders a Restructuring Fee as set forth in
that certain Restructuring Fee Letter dated ___________, 1997 between
Borrower and Collateral Agent (the "Restructuring Fee Letter")."
(g) Paragraph (7) of Exhibit A is hereby amended to amend and
restate subparagraph (d) and (e) and to add a new subparagraph (f), as follows:
"(d) Within three (3) Business Days of receipt thereof by
Collateral Agent, payments to be applied to the Unused Line Fee set
forth on Paragraph (6)(a) of this Exhibit A shall be paid to each
Lender in proportion to its Pro Rata Share;
(e) Within three (3) Business Days of receipt thereof by
Collateral Agent, payments to be applied to the Facilities Fee set
forth in Paragraph (6)(c) of this Exhibit A shall be paid to the
parties, and in the amounts set forth in the Fee Letter; and
(f) Within three (3) Business Days of receipt thereof by
Collateral Agent, payment to be applied to the Restructuring Fee set
forth in Paragraph (6)(d) of this Exhibit A shall be paid to each
Lender in proportion to its Pro Rata Share."
(h) Each Lender's Maximum Loan Amount is hereby amended to
be as follows:
LaSalle National Bank $22,058,823.53
BT Commercial Corporation $22,058,823.53
Congress Financial Corporation (Central) $17,647,058.82
The CIT Group/Credit Finance, Inc. $ 8,823,529.41
FINOVA Capital Corporation $ 4,411,764.71
4. This Amendment shall not become effective until (i) this
Amendment is fully executed by all parties hereto, (ii) Borrower executes
replacement Secured Promissory Notes in favor of each Lender in an amount equal
to each such Lender's new Maximum Loan
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Amount, and (iii) Borrower pays to Collateral Agent the portion of the
Restructuring Fee due and owing upon execution hereof pursuant to the
Restructuring Fee Letter.
5. Except as expressly consented to and amended hereby, the
Loan Agreement and Exhibit A thereto remain unchanged and of full force and
effect in accordance with the terms thereof.
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LASALLE NATIONAL BANK, as Collateral Agent
and Lender
By /s/ Xxxxxx Xxxxxxxxxx
Its Senior Vice President
Consented and agreed to this 5th day of February, 1997.
BT COMMERCIAL CORPORATION, as Administrative Agent
and a Lender
By /s/ Xxxxxx Xxxx
Its Associate
CONGRESS FINANCIAL CORPORATION (CENTRAL), as a
Lender
By /s/ Xxxxx Xxxx
Its Vice President
THE CIT GROUP/CREDIT FINANCE, INC., as a Lender
By /s/ Xxxxxxxx Xxxxx
Its Vice President
FINOVA CAPITAL CORPORATION, as a Lender
By /s/ Xxxx Xxxxxxxx
Its Vice President
Accepted and agreed to this 5th day of February, 1997.
EMPIRE INDUSTRIES, INC.
By /s/ Xxxxxxx Xxxxxxx
Its Executive Vice President-Finance
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The undersigned Guarantor hereby acknowledges that it has read the foregoing
amendment and all previous amendments and hereby reaffirms its guaranty of the
obligations of Borrower this 5th day of February, 1997.
EMPIRE OF CAROLINA, INC.
By /s/ Xxxxxxx Xxxxxxx
Its Executive Vice President Finance
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