AMENDMENT NO. 7 TO
LOAN AND SECURITY AGREEMENT AND WAIVER
This Amendment No. 7 to Loan and Security Agreement and Waiver
(this "Amendment") is entered into as of this 24th day of September, 1997, by
and between FACTORY 2-U, INC., an Arizona corporation ("Borrower"), and FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower and Lender are parties to that certain Loan
and Security Agreement dated as of November 10, 1995, as amended by (i) an
Amendment No. 1 to Loan and Security Agreement and Waiver dated as of Xxxxx 00,
0000, (xx) an Amendment No. 2 to Loan and Security Agreement and Waiver dated as
of Xxxxx 00, 0000, (xxx) an Amendment No. 3 to Loan and Security Agreement and
Waiver dated July 10, 1996, (iv) an Amendment No. 4 to Loan and Security
Agreement and Waiver dated December 31, 1996, (v) an Amendment No. 5 to Loan and
Security Agreement and Waiver dated April 23, 1997 and (vi) an Amendment No. 6
to Loan and Security Agreement dated as of May 30, 1997 (as so amended, the
"Loan Agreement") that evidences a loan from Lender to Borrower; and
WHEREAS, Borrower has asked Lender to modify the Loan
Agreement in accordance with the terms of, and subject to the conditions
contained in, this Amendment and Lender is willing so to amend the Loan
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of these recitals, the
covenants contained in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows:
1. Definitions. Unless otherwise defined in this Amendment,
all capitalized terms used herein, which are defined in the Loan Agreement, have
the same meaning as set forth in the Loan Agreement.
2. Amendments to Loan Agreement. The Loan Agreement is amended
as follows:
2.1 That subsection of that Section of the Schedule
to the Loan Agreement entitled "NEGATIVE COVENANTS (Section 14)", which
subsection is entitled "Capital Expenditures", is hereby amended in its
entirety to read as follows:
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"Capital Expenditures. Borrower shall not make or incur any Capital
Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by
Borrower during any fiscal year would exceed
One Million Six Hundred Thousand Dollars
($1,600,000); provided, however, that before the
aggregate amount of Capital Expenditures
incurred by Borrower and by General Textiles
during any fiscal year of Borrower exceeds the
amount of Three Million Dollars ($3,000,000),
Borrower shall establish Availability of notless
than Three Hundred Thousand Dollars ($300,000)
and shall maintain such Availability for remaining
portion of such fiscal year. The Availability
required to be maintained by Borrower pursuant
to this subsection shall be in addition to any
required Availability which Borrower must
establish and maintain pursuant to other
provisions of the Loan Documents."
2.2. All references to the "Loan Documents" shall be
deemed to refer to any such Loan Documents as the same may be amended
as of the date the conditions precedent to the effectiveness of this
Amendment described in Section 4 have been fulfilled as set forth
therein, or as the same may be subsequently modified, amended, renewed
or restated.
3. Waivers. Provided that the conditions precedent described
in Section 4 hereof are met to the satisfaction of Lender, and subject to the
terms of this Amendment, Lender hereby waives Borrower's non-compliance with (i)
the covenant with respect to Borrower's Capital Expenditures, described in that
subsection of that Section of the Schedule to the Loan Agreement entitled
"NEGATIVE COVENANTS (Section 14)", which subsection is entitled "Capital
Expenditures", for Borrower's fiscal year-to-date period ended July 31, 1997,
and (ii) the covenant with respect to Borrower's consolidated-basis ratio of
Operating Cash Flow to Total Contractual Debt Service, described in that
subsection of that Section of the Schedule to the Loan Agreement entitled
"FINANCIAL COVENANTS (Section 13.14)", which subsection is entitled "Debt
Service Coverage Ratio", for the calendar month ended August 31, 1997. The
waivers set forth in this Section 3 shall be effective only in this specific
instance and for the specific purpose for which given, and Lender's granting of
such waivers shall not entitle Borrower to any further or other waiver in any
similar or other circumstances.
4. Conditions Precedent. This Amendment, and the waivers
described in Section 3 above, will not be effective unless and until each of the
following conditions
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precedent have been satisfied, in form, manner and substance satisfactory to
Lender prior to September 24, 1997:
(a) Borrower shall have delivered or caused to be
delivered to Lender the following documents, all of which shall be
properly completed, executed and otherwise satisfactory to Lender:
(i) This Amendment;
(ii) Consent of Guarantor in the form attached hereto;
(iii) Such acknowledgments, reaffirmations
and consents of third parties as Lender shall deem necessary;
(iv) A corporate resolution of Borrower
approving the transactions contemplated hereby to which it is
a party;
(v) A corporate resolution of Guarantor approving the transactions
contemplated hereby to which it is a party; and
(vi) Such other items as Lender may require or deem necessary.
(b) Lender and General Textiles shall have executed
an Amendment No. 10 to the GenTex Loan Agreement and each condition to
the effectiveness thereof shall have been satisfied other than the
execution of this Amendment.
(c) There shall not then exist an Event of Default or
any act or event which with notice, passage of time, or both would
constitute an Event of Default.
(d) All the representations and warranties of the
Loan Parties in the Loan Documents shall be true and correct, in all
material respects, before and after giving effect to the making of this
Amendment.
(e) Borrower shall have paid all closing costs,
recording fees and taxes, appraisal fees and expenses, travel expenses,
fees and expenses of Lender's counsel, and all other costs and expenses
incurred by Lender in connection with the preparation of, closing of
and disbursement of the advances pursuant to this Amendment, which
costs, fees and expenses may be payable from the first advance made
pursuant to this Amendment.
5. Indebtedness Acknowledged. Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and agrees to pay
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such indebtedness in accordance with the terms of the Loan Documents. Borrower
further acknowledges and represents that no event has occurred and no condition
presently exists that would constitute a breach, default or Event of Default by
Lender under the Loan Agreement or any of the other Loan Documents, with or
without notice or lapse of time.
6. Validity of Documents. Borrower hereby ratifies, reaffirms,
acknowledges and agrees that the Loan Agreement and the other Loan Documents
represent valid, enforceable and collectable obligations of Borrower, and that
Borrower presently has no existing claims, defenses (personal or otherwise) or
rights of setoff whatsoever with respect to the Obligations of Borrower under
the Loan Agreement or any of the other Loan Documents. Borrower furthermore
agrees that it has no defense, counterclaim, offset, cross-complaint, claim or
demand of any nature whatsoever which can be asserted as a basis to seek
affirmative relief or damages from Lender.
7. Reaffirmation of Warranties. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements of
Borrower as set forth in each of the Loan Documents with the same force and
effect as if each were separately stated herein and made as of the date hereof.
Borrower represents and warrants to Lender that, with respect to the financing
transaction herein contemplated, no Person is entitled to any brokerage fee or
other commission and Borrower agrees to indemnify and hold Lender harmless
against any and all such claims.
8. Ratification of Terms and Conditions. All terms, conditions
and provisions of the Loan Agreement, and of each of the other Loan Documents
shall continue in full force and effect and shall remain unaffected and
unchanged except as specifically amended hereby. In the event of any conflict
between the terms and conditions of this Amendment and any of the other Loan
Documents, the provisions of this Amendment shall control. Without limiting the
generality of the foregoing, Borrower reaffirms its obligation to deliver to
Lender Landlord's Consents with respect to all of Borrower's facilities in which
Collateral is or is intended to be kept or maintained and further acknowledges
that Lender has not waived its right to require the delivery of such Landlord's
Consents.
9. Other Writings. Lender and Borrower will execute such other
writings as may be necessary to confirm or carry out the intentions of Lender
and Borrower evidenced by this Amendment.
10. Benefit of the Amendment. The terms and provisions of this
Amendment and the other Loan Documents shall be binding upon and inure to the
benefit of Lender and Borrower and their respective successors and assigns,
except that Borrower shall not have any right to assign its rights under this
Amendment or any of the Loan Documents or any interest therein without the prior
written consent of Lender.
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11. Choice of Law. The Loan Documents and this Amendment shall
be performed and construed in accordance with the laws of the State of Arizona.
12. Entire Agreement. Except as modified by this Amendment,
the Loan Documents remain in full force and effect. The Loan Documents as
modified by this Amendment embody the entire agreement and understanding between
Borrower and Lender, and supersede all prior agreements and understandings
between said parties relating to the subject matter thereof.
13. Counterparts; Telecopy Execution. This Amendment may be
executed in any number of separate counterparts, all of which when taken
together shall constitute one and the same instrument, admissible into evidence,
notwithstanding the fact that all parties have not signed the same counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile shall also deliver a manually executed counterpart of this
Amendment, but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first written above.
FINOVA CAPITAL CORPORATION, a Delaware corporation
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Vice President
FACTORY 2-U, INC., an Arizona corporation
By: /s/ Xxxxxxxx X. Xxxxx
Name: Xxxxxxxx X. Xxxxx
Title: Executive Vice President
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CONSENT OF GUARANTOR
The undersigned ("Guarantor") hereby executes this Consent for
the purpose of (i) evidencing Guarantor's consent to the execution and
performance of the foregoing Amendment No. 7 to Loan and Security Agreement (the
"Seventh Amendment") by Lender and Borrower, (ii) reaffirming the terms of the
Guaranty Agreement executed by Guarantor, (iii) evidencing Guarantor's agreement
that the Borrower's Obligations as set forth in the Guaranty Agreement shall,
for all purposes, include the Loan Documents, as amended by the Seventh
Amendment, and shall further include all additional amounts which may be funded
or advanced to Borrower pursuant to the Loan Agreement described above as
amended by the Seventh Amendment, and (iv) ratifying and affirming all terms and
provisions of the Guaranty Agreement. Except to the extent otherwise indicated,
terms used herein with initial capital letters shall have the meanings set forth
in the Loan Agreement, as amended by the Seventh Amendment.
Guarantor agrees that it has no defense, counterclaim, offset,
cross-complaint, claim or demand of any nature whatsoever which can be asserted
as a basis to seek affirmative relief or damages from Lender.
IN WITNESS WHEREOF, the undersigned has hereunto executed this
Consent as of this 24th day of September, 1997.
FAMILY BARGAIN CORPORATION, a Delaware corporation
By: /s/ Xxxxxxxx X. Xxxxx
Name: Xxxxxxxx X. Xxxxx
Title: Executive Vice President
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