Exhibit 10.4
AMENDMENT DATED JANUARY 6, 2007
TO COMMERCIAL LOAN AND SECURITY AGREEMENT
THIS AMENDMENT DATED JANUARY 6, 2007 TO COMMERCIAL LOAN AND SECURITY
AGREEMENT ("Amendment"), is by and between STANFORD INTERNATIONAL BANK LTD., a
company organized under the laws of Antigua (the "Lender") and SUPERIOR
GALLERIES, INC., a Delaware corporation ("Borrower"), with reference to the
following facts:
R E C I T A L S
A. Pursuant to a Commercial Loan and Security Agreement originally dated
October 1, 2003, as amended as of March 29, 2005 and as further amended on April
7, 2006, Stanford Financial Group Company ("SFG") has provided certain credit
facilities to Borrower. Such Commercial Loan and Security Agreement as amended
to date, is referred to herein as the "Loan Agreement." On November 30, 2004,
the Lender was assigned all of SFG's right, title and interest in the Loan
Agreement and the promissory note issued thereunder.
B. The maximum amount that can currently be borrowed under the Loan
Agreement is $10,850,000. The parties desire to increase the maximum amount that
may be borrowed under the Loan Agreement to $19,892,340.00.
C. The parties to further amend the Loan Agreement in accordance with the
terms and conditions set forth herein.
D. As of the date hereof, the parties have entered into a forbearance
agreement (the "Forbearance Agreement") with respect to certain "Existing
Defaults" under the Loan Agreement, as such term is defined in the Forbearance
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the parties agree as follows:
AGREEMENT
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1. Except as provided in the Forbearance Agreement or any other forbearance
agreement that the Lender may execute from time-to-time, the parties agree that
the maximum amount that may be borrowed under the Loan Agreement is Nineteen
Million Eight Hundred Ninety Two Thousand Three Hundred Forty Dollars
($19,892,340.00). Accordingly, the first sentence of Section 1.1 of the Loan
Agreement is hereby amended to read in full as follows:
"Subject to all the terms and conditions of this Agreement, including
the preconditions to loan advances as herein provided and so long as
there exists no Event of Default nor any event which with the passage
of time, the giving of notice or both would constitute an Event of
Default (other than "Existing Defaults" as defined in the Forbearance
Agreement), Lender will make available to the Borrower a revolving
Commercial Loan in the principal amount of Nineteen Million Eight
Hundred Ninety Two Thousand Three Hundred Forty Dollars
($19,892,340.00) (referred to herein as the "Loan") which Borrower
shall use for borrowing against its inventory and providing loans to
Borrower's customers secured by collateral property consigned to
Borrower for auction or otherwise in Borrower's possession, custody
and control."
2. Consistent with Section 1 above, Borrower shall execute and deliver an
amended and restated promissory note in the form attached hereto as Exhibit "A",
reflecting the increased loan amount. Such amended and restated note shall
replace the currently existing Commercial Note originally dated March 29, 2005,
as amended to date, delivered by the Borrower to Lender under the Loan Agreement
(the "Commercial Note") in the principal amount of $10,850,000.
3. Simultaneously with the execution hereof, the Lender shall make an
advance to the Borrower in the amount of $400,000, along with interest from
January 1, 2007 through the date of this payment (estimated at $137 per day), to
repay certain indebtedness due to an affiliate of the Borrower, which repayment
(including the interest payment) Lender expressly approves and waives any
prohibition on such payments set forth in the Loan Agreement.
4. For purposes of (i) any representation or warranty made or required to
be made by the Borrower, (ii) any condition to which the rights of the Borrower
are subject, (iii) any covenant of the Borrower, or (iv) any certification made
or required to be made by the Borrower; in each case in the Loan Agreement
(including without limitation Section 2.13 thereof) or any of the other
Documents, relating either to the liabilities of the Borrower or to the maximum
amount that is currently available to be advanced to the Borrower under the Loan
Agreement, an amount equal to $8,392,340.00, representing the amount of
outstanding debt of the Borrower under the Loan Agreement to be converted into
shares of common stock of the Borrower in connection with the transactions
contemplated by that certain Amended and Restated Agreement and Plan of Merger
and Reorganization, of even date herewith, by and among DGSE Companies, Inc., a
Nevada corporation, DGSE Merger Corp., a Delaware corporation, the Borrower and
the Lender, as stockholder agent (the "Merger Agreement"), shall be deducted
from the current outstanding principal balance of the Loan.
5. Section 5(b) of the Loan Agreement is hereby amended to read in full as
follows:
"(b) If Borrower shall be in default in the performance of or
compliance with any other term, covenant or condition applicable to it
contained in this Agreement or in any other Documents, and shall have
failed to cure such default for ten (10) days after the sooner to
occur of Borrower's receipt of written notice of such default from the
Lender or the date on which such default first becomes known to any
officer of Borrower;"
6. The following provisions are added as additional "Events of Default"
following Section 5(g):
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(h) A writ of attachment, garnishment execution, distraint or similar
process in excess of $25,000 is issued against Borrower, any Affiliate
of Borrower, or any of their respective properties except for any such
writ of attachment, garnishment execution, distraint or similar
process that is subject to a bona fide dispute by Borrower and is
properly contested by appropriate proceedings promptly instituted and
diligently conducted;
(i) Lender determines, in its sole discretion, that a materially
adverse effect has occurred with respect to the Borrower; as used
herein, "materially adverse effect" means a material adverse effect
occurring after the date of this Amendment on (1) the business,
assets, properties, financial condition, contingent liabilities or
material agreements of Borrower and its Subsidiaries taken as a whole,
(2) the value of the Collateral, (3) the security interest or the
priority of the security interest granted in favor of Lender, (4) the
ability of Borrower to perform any material obligations under the Loan
Agreement or any other Document, or (5) the rights of or benefits
available to Lender under, or the validity or enforceability of, any
Document.
(j) Any judgment or order for the payment of money in excess of
$25,000, or in excess of $100,000 in the aggregate for all such
judgments or orders, is entered against Borrower, unless the same
shall be (1) fully covered by insurance, or (2) vacated, stayed,
bonded, paid or discharged within a period of thirty (30) days from
the date of such judgment or order;
(k) Borrower conceals, removes, or permits to be concealed or removed,
any of its assets with the intent to hinder, delay or defraud the
Lender or any of Borrower's other creditors;
(l) A guarantor, surety or endorser for any of the Obligations
revokes, terminates or fails to perform any of the terms of any
guaranty, endorsement or other agreement of such party in favor of
Lender, or prospectively terminates or revokes such guaranty or
surety;
(m) Any loss, theft, damage or destruction of any item of Collateral
or other property of Borrower which has a materially adverse effect;
or
(n) There is filed against Borrower or any guarantor or other party
liable for any of the Obligations any civil or criminal action, suit
or proceeding under any federal or state racketeering statute
(including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding could
result in the confiscation or forfeiture of any material portion of
the Collateral;
7. Section 18.2 of the Loan Agreement is hereby amended to read in full as
follows:
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18.2 The obligation of the Lender to make each subsequent advance to
be made by it hereunder is subject to the conditions precedent that,
other than "Existing Defaults" as defined in the Forbearance
Agreement:
(a) NO EVENT OF DEFAULT
No Event of Default specified in Section 5 hereof, and no event which
pursuant to the provisions of Section 5 with the lapse of time and/or
notice specified therein would become such an Event of Default, has
occurred and is continuing; and
(b) NO MATERIAL ADVERSE CHANGE
There has been no material adverse change in the consolidated
financial condition of the Borrower or any of the Guarantors and its
or his consolidated subsidiaries; and
(c) REPRESENTATIONS AND WARRANTIES
The Representations and Warranties contained in Section 2 are true and
correct.
The Lender shall have received a certificate of the CEO and CFO of the
Borrower certifying as of the date of the current advance that, other
than "Existing Defaults" as defined in the Forbearance Agreement: (i)
no Event of Default specified in Section 5 hereof exists or is
continuing, (ii) no material change has taken place with regard to its
financial condition as represented to the Lender and (iii) the
Representations and Warranties contained in Section 2 are still true
and correct.
8. To induce Lender to enter into this Amendment, Borrower shall execute
and deliver to Lender a forbearance agreement in form and substance agreeable to
Lender in its sole discretion.
9. Borrower hereby restates, ratifies and reaffirms each and every term,
condition, representation and warranty heretofore made by it under or in
connection with the execution and delivery of the Loan Agreement, as amended
hereby, and the other Documents, as fully as though such representations and
warranties had been made on the date hereof and with specific reference to this
Amendment and the Documents.
10. To induce Lender to enter into this Amendment, Borrower (a)
acknowledges and agrees that no right of offset, defense, counterclaim, claim or
objection exists in favor of Borrower against Lender arising out of or with
respect to the Loan Agreement, the other Documents, the Obligations, or any
other arrangement or relationship between Lender and the Borrower, and (b)
releases, acquits, remises and forever discharges Lender and its affiliates and
all of their past, present and future officers, directors, employees, agents,
attorneys, representatives, successors and assigns from any and all claims,
demands, actions and causes of action, whether at law or in equity, whether now
accrued or hereafter maturing, and whether known or unknown, which Borrower now
or hereafter may have by reason of any manner, cause or things to and including
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the date of this Amendment with respect to matters arising out of or with
respect to the Loan Agreement, the other Documents, the Obligations, or any
other arrangement or relationship between Lender and Borrower.
11. Borrower acknowledges that (a) except as expressly set forth herein,
Lender has not agreed to (and has no obligation whatsoever to discuss, negotiate
or agree to) any restructuring, modification, amendment, waiver or forbearance
with respect to the Obligations or any of the terms of the Documents, (b) no
understanding with respect to any other restructuring, modification, amendment,
waiver or forbearance with respect to the Obligations or any of the terms of the
Documents shall constitute a legally binding agreement or contract, or have any
force or effect whatsoever, unless and until reduced to writing and signed by
authorized representatives of Borrower and Lender, and (c) the execution and
delivery of this Amendment has not established any course of dealing among the
parties hereto or created any obligation or agreement of Lender with respect to
any future restructuring, modification, amendment, waiver or forbearance with
respect to the Obligations or any of the terms of the Documents.
12. To induce Lender to enter into this Amendment and except for the
"Existing Defaults" referred to in the Forbearance Agreement, Borrower hereby
represents and warrants that, as of the date hereof, and after giving effect to
the terms hereof, there exists no Event of Default under the Loan Agreement or
any of the other Documents.
13. Borrower hereby represents and warrants that the undersigned signatory
executing this Amendment on behalf of Borrower has the authority to execute and
deliver this Amendment on behalf of Borrower, and Borrower is authorized to
enter into and perform this Amendment.
14. In consideration of the accommodations made by Lender hereunder,
Borrower agrees to pay to Lender on demand all costs and expenses of Lender in
connection with the preparation, execution, delivery and enforcement of this
Amendment and the other Documents and any other transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and reasonable
out-of-pocket expenses of legal counsel to Lender.
15. Except as modified hereby and in the Amended and Restated Commercial
Note of even date herewith, all terms and conditions of the Loan Agreement and
the Commercial Note shall continue in full force and effect as originally
written, and shall constitute the legal, valid, binding and enforceable
obligation of the Borrower to Lender. In the event of any conflict between the
terms or provisions of this Amendment and the Loan Agreement or the Commercial
Note, then this Amendment shall prevail in all respects.
16. This Amendment may be executed in two counterparts, which taken
together shall be deemed a single instrument. Executed copies of this Amendment
may be delivered by facsimile transmission or other electronic means. The
parties shall execute and deliver any other instruments or documents and take
any further actions after the execution of this Amendment, which may be
reasonably required for the implementation of this Amendment and the
transactions contemplated hereby. Capitalized terms used in this Amendment and
not otherwise defined in this Amendment have the meanings assigned to them in
the Loan Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
BORROWER:
SUPERIOR GALLERIES, INC.
By: /s/ Xxxxxxx XxXxxxxx
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Xxxxxxx XxXxxxxx
Chief Executive Officer
LENDER:
STANFORD INTERNATIONAL BANK LTD.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
Chief Financial Officer
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EXHIBIT "A"
FORM OF AMENDED & RESTATED PROMISSORY NOTE
