AMENDMENT NO. 10 TO
LOAN AND SECURITY AGREEMENT AND WAIVER
This Amendment No. 10 to Loan and Security Agreement and Waiver (this
"Amendment") is entered into as of this 24th day of September, 1997, by and
between FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender"), and
GENERAL TEXTILES, a California corporation ("Borrower").
W I T N E S S E T H :
WHEREAS, Borrower and Greyhound Financial Capital Corporation, an
Oregon corporation, predecessor by merger and name change to Lender, entered
into a Loan and Security Agreement dated as of October 14, 1993, as amended by
(i) an Amendment No. 1 to Loan and Security Agreement dated as of July 11, 1994,
(ii) an Amendment No. 2 to Loan and Security Agreement dated as of Xxxxx 00,
0000, (xxx) an Amendment No. 3 to Loan and Security Agreement dated as of July
27, 1995, (iv) an Amendment No. 4 to Loan and Security Agreement dated as of
November 10, 1995, (v) an Amendment No. 5 to Loan and Security Agreement dated
as of April 18, 1996, (vi) an Amendment No. 6 to Loan and Security Agreement
dated as of July 10, 1996, (vii) an Amendment No. 7 to Loan and Security
Agreement dated as of December 31, 1996, (viii) a Letter Agreement dated January
10, 1997 with respect to the establishment of certain letters of credit (ix) an
Amendment No. 8 to Loan and Security Agreement and Waiver dated April 23, 1997
and (x) an Amendment No. 9 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. Loan Agreement. The Loan Agreement is amended as follows:
2.1. Section 1(A) is hereby amended by adding or substituting,
as the case may be, the following definitions:
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"'Advance Rate' means (i) during the period commencing October 1, 1997
through and including October 31, 1997, an amount equal to seventy-five percent
(75.0%); (ii) during the period commencing November 1, 1997 through and
including December 15, 1997, an amount equal to seventy percent (70.0%); and
(iii) at all other times, an amount equal to sixty-five percent (65.0%)."
"'Mowbray Debt' means the settlement obligation of Borrower to Xxxxxxx
Xxxxxxx in the amount of $1,750,000."
"'Temporary Availability' has the meaning given to it in paragraph
2(B)(i)."
"'Tenth Amendment' means that certain Amendment No. 10 to Loan and
Security Agreement between Lender and Borrower dated as of September 24, 1997."
"'Tenth Amendment Effective Date' means September 24, 1997, the date upon
which the Tenth Amendment became effective pursuant to the terms and upon the
conditions thereof."
2.2. Paragraph 2(B) is hereby amended in its entirety to read as follows:
"2(B) Loans. Advances of the Total Facility shall be comprised of the
following:
(i) Inventory Loans. A revolving line of credit consisting of
loans against Borrower's Eligible Inventory ('Inventory Loans') in an
aggregate outstanding principal amount not to exceed the lesser of:
(a) the sum of (1) the amount obtained when the
Advance Rate is multiplied by the value of Borrower's Eligible
Inventory, calculated at the lower of cost or market and determined
on a first-in, first-out basis (and after reserving for Inventory
shrinkage in amounts determined by Lender from time to time in its
sole discretion) minus (2) the aggregate face amount of al
outstanding Letters of Credit; or
(b) Thirty-Five Million Dollars ($35,000,000) minus the sum of
the aggregate outstanding balances of (A) the Capex Note,
(B) the Term Note and (C) the Additional Term Note.
Notwithstanding the foregoing, Availability attributable to that portion of the
Advance Rate exceeding the amount of sixty-five percent (65.0%) (such
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excess being herein the 'Temporary Availability') shall not exceed (x) during
the period commencing October 1, 1997 through and including October 31,
1997, an amount equal to THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
($3,500,000), and (y) during the period commencing November 1, 1997 through and
including December 15, 1997, an amount equal to ONE MILLION SEVEN HUNDRED FIFTY
THOUSAND DOLLARS ($1,750,000).
(ii) Capital Expenditure Line. The Capital Expenditure Line in
such amounts and on such terms as are set forth in the Second Amendment
and in the Capex Note.
(iii) Term Loan. The Term Loan on such terms as are set forth in
the Fifth Amendment and in the Term Note.
(iv) Additional Term Loan. The Additional Term Loan on such terms
as are set forth in the Sixth Amendment and in the Additional Term
Note."
2.3. For all purposes of the Loan Agreement as amended by the Tenth
Amendment, the value of Borrower's Eligible Inventory shall be calculated at the
lower of cost or market and determined on a first-in, first-out basis (and after
reserving for Inventory shrinkage in amounts determined by Lender from time to
time in its sole discretion).
2.4. Paragraph 3(A) is hereby amended in its entirety to read as follows:
"3(A) Interest. Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at a per annum rate of
three-quarters of one percent (0.750%) in excess of the rate of interest
announced publicly by Citibank, N.A., from time to time as its "base rate"
(or any successor thereto), which may not be such institution's lowest
rate (the "Base Rate"); provided, however, that the outstanding and unpaid
principal balance of each of the Capex Note, the Term Note and the
Additional Term Note shall accrue interest at the per annum rate
respectively provided therein; provided further, however, that the
outstanding and unpaid principal balance of any and all loans initially
advanced against Temporary Availability shall accrue interest at the per
annum rate of three percent (3.0%) in excess of the Base Rate. The
interest rate chargeable hereunder shall be increased or decreased, as the
case may be, without notice or demand of any kind, upon the announcement
of any change in the Base Rate. Each change in the Base Rate shall be
effective hereunder on the first day following the announcement of such
change, provided, that a cumulative change of less than one-fourth of one
percent (0.25%) shall not be considered. Interest charges and all other
fees and charges herein shall be computed on the basis of a
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year of 360 days and actual days elapsed and will be payable to Lender in
arrears on the first day of each month hereafter at its address set forth
in Exhibit B of the Original Agreement."
2.5. Borrower acknowledges and agrees that Lender has no obligation to
fund any advance of Term Loan D. Accordingly, each and every reference to each
of "Term Loan D" and "Term Note D" shall be deemed deleted and of no further
effect.
2.6. Paragraph 14(N) is hereby amended in its entirety to read as follows:
"(N) Current Ratio. As of the end of each fiscal month of Borrower,
through and including September 30, 1997, and as of the end of each
quarter thereafter, beginning with the quarter ending October 31, 1997,
maintain a ratio of Current Assets to Current Liabilities of not less than
1.2 to 1.0."
2.7. Paragraph 14(P) is hereby amended in its entirety to read as follows:
"(P) Debt to Net Worth. As of the end of each fiscal month of
Borrower, commencing with the month ending October 31, 1997, maintain a
ratio of Indebtedness to Net Worth of not greater than 1.70 to 1.0. For
the purposes hereof, Net Worth shall not include the Guilford Subordinated
Debt, the New Subordinated Debt, the New Subordinated Notes, the Junior
Subordinated Reorganization Notes, the Subordinated Reorganization Notes,
the Mowbray Debt or any indebtedness of Borrower incurred under or in
connection with real estate leases; further, Net Worth shall be increased
by, and Indebtedness shall be decreased by, the unpaid and outstanding
principal balance of the 6.35MM Debt at the end of the period to be
tested."
2.8. Paragraph 15(I) is hereby amended in its entirety to read as follows:
"15(I) Capital Expenditures. Make or incur any Capital Expenditure
except to the extent set forth in this paragraph. Borrower shall be
permitted to make or incur Capital Expenditures during each fiscal year of
Borrower in an aggregate amount not in excess of the sum of Six Million
Five Hundred Thousand Dollars ($6,500,000); provided that all Capital
Expenditures are made from (A) the proceeds of capital contributions made
by Guarantor to Borrower, (B) the proceeds of Permitted Guarantor
Indebtedness or(C) the proceeds of Permitted Equipment Indebtedness or
(D) working capital representing the proceeds of an advance of the
Inventory Loans; provided further, that before the aggregate amount of
Capital Expenditures incurred by Borrower and by Factory 2-U during any
fiscal year of Borrower exceeds the amount of Three Million Dollars
($3,000,000), Borrower shall establish Availability of not less than Seven
Hundred Thousand Dollars ($700,000) and shall maintain such Availability
for remaining portion of such fiscal year. The Availability required to be
maintained by Borrower pursuant to this paragraph shall be in addition to
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any required Availability which Borrower must establish and maintain
pursuant to other provisions of the Loan Documents. The foregoing covenant
shall be tested monthly."
2.9. Paragraph 22 of the Addendum to the Loan Agreement, entitled "Debt
Service Coverage Ratio", shall be amended to provide that, commencing with the
quarter ending October 31, 1997, each of Senior Contractual Debt Service and
Total Contractual Debt Service covenant compliance shall be tested quarterly,
on a cumulative quarter-to-date rolling basis up to twelve (12) months.
Paragraph 22 of the Addendum to the Loan Agreement shall be further amended to
provide that so long as any of the Obligations remain outstanding and the Loan
Agreement is in effect, Borrower shall maintain a ratio of Operating Cash Flow
to Senior Contractual Debt Service of not less than 1.6 to 1.0. Paragraph 22 of
the Addendum to the Loan Agreement shall be further amended to provide that so
long as any of the Obligations remain outstanding and the Loan Agreement is in
effect, Borrower shall maintain a ratio of Operating Cash Flow to Total
Contractual Debt Service of not less than 1.4 to 1.0.
2.10. 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 Tenth Amendment
Effective Date, or as the same may subsequently be modified, amended, renewed or
restated.
3. Waivers. Provided that the conditions precedent described in Section 6
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 ratio of Current Assets to Current Liabilities,
described in Section 14(N) of the Loan Agreement, through Borrower's fiscal
month ending September 30, 1997, (ii) the covenant with respect to Borrower's
ratio of Indebtedness to Net Worth, described in Section 14(P) of the Loan
Agreement, through Borrower's fiscal month ending September 30, 1997, (iii) the
covenant with respect to Borrower's ratio of Operating Cash Flow to Senior
Contractual Debt Service, described in Paragraph 22 to the Addendum to the Loan
Agreement, through Borrower's fiscal month ending September 30, 1997, and (iv)
the covenant with respect to Borrower's ratio of Operating Cash Flow to Total
Contractual Debt Service, described in Paragraph 22 to the Addendum to the Loan
Agreement, through Borrower's fiscal month ending September 30, 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. Fees. In consideration of Lender's agreement to enter into this
Amendment and to the modification to the Loan Documents and the waivers by
Lender described herein, Borrower agrees to pay on or before the Tenth Amendment
Effective Date the amount of FIFTY THOUSAND DOLLARS ($50,000). Borrower and
Lender acknowledge that Lender may withhold the Fee from the proceeds of the
Total Facility, to the extent the Fee is not paid prior to disbursement thereof.
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5. Subordination Agreement. Borrower is a party to that certain
Standstill and Subordination Agreement dated November 10, 1995, Factory 2-U and
Lender (the "GT Subordination Agreement"). Borrower hereby acknowledges that the
GT Subordination Agreement shall remain in full force and effect notwithstanding
the making of Amendment No. 7 to the Factory 2-U Loan Agreement and
notwithstanding the making of any previous amendments thereto. Borrower restates
and confirms each of Borrower's representations and warranties set forth the GT
Subordination Agreement as if made on the date hereof.
6. Conditions Precedent. This Amendment, and the waivers described in
Section 3 above, will not be effective unless and until each of the following
conditions 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;
(vi) Such other items as Lender may require or deem necessary.
(b) Lender and Factory 2-U shall have executed an Amendment
No. 7 to the Factory 2-U 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.
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(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.
(f) Borrower shall have paid the Fee.
7. Indebtedness Acknowledged. Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and agrees to pay
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 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.
8. 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.
9. 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.
10. 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.
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11. 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.
12. 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.
13. Choice of Law. The Loan Documents and this Amendment shall be
performed and construed in accordance with the laws of the State of Arizona.
14. 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.
15. 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, successor-by-merger to Greyhound
Financial Capital Corporation, an Oregon corporation
By: /s/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Vice President
GENERAL TEXTILES, a California 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. 10 to Loan and Security Agreement and
Waiver (the "Tenth 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 Tenth 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 Tenth 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 Tenth
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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