AMENDED AND RESTATED CREDIT AGREEMENT
NOTICE - CONTAINS WAIVER OF TRIAL BY JURY
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of June 30,
1995 by and among BIG DOG HOLDINGS, INC., a Delaware corporation ("Big Dog
Holdings"), BIG DOG USA, INC. a California corporation ("Big Dog USA") and
FORTUNE DOGS INC., a California corporation ("Fortune Dogs"; and together with
Big Dog Holdings and Big Dog USA, individually and collectively, "Borrowers")
and ISRAEL DISCOUNT BANK LIMITED, LOS ANGELES AGENCY ("Lender").
RECITALS
A. Fortune Dogs and Lender have previously entered into the Original
Documents.
B. Borrowers have requested that Lender amend and restate the terms of the
Original Documents as more fully set forth herein and in the Documents.
C. This Agreement is entered into and will be performed in the State of
California.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Parties hereby agree as follows:
AGREEMENT
1. CERTAIN DEFINITIONS AND INDEX TO DEFINITIONS.
1.1 ACCOUNTING TERMS. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with generally accepted accounting
principles and practices consistently applied.
1.2 DEFINITIONS. The following terms shall have the following
respective meanings:
1.2.1 "ACCEPTANCE" - an acceptance created by a draft drawn
upon Lender under a Letter of Credit.
1.2.2 "ADVANCE" - see section 2.1.
1.2.3 "AFFILIATE" - any Person
1.2.3.1 which directly or indirectly controls, or is
controlled by, or is under common control with Borrowers or any Subsidiary (the
term "control" meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise);
1.2.3.2 which directly or indirectly beneficially owns or
holds fifty percent (50%) or more of any class of voting stock of Borrowers or
any Subsidiary; or
1.2.3.3 Fifty percent (50%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by Borrowers or any
Subsidiary.
1.2.4 "BALANCE SUBJECT TO INTEREST" - the (a) Revolving Loans
Balance, plus (b) payments by Lender on account of Letters of Credit, plus (c)
the Term Loan Balance, plus (d) any other payments made by Lender arising
hereunder for which Borrowers are liable to Lender.
1.2.5 "BORROWERS' ACCOUNT" - any general deposit account of
Borrowers maintained with Lender.
1.2.6 "COLLATERAL" - the property of Borrowers described in any
security agreement securing the Obligations.
1.2.7 "CONTROLLED GROUP" - a "controlled group of corporations"
as defined in Section 1563(a)(4) of the Internal Revenue Code of 1954, as
amended, determined without regard to Section 1563(a) and (e) (3) (c) of such
Code, of which Borrowers is a part.
1.2.8 "CREDIT ACCOMMODATION" - any extension of credit by
Lender to Borrowers hereunder, including the issuance by Lender of Letters of
Credit or the making of any loan.
1.2.9 "DEFAULT RATE" - the Interest Rate plus five (5%) percent
per annum.
1.2.10 "DOCUMENTS" - this Agreement, any riders, supplements and
amendments thereto, and any and all other documents, instruments or agreements
now or hereafter executed and/or delivered in connection with this Agreement,
including but not limited to mortgages, security agreements, assignments,
pledges, subordination agreements or guaranties.
1.2.11 "ERISA" - the Employee Retirement Income Security Act of
1974, as amended.
1.2.12 "EVENTS OF DEFAULT" - see Section 8.
1.2.13 "GUARANTORS" - any and all persons now or hereafter
guaranteeing the Obligations.
-2-
1.2.14 "GUARANTY" - a continuing guaranty in form and content
acceptable to Lender.
1.2.15 "INDEBTEDNESS" (of any Person) - all items of
indebtedness which, in accordance with generally accepted accounting principles
and practices, would be deemed a liability of such Person as of the date as of
which such indebtedness is to be determined and shall also include all
indebtedness and liabilities of others assumed or guaranteed by such Person or
in respect of which such Person is secondarily or contingently liable (other
than by endorsement of instruments in the course of collection) whether by
reason of any agreement to acquire such indebtedness, to supply or advance sums,
or otherwise.
1.2.16 "INTEREST RATE" - three quarters of one (3/4 of 1%)
percent per annum in excess of the rate which Lender publicly announces from
time to time at its headquarters office as its "prime rate" with the
understanding that said prime rate is one of its base rates and serves as a
basis upon which effective rates of interest are calculated for loans making
reference thereto and may not be the lowest of the base rates offered by Lender.
Any change in the Interest Rate shall be effective as of the date of any change
in such prime rate.
1.2.17 "KEY EMPLOYEE" - Xxxxxx Xxxxxxxx.
1.2.18 "LENDING OFFICE" - Lender's office described in the
Section below entitled "Notices".
1.2.19 "LETTER OF CREDIT" - a commercial or standby letter of
credit issued by Lender for the account of Borrowers.
1.2.20 "LETTER OF CREDIT AGREEMENTS" - agreements between
Borrowers and Lender pursuant to which Borrowers requests that Lender issue
Letters of Credit for the account of Borrowers.
1.2.21 "MAXIMUM COMMITMENT" - $5,266,300.00.
1.2.22 "OBLIGATIONS" - all present and future obligations owing
by Borrowers to Lender whether or not for the payment of money, whether or not
evidenced by any note or other instrument, whether direct or indirect, absolute
or contingent, due or to become due, joint or several, primary or secondary,
liquidated or unliquidated, secured or unsecured, original or renewed or
extended, whether arising before, during or after the commencement of any
Bankruptcy Case in which Borrowers are a debtor, including but not limited to
any obligations arising pursuant to letters of credit or acceptance transactions
or any other financial accommodations; and all principal, interest, fees,
charges, expenses, attorneys' fees and accountants' fees chargeable to Borrowers
or incurred by Lender in connection with this Agreement, the other Documents
and/or the transaction(s) related thereto.
-3-
1.2.23 "OBLIGORS" - Borrowers and all Guarantors.
1.2.24 "ORIGINAL CREDIT AGREEMENT" - the Revolving Credit
Agreement, dated as of November 18, 1992, between Fortune Dogs and Lender.
1.2.25 "ORIGINAL DOCUMENTS" - the Original Credit Agreement, the
Original Notes, and any riders, supplements and amendments thereto, and any and
all other documents, instruments or agreements executed and/or delivered in
connection therewith, including, but not limited to mortgages, security
agreements, assignments, pledges, subordination agreements or guaranties.
1.2.26 "ORIGINAL NOTES" - the Revolving Credit Note, dated as of
November 18, 1992, made payable by Fortune Dogs to the order of Lender in the
original principal amount of $1,500,000 and the Promissory Note, dated August 1,
1993, made payable by Fortune Dogs to the order of Lender in the original
principal amount of $416,000.
1.2.27 "PERMITTED LIENS" - (a) liens of Lender; (b) liens for
taxes not delinquent or for taxes being diligently contested in good faith by
Borrowers by appropriate proceedings, subject to the conditions set forth in
section 6.4 of this Agreement; (c) purchase money liens on equipment,
mechanic's, xxxxxxx'x, materialman's, landlord's, carrier's and other like liens
arising in the ordinary course of business with respect to obligations which are
not due or which are being diligently contested in good faith by Borrowers by
appropriate proceedings, provided such liens did not arise in connection with
the borrowing of money or the obtaining of advances or credit and do not, in
Lender's discretion, in the aggregate materially detract from the value of
Borrowers' assets or materially impair the use thereof; (d) liens specifically
consented to by Lender in writing; and (e) liens, if any, specifically permitted
by this Agreement.
1.2.28 "PERSON" - any entity, government, governmental agency or
any other entity and whether acting in an individual, fiduciary or other
capacity.
1.2.29 "PLAN" - any employee pension benefit plan subject to
Title IV of ERISA and maintained by Borrowers or any member of a Controlled
Group or any such plan to which Borrowers or any member of a Controlled Group is
required to contribute on behalf of any of its employees.
1.2.30 "REPORTABLE EVENT" - a reportable event as defined in
Title IV of ERISA, except actions of general applicability by the Secretary of
Labor under ERISA.
1.2.31 "REVOLVING CREDIT FACILITY" - the revolving advance
facility described in Section 2.1 of this Agreement.
-4-
1.2.32 "REVOLVING CREDIT FACILITY SUBLIMIT"
$5,000,000.00 .
1.2.33 "REVOLVING LOANS BALANCE" - the sum of:
1.2.33.1 outstanding Advances;
1.2.33.2 payments by Lender on account of Letters of Credit
which are not included in the immediately preceding subsection; and
1.2.33.3 any other payments made by Lender arising
hereunder for which Borrowers is liable to Lender.
1.2.35 "SECURITY AGREEMENT" - any security agreement securing
the Obligations.
1.2.36 "STATEMENT DATE" - December 31, 1994 (see section 5.4).
1.2.37 "SUBORDINATING CREDITOR" - Xxxx Xxxxx.
1.2.38 "SUBORDINATION AGREEMENT" - a subordination agreement in
form and content acceptable to Lender.
1.2.39 "SUBSIDIARY" - corporation or similar entity of which
more than fifty percent (50%) of the outstanding stock having ordinary voting
power (irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned by
Borrowers and/or any subsidiary.
1.2.40 "TANGIBLE NET WORTH" - the excess of total assets
(excluding intangible assets) over total liabilities (excluding such liabilities
as are fully subordinated to Lender pursuant to a Subordination Agreement).
1.2.41 "TERM LOAN FACILITY" - the Term Loan Facility described
in Section 2.3 of this Agreement.
1.2.42 "TERM LOAN BALANCE" - the outstanding amount of the Term
Loan Facility.
1.2.43 "TERM LOAN" - see Section 2.3.
1.2.44 "TERM NOTE" - the Promissory Note, dated of approximately
even date herewith, made payable by Borrowers to the order of Lender in the
original principal amount of $266,300.00.
-5-
1.2.45 "TERMINATION DATE" - the earlier of February 15, 1996 or
the date on which the Lender elects to terminate this Agreement pursuant to the
terms herein.
1.3 OTHER CAPITALIZED TERMS. All capitalized terms not defined above
shall have the meanings ascribed to such terms in the Uniform Commercial Code.
2. CREDIT FACILITIES.
2.1 REVOLVING CREDIT FACILITY.
2.1.1 ADVANCES. Subject to the terms and conditions of this
Agreement, from the date on which this Agreement becomes effective until
termination, Lender, upon the request of Borrowers, shall from time to time,
make advances ("Advances") to Borrowers, so long as, before and after such
advance the Revolving Loans Balance does not exceed the Revolving Credit
Facility Sublimit.
2.1.2 GENERAL. All loans and advances by Lender may be made by
crediting Borrowers' Account.
2.1.3 MAXIMUM COMMITMENT. Despite the foregoing and
notwithstanding the nature or amount of the Collateral, the Obligations shall
not exceed at any one time the Maximum Commitment.
2.1.4 AUTHORIZATION FOR LOANS AND ADVANCES. Lender is
authorized to make loans and advances under this Agreement: (a) upon telephonic,
facsimile or other instructions received from anyone purporting to be an
officer, employee or representative of Borrowers; or (b) at the sole discretion
of Lender, and notwithstanding any other provision in this Agreement, if
necessary to meet any Obligations, including but not limited to any interest not
paid when due.
2.2 LETTERS OF CREDIT AND ACCEPTANCES.
2.2.1 ISSUANCE OF LETTERS OF CREDIT. At the request of
Borrower, Lender may, subject to the terms and conditions of this Agreement and
such additional terms and conditions as Lender shall then require, issue Letters
of Credit or create Acceptances, but the aggregate outstanding face amount of
such Letters of Credit and Acceptances plus the aggregate amount paid by Lender
pursuant to such Letters of Credit and Acceptances for which Lender has not been
reimbursed shall not exceed $5,000,000 at any one time.
2.2.2 INDEMNITY. In addition to any obligations under the
Letter of Credit Agreements, Borrower shall indemnify Lender and hold it
harmless from and against any and all claims, damages, losses, liabilities,
costs and expenses whatsoever which it may incur or suffer by reason of or in
connection with the execution and delivery or assignment of or payment or
presentation under any Letter of Credit or any action taken or omitted to be
taken with respect to any Letter
-6-
of Credit, except only if and to the extent that any such claims, damages,
losses, liabilities, costs or expenses shall be caused by the willful misconduct
or gross negligence of Lender or any issuer on behalf of Lender in making
payment against any draft presented under any Letter of Credit which does not
comply with the terms thereof, or in failing to make payment against any draft
presented under any Letter of Credit which does not comply with the terms
thereof, or in failing to make payment against any such draft which complies
with the terms of such Letter of Credit (it being understood that (a) in making
such payment, Lender's or such issuer's exclusive reliance in good faith on the
documents presented to and believed to be genuine by it in accordance with the
terms of such Letter of Credit as to any and all matters set forth therein,
including, without limitation, reliance in good faith on any affidavit presented
pursuant to such Letter of Credit and on the amount of any sight draft presented
pursuant to any Letter of Credit whether or not any statement or any other
document presented pursuant to such Letter of Credit proves to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
proves to be untrue or inaccurate in any respect whatsoever, and (b) any such
noncompliance in a nonmaterial respect shall, in each case, not be deemed
willful misconduct or gross negligence of Lender or such issuer). Upon demand by
Lender or such issuer at any time, the Borrower shall reimburse Lender or such
issuer for any legal or other out of pocket expenses incurred in connection with
investigating or defending against any of the foregoing, except if the same is
due to Lender's or such issuer's willful misconduct or gross negligence as
aforesaid. The indemnities contained herein shall survive the expiration or
termination of the Letters of Credit and this Agreement and shall be payable
upon demand.
2.2.3 PAYMENT OF DRAFTS. Delivery to Lender or the issuer of
any documents purporting and appearing on their face to comply with the
requirements of any Letter of Credit shall be sufficient evidence of the
validity, genuineness, and sufficiency thereof and of the good faith and proper
performance of the shippers, drawers and user of any Letter of Credit, their
agents and assignees, and Lender and such issuer may rely and act thereon
without liability of responsibility with respect thereto or with respect to the
correctness or condition of any shipment of merchandise to which the same may
relate. Upon receipt by Lender of approval thereof from Borrower, Lender may
(but shall not be required to) accept or pay overdrafts or irregular drafts or
drafts with irregular documents attached or with respect to which property has
been substituted or time limits have been extended, and no such acceptance or
payment shall impair any rights of Lender under this Agreement. In case of any
variation between the documents called for by any Letter of Credit and the
documents accepted by Lender or any issuer on Lender's behalf, Borrower shall be
conclusively deemed to have waived any right to object to such variation with
respect to any action of Lender or such issuers relating to such documents and
to have ratified and approved such action as having been taken on the direction
of Borrower, unless Borrower within ten business days of the receipt of such
documents or
-7-
acquisition of knowledge of such variation files an objection with Lender in
writing. Lender shall not be liable for any delay in giving, or failing to give,
notice of the arrival of any goods or any other notice, or for any error,
neglect or default of any issuer on its behalf or any shipper, carrier, bailee
or insurer; nor shall Lender be responsible for the nonfulfillment of any
requirement of any Letter of Credit that (a) drafts bear appropriate reference
to any Letter of Credit, (b) the amount of any draft be noted on the reverse of
any Letter of Credit, (c) any Letter of Credit be surrendered or taken up, or
(d) documents be forwarded apart from any drafts, and Lender or the issuers may,
if they see fit, waive any such requirements.
2.3 TERM LOAN FACILITY. In addition to the Revolving Credit Facility
made available by Lender to Borrowers pursuant to Section 2.1 of this Agreement,
Lender shall make a term loan (the "Term Loan") to Borrowers in the original
principal amount of Two Hundred Sixty Six Thousand Three Hundred Dollars
($266,300.00) pursuant to the Term Note. The Term Loan shall, for all purposes,
be deemed to be part of the Obligations of Borrowers and shall be subject to all
of the terms and provisions of this Agreement except that principal monthly
payments of $11,600.00 plus interest accrued and unpaid on the unpaid principal
balance of the Term Loan, at the rate set forth in Section 3.2 of this Agreement
shall be due and payable on the first day of the month following disbursement of
money and each month thereafter to and including February 1, 1996, and the
entire unpaid principal balance of the Term Loan, together with interest accrued
and unpaid thereon at the rate set forth in Section 3.2 of this Agreement, shall
be due and payable on the Termination Date.
3. PAYMENTS BY BORROWERS.
3.1 IN GENERAL.
3.1.1 All payments hereunder shall be made by Borrowers to
Lender at the Lending Office, or at such other place as Lender may designate in
writing.
3.1.2 No checks, drafts or other instruments received by Lender
purportedly in satisfaction of any of the Obligations shall constitute payment
thereof unless and until such instruments have actually been collected.
3.1.3 Borrowers shall have the right to make payments at any
time in reduction of the Obligations, in whole or in part, without premium or
penalty; provided, however, that Lender may apply any payments received by
Borrowers to any of the Obligations, or portion thereof, in any manner and in
any order as Lender may determine in its sole discretion, notwithstanding
contrary instructions received from the payor, AND NOTWITHSTANDING SECTION 2822
OF THE CALIFORNIA CIVIL CODE.
-8-
3.1.4 Borrowers shall promptly make payments, from time to
time, without demand or notice, in reduction of the Revolving Loan Balance, in
the amount by which the Obligations exceed the Maximum Commitment.
3.2 INTEREST PAYMENTS.
3.2.1 Interest on the Balance Subject to Interest shall be
computed at the Interest Rate, shall be due on the first day of each month
following the accrual thereof, and shall be computed on the basis of a 360-day
year for actual days elapsed.
3.2.2 Lender is authorized to debit Borrowers' Account on the
fifth business day of each month for interest accrued on the daily Balance
Subject To Interest during the preceding month at the Interest Rate;
3.2.3 Interest upon any Obligations not paid when due (whether
by acceleration or otherwise, and before as well as after judgment) shall accrue
at the Default Rate.
3.3 PAYMENTS UPON TERMINATION. Upon the Termination Date, the unpaid
balance of the Obligations shall be due and payable without demand or notice.
3.4 LETTERS OF CREDIT.
3.4.1 Upon the Termination Date, Borrower shall immediately and
without notice pay to Lender an amount equal to the undrawn amount of all
outstanding and unexpired Letters of Credit, which payments shall be held by
Lender as cash collateral securing the Obligations in a non-interest bearing
account (the "Cash Collateral Account").
3.4.2 Subsequent to passage of the Termination Date, Lender may
charge the Cash Collateral Account with the amount of any payments made by
Lender on account of Letters of Credit, or with the amount of any other
Obligations. To the extent that the balance of the Cash Collateral Account is
insufficient, Borrower shall pay the deficiency on demand.
4 CONDITIONS PRECEDENT.
4.1 FIRST CREDIT ACCOMMODATION. Lender's obligation to make the
initial Credit Accommodation available to Borrowers is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such Credit Accommodation, the following conditions precedent:
4.1.1 Borrowers shall deliver, or cause to be delivered, to
Lender:
-9-
4.1.1.1 a duly executed copy of this Agreement;
4.1.1.2 all Security Agreements and such other documents
as Lender may require to perfect Lender's security interest in the
Collateral;
4.1.1.3 Guaranties duly executed by each Guarantor;
4.1.1.4 Subordination Agreements duly executed by the
Subordinating Creditor;
4.1.1.5 a listing of all Account Debtors' names and
addresses;
4.1.1.6 a listing of all locations where Borrowers
maintains or expects to maintain inventory; and
4.1.1.7 a letter, in the form of EXHIBIT A hereto, to
Borrowers' outside auditors (which letter Borrowers shall also deliver to
any subsequent outside auditors hired by Borrowers, all of which shall be
independent certified public accountants acceptable to Lender): (a)
instructing such auditors to send to Lender copies of all final financial
statements and reports which are prepared as a result of any audit or other
review of Borrowers' operations, finances or internal controls, including
any reports dealing with improper accounting practices, defalcations,
financial reporting errors or misstatements or fraud; (b) instructing such
auditors to, upon Lender's request, meet with Lender to discuss said
financial statements and any questions regarding same; and (c) advising
such auditors that one of the principal purposes of the audited financial
statements which they may be asked to prepare is to provide Lender with
information regarding Borrowers' financial condition.
4.1.2 Borrowers shall cause to be delivered to Lender a
certified statement by the president and any other officers of Borrowers as
Lender may require listing all fictitious business names of Borrowers, the
location of Borrowers' accounting records concerning the Collateral and
Borrowers' chief place of business, and all locations of the Collateral and the
names of the owners and mortgagees of said locations, and such other information
as Lender may require.
4.1.3 All documentation shall be reasonably satisfactory in
form and substance to Lender, and Lender shall have received any and all further
information, documents and opinions which Lender may reasonably have requested
in connection therewith, and such documents, where appropriate, shall be
certified by proper authorities and officials of Borrowers.
-10-
4.1.4 Borrowers shall have delivered to Lender evidence
satisfactory to Lender that any casualty insurance policies required under any
Security Agreement listing Lender as loss payee or mortgagee (as the case may
be) and all other documents which may be required thereunder, are in full force
and effect.
4.1.5 All acts, conditions, and things (including, without
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations, including but not limited
to form UCC financing statements, mortgages, and deeds of trust) required to be
done and performed and to have happened prior to the execution, delivery and
performance of the Documents to constitute the same legal, valid and binding
obligations of Borrowers, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in compliance with
all applicable laws.
4.2 ALL CREDIT ACCOMMODATIONS. Lender's obligation to make any Credit
Accommodation available to Borrowers is subject to the satisfaction of, or
waiver of, immediately prior to or concurrently with the making of such Credit
Accommodation, the following conditions precedent:
4.2.1 All representations and warranties of Borrowers to Lender
set forth herein or in any of the Documents shall be true and accurate and
complete in all respects;
4.2.2 There shall not exist an Event of Default or an event
which with the giving of notice or the passage of time, or both, would be or
become an Event of Default;
4.2.3 Borrowers shall have paid to Lender all accrued and
unpaid fees and expenses payable hereunder and pursuant to the terms hereof; and
4.2.4 After such Credit Accommodation is made, the Revolving
Loans Balance plus the Term Loan Balance shall not exceed the Maximum
Commitment.
4.3 REPRESENTATIONS AND WARRANTIES AT TIME OF REQUEST. By making a
request for a Credit Accommodation, Borrowers represent and warrant the accuracy
of the matters set forth herein on and as of the date of such request.
5. REPRESENTATIONS AND WARRANTIES OF BORROWERS. Borrowers represent and
warrant to Lender as follows, the truth and accuracy of which, and compliance
with which, shall be continuing conditions of the making of any Credit
Accommodations:
5.1 CAPACITY. Borrowers are duly organized, validly existing, and in
good standing under the laws of their respective States of incorporation, and
are authorized to do business in all
-11-
jurisdictions in which their ownership of property or transaction of business
legally requires such authorization, and have full power, authority, and legal
right to own their respective property and to transact their respective business
as presently transacted or proposed to be transacted.
5.2 AUTHORITY. Borrowers have full power, authority and legal right
to execute and deliver, and to perform and observe the provisions of the
Documents. The execution, delivery and performance of the Documents have been
duly authorized by all necessary Persons, and when duly executed and delivered,
will be legal, valid, and binding obligations of Borrowers enforceable in
accordance with their respective terms, except as enforceability may be limited
by the United States Bankruptcy Code or other statutes affecting creditors'
rights generally.
5.3 COMPLIANCE. The execution and delivery of the Documents and
compliance with their terms will not violate any provision of applicable law and
will not result in (a) a default under, or a breach of any of the terms or
conditions of, any agreement or other document to which any Borrower is a party,
or (b) the imposition of any lien, charge, or encumbrance upon any property of
Borrowers (with due notice or lapse of time or both), or (c) an occurrence of an
event pursuant to which any holder or holders of Indebtedness may declare the
same due and payable.
5.4 FINANCIAL STATEMENTS. Borrowers have furnished Lender with their
audited balance sheets and related statements of income and retained earnings
for the twelve (12) month period ending on the Statement Date. Such balance
sheets and statements fairly present the financial condition and results of
operations of Borrowers for such fiscal periods.
5.5 MATERIAL ADVERSE EVENTS. Since the Statement Date, neither the
respective business, properties, nor financial condition of Borrowers have been
materially and adversely affected in any way.
5.6 LITIGATION. Except as heretofore disclosed by Borrowers to Lender
in writing, there are no actions or proceedings pending, or to Borrowers'
knowledge threatened, against or affecting Borrowers or any Guarantor which, if
adversely determined, could have a material adverse effect on Borrowers.
Borrowers are not in default with respect to any applicable laws or regulations
which affect the operations or financial condition of Borrowers, nor are they in
default with respect to any other writ, injunction, demand, or decree or in
default under any indenture, agreement, or other instrument to which any
Borrower is a party or by which any Borrowers may be bound.
5.7 TAXES. Borrowers have filed or caused to be filed all tax returns
which are required to be filed by them. Borrowers have paid, or made provision
for the payment of, all taxes which have or may become due pursuant to said
returns or otherwise or pursuant to an
-12-
assessment received by Borrowers, except such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been provided.
The charges, accruals, and reserves in respect of income taxes on the books of
Borrowers are adequate. Borrowers know of no proposed material tax assessment
against them and no extension of time for the assessment of federal, state, or
local taxes of Borrowers is in effect or has been requested, except as disclosed
in the financial statements furnished to Lender.
5.8 PRIORITY INTEREST. No Person other than Lender has (or, in the
case of after-acquired Collateral, will have, at the time Borrowers acquires
rights therein) any interest in the Collateral, including but not limited to any
security interest or other lien or charge.
5.9 ACCURATE INFORMATION. All information supplied to Lender by or on
behalf of Borrowers is and shall be true and correct in all material respects.
5.10 USE OF LOAN PROCEEDS. Borrowers are not engaged principally in,
nor do they have as one of them significant activities, the extension of credit
for the purpose of purchasing or carrying any margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System), and no
part of any advance made hereunder will be used to purchase or carry margin
stock, extend credit to others for the purpose of purchasing or carrying any
margin stock, or used for any purpose which violates Regulation U or Regulation
X of the Board of Governors of the Federal Reserve System or any other provision
of law.
5.11 RELATIONSHIP OF CERTAIN GUARANTORS WITH BORROWERS.
With respect to any Guarantor which is a corporation, its stock ownership
relationship with Borrowers is as follows:
Fortune Fashions, Inc. dba HRLA - Commonly controlled
6. BORROWERS' AFFIRMATIVE COVENANTS. Until payment in full of the
Obligations, Borrowers agree to:
6.1 FINANCIAL STATEMENTS, REPORTS AND CERTIFICATIONS. Furnish to
Lender, in form and substance satisfactory to Lender:
6.1.1 As soon as possible after the end of each fiscal year of
Borrowers, and in any event within ninety (90) days thereafter: (a) a complete
copy of Borrowers' financial statements, including but not limited to (i) the
management letters, if any, (ii) the balance sheets as of the close of the
fiscal year, and (iii) the income statements for such year, together with
statements of cash flows, audited by certified public accountants selected by
Borrowers and satisfactory to Lender; and (b) statements certified by the chief
financial officer of Borrowers that Borrowers are in
-13-
compliance with all the terms, conditions, covenants and warranties of this
Agreement;
6.1.2 No later than ninety (90) days after June 30 of each
year: (a) a complete copy of Borrowers' financial statements, including, but not
limited to (i) the management letters, if any, (ii) the balance sheets as of the
close of each June 30, and (iii) the income statements as of each June 30,
together with statements of cash flows, reviewed by certified public accountants
selected by Borrowers and satisfactory to Lender; and (b) statements certified
by the chief financial officer of Borrowers that Borrowers are in compliance
with all the terms, conditions, covenants and warranties of this Agreement;
6.1.3 No later than thirty (30) days after the close of each
month, Borrowers' balance sheets as of the close of such month and their income
statements for that portion of the then current fiscal year through the end of
such month certified by Borrowers' chief financial officer as being complete,
correct, and fairly representing their respective financial condition and
results of operations;
6.1.4 Within ten (10) days each is required to be filed, copies
of all of Borrowers' tax returns; and
6.1.5 Such other information concerning the Collateral as
Lender may reasonably request.
6.2 OTHER INFORMATION.
6.2.1 Maintain accurate books and records concerning their
respective businesses;
6.2.2 Upon request, furnish to Lender such information,
statements, lists of property and accounts, budgets, forecasts, or reports as
Lender may reasonably request with respect to the respective business, affairs,
and financial condition of Borrowers; and
6.2.3 Permit Lender or any representatives thereof, during
usual business hours, without notice to Borrowers, to inspect each of Borrowers'
respective properties and to inspect, audit, make copies of, and make extracts
from Borrowers' books and accounts.
6.3 INDEMNIFICATION. Indemnify and save Lender harmless from any and
all liability with respect to any stamp or other taxes (other than transfer or
income taxes) which may be determined to be payable in connection with the
execution of the Documents or any action of Lender with respect to the
Collateral, including, without limitation, the transfer of the Collateral to
Lender's name or that of Lender's nominee or any purchaser at a foreclosure
sale.
-14-
6.4 TAXES, EXPENSES AND OBLIGATIONS REGARDING BORROWERS' PROPERTY.
Make timely payment or deposit of all taxes, assessments, contributions or other
obligations required of Borrowers. If Borrowers fail to make any such payment or
deposit or furnish the required proof, Lender may, in its sole discretion and
without notice to or consent from Borrowers, and whether or not such taxes,
assessments, contributions or obligations are secured by liens in and to the
Collateral, or whether or not such liens, if any, are senior or junior to the
liens of Lender in and to the Collateral, make payment of the same or any part
thereof, or set up such reserves in Borrowers' Account as Lender deems necessary
to satisfy the liability therefore, or both. Lender may conclusively rely on
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Any payment made by Lender (i) shall constitute
neither (A) an agreement by Lender to make similar payments in the future, nor
(B) a waiver by Lender of any default under the Documents, and (ii) shall be
deemed part of the Obligations under this Agreement and shall accrue interest at
the rate(s) set forth in this Agreement. Lender need not inquire into, nor
contest the validity of, any expense, tax, security interest, encumbrance or
lien, and the receipt of the usual official notice requiring the payment thereof
shall be conclusive evidence that the same was validly due and owing.
6.5 INSURANCE. Maintain: (a) insurance on all insurable property
owned or leased by Borrowers in the manner, to the extent and against at least
such risks (in any event, including but not limited to fire and business
interruption insurance) as usually maintained by owners of similar businesses
and properties in similar geographic areas, and (b) adequate insurance against
Workers' Compensation. All such insurance shall be in amounts and form and with
insurance companies acceptable to Lender in its sole discretion. Borrowers shall
furnish to Lender: (i) upon written request, any and all information concerning
such insurance carried; (ii) lender loss payable endorsements naming Lender as
loss payee, in form and substance satisfactory to Lender; and (iii) at least
annually and on such other times as reasonably requested by Lender, certificates
of insurance from such insurance companies, showing Lender as loss payee. All
policies of insurance shall provide for not less than thirty (30) days prior
written cancellation notice to Lender.
6.6 NOTICE OF EVENTS. Give Lender prompt written notice of any Event
of Default or any event which with the giving of notice or passage of time, or
both, would become an Event of Default.
6.7 ERISA REPORTS. Furnish to Lender: (a) as soon as possible, and in
any event within thirty (30) days after Borrowers or any of their respective
subsidiaries know or has reason to know that any Reportable Event, as defined in
Title IV of ERISA with respect to any employee benefit plan ("Plan") subject to
ERISA and maintained by Borrowers or any member of a Controlled Group of which
Borrowers are a part, a statement of the chief financial officer of Borrowers or
the affected subsidiary setting forth details of such Reportable Event and
-15-
the actions which Borrowers or the affected subsidiary proposes to take with
respect thereto; (b) a copy of the notice of such Reportable Event given to the
Pension Benefit Guaranty Corporation, if a copy of such notice is available to
Borrowers; (c) prompt written notice of any decision by Borrowers, any
subsidiary or any member of the Controlled Group to terminate or withdraw from
any Plan; and (d) promptly after receipt thereof, a copy of any notice of intent
to terminate any Plan or to appoint a trustee to administer any Plan which
Borrowers, any subsidiary or any member of the Controlled Group may receive from
the Pension Benefit Guaranty Corporation or the Internal Revenue Service with
respect to any Plan.
6.8 NOTICE OF LITIGATION. Give prompt written notice to Lender of any
proceedings against Borrowers involving amounts in excess of $50,000 not fully
covered by insurance, any substantial claim or dispute which may exist between
Borrowers and any Person, any labor controversy resulting in or threatening to
result in a strike against Borrowers, or any proposal by any public authority to
acquire a material portion of the respective assets or businesses of Borrowers.
6.9 EVIDENCE OF OWNERSHIP. Deliver to Lender at any time, upon
request of Lender, all invoices, bills of sale, or other documents, satisfactory
to Lender, in its sole discretion, to evidence Borrowers' ownership of any and
all Collateral.
6.10 COOPERATION. Execute and deliver to Lender any and all documents,
and do or cause to be done any and all other acts reasonably deemed necessary by
Lender, in its sole discretion, to effect the provisions and purposes of this
Agreement or any of the Documents.
6.11 NOTICE OF UNINSURED LOSS. Give Lender written notice of any
uninsured loss in excess of $50,000 in each instance.
6.12 LOCATION OF COLLATERAL. Give Lender written notice immediately
upon forming an intention to change the location of their respective chief
places of business or any of the Collateral.
6.13 CHANGE IN NAME. Give Lender written notice immediately upon
forming an intention to change their respective names or forms of business
organization.
6.14 MAINTENANCE OF EXISTENCE. Preserve and maintain their respective
legal existence and all rights, privileges, licenses, permits, and franchises
necessary or desirable in the normal conduct of their respective businesses,
conduct their respective businesses in an orderly, efficient and regular manner,
and comply with all applicable laws and regulations and the terms of any
indenture, contract or other instrument to which they may be a party or under
which they or their properties may be bound.
-16-
6.15 GUARANTORS' FINANCIAL STATEMENTS. Cause each Guarantor to furnish
to Lender, by March 1st of each year, all of such Guarantor's financial
statements and income tax returns for the preceding fiscal year, including such
Guarantor's balance sheet and income statement for such fiscal year.
6.16 NOTICE TO LENDER UPON PERCEIVED BREACH. Give Lender written
notice, within ten (10) days of Borrowers' becoming aware thereof, of the
occurrence of any action or inaction of Lender which Borrowers believes may (a)
be actionable against Lender, or (b) give rise to a defense to payment hereunder
for any reason, including without limitation, commission of a tort or violation
of any contractual duty or duty implied at law.
6.17 NOTICE TO LENDER RE: EXPANSION OF BUSINESS. Give Lender written
notice immediately upon forming the intention to expand their respective
businesses to add any retail stores above the total amount of eighty-five (85).
7. BORROWERS' NEGATIVE COVENANTS. Until full and indefeasible payment of
the Obligations, Borrowers will not, without the prior written consent of
Lender:
7.1 COLLATERAL. Except in the ordinary course of business, waive,
amend, or vary the terms of any Account Receivable, including but not limited to
the postponement of payment thereof.
7.2 LIENS. Suffer to exist any lien (including any encumbrance or
security interest) of any kind upon any of their respective assets, whether now
owned or hereafter acquired, except Permitted Liens.
7.3 SALE OF ASSETS. Sell, abandon, or otherwise dispose of any of
their respective assets except in the ordinary course of business.
7.4 CONSOLIDATION, MERGER, ETC. Consolidate with, merge into, or sell
(whether in one transaction or in a series of transactions) all or substantially
all of their respective assets to any Person.
7.5 INVESTMENT, ADVANCES, AND GUARANTIES. Other than in the ordinary
course of business, advance funds to any Person (whether by way of loan, stock
purchase, capital contribution, or otherwise) other than loans not exceeding
$25,000 in any instance to employees of Borrowers, or incur any Indebtedness
with respect to the obligations of any Person, including by way of a guaranty of
indebtedness, or acquire by purchase of stock or by purchase of assets in
exchange for cash, shares of capital stock, or other securities of Borrowers or
any other Person, all or any substantial division or portion of the assets or
business of any other Person.
-17-
7.6 NO INDEBTEDNESS. Create, incur, assume, suffer to exist, or
otherwise be or become liable in respect of any Indebtedness in excess of the
aggregate of $100,000, exclusive of the Obligations, except (a) trade debts
incurred in the ordinary course of business, or (b) indebtedness which is fully
subordinated to the Obligations; PROVIDED, THAT, the aggregate amount of such
subordinated indebtedness shall not at any time exceed Six Million Five Hundred
Twenty Thousand Dollars ($6,520,000), or (c) indebtedness due to any Guarantor
which is fully subordinated to the Obligations.
7.7 DIVIDENDS, REDEMPTIONS.
7.7.1 Declare or pay any dividend on, or declare or make any
other distribution on account of, any shares of any class of its stock now or
hereafter outstanding, unless approved by Lender;
7.7.2 Directly or indirectly redeem, retire, purchase, or
otherwise acquire beneficially any shares of any class of their own stock now or
hereafter outstanding or set apart any sum for any such purpose other than the
repurchase of stock owned by executives in the event of termination of their
employment or similar circumstances.
7.9 LEASE OBLIGATIONS. Directly or indirectly incur, assume,
guarantee, or have outstanding any Indebtedness under a lease (including rent
and other periodic payments in respect of any capitalized lease obligations)
payable in any fiscal year exceeding $5,000,000 in the aggregate.
7.10 COMPENSATION, SALARY, ETC. Pay aggregate compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other
payments, whether directly or indirectly, in money or otherwise, to all of
Borrowers' executives, officers, directors, and stockholders in an aggregate
amount in excess of $1,100,000 for any fiscal year.
7.11 FINANCIAL COVENANTS.
7.11.1 TANGIBLE NET WORTH. Permit their consolidated Tangible
Net Worth at any time to be less than $8,500,000.00; or
7.11.2 DEBT-TO-WORTH RATIO. Permit the ratio of their
consolidated aggregate debt to Tangible Net Worth at any time to be greater than
1.3 to 1.
7.11.3 WORKING CAPITAL. Permit their consolidated working
capital to be less than $4,500,000.00.
7.12 TRANSACTIONS WITH AFFILIATES. Enter into any transaction with any
Person affiliated with Borrowers on terms less favorable to Borrowers than at
the time available to Borrowers from any Person not affiliated with Borrowers.
-18-
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. Each of the following events or conditions
shall constitute an "Event of Default":
8.1.1 Borrowers default for a period of five (5) days after
notice from Lender in the payment of any Obligations when due, whether at
maturity, upon acceleration, or otherwise;
8.1.2 Any of Borrowers are in material default with respect to
the Documents for a period of thirty (30) days;
8.1.3 Any of Borrowers or any Guarantor (a) fail to pay any
Indebtedness for borrowed funds when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), or (b) fail to perform
or observe any term, covenant, or condition of any agreement relating to any
such Indebtedness, if the effect of such failure to perform or observe is the
acceleration of the maturity of such Indebtedness, whether or not such failure
is waived by the obligee of such Indebtedness; or any such Indebtedness is
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
8.1.4 An order for relief is entered against any of Borrowers
or any Guarantor by any United States Bankruptcy Court; or any of Borrowers or
any Guarantor does not generally pay its debts as they become due (within the
meaning of 11 U.S.C. 303(h) as at any time amended, or any successor statute
thereto); or any of Borrowers or any Guarantor makes an assignment for the
benefit of creditors; or any of Borrowers any Guarantor applies for or consents
to the appointment of a custodian, receiver, trustee, or similar officer for it
or for all or any substantial part of its property, or such custodian, receiver,
trustee, or similar officer is appointed without the application or consent of
such Borrowers or such Guarantor; or any of Borrowers or any Guarantor
institutes (by petition, application, answer, consent, or otherwise) any
bankruptcy, insolvency, reorganization, moratorium, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application, or otherwise) against any of Borrowers or any Guarantor;
or any judgment, writ, warrant of attachment, execution, or similar process
shall be issued or levied against a substantial portion of the property of any
of Borrowers or any Guarantor;
8.1.5 An adverse change occurs with respect to the financial
condition or operations of any of Borrowers which results in a material
impairment of the prospect of repayment of such Borrowers' Indebtedness;
-19-
8.1.6 A sale, hypothecation or other disposition is made of
twenty (20%) percent or more of the beneficial interest in any class of voting
stock of any of Borrowers;
8.1.7 Any Reportable Event occurs which the Lender determines
in good faith to constitute grounds for the termination of any Plan or Plans by
the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer or liquidate
any Plan or Plans (and such Reportable Event is continuing thirty (30) days
after written notice of such determination by the Lender has been given to
Borrowers), or a decision has been made by any of Borrowers, any subsidiary or
any member of the Controlled Group to terminate, file a notice of termination
with respect to, or withdraw from, any Plan or Plans, or a trustee has been
appointed by the appropriate United States District Court to administer any Plan
or Plans, or the Pension Benefit Guaranty Corporation has instituted proceedings
to terminate any Plan or Plans or to appoint a trustee to administer any Plan or
Plans, and, in case of the occurrence of any of the above, the aggregate amount
of Borrowers' liability to the Pension Benefit Guaranty Corporation under
Sections 4062, 4063 and 4064 of ERISA as determined in good faith by the Lender
could exceed 5% of consolidated tangible net worth, and such liability of
Borrowers is not covered in full, for the benefit of Borrowers, by insurance;
8.1.8 Any Guarantor fails within thirty (30) days after notice
from Lender to perform or observe any of such Guarantor's obligations under any
Guaranty, or shall notify Lender of its intention to rescind, modify, terminate
or revoke the Guaranty with respect to future transactions, or the Guaranty
shall cease to be in full force and effect for any reason whatever;
8.1.9 Any Subordinating Creditor fails to perform or observe
any of such Subordinating Creditor's obligations under any Subordination
Agreement, or notifies Lender of the Subordinating Creditor's intention to
rescind, modify, terminate or revoke the Subordination Agreement with respect to
future transactions, or the Subordination Agreement ceases to be in full force
and effect for any reason whatsoever;
8.1.10 The Key Employee fails to devote 100% of his efforts in
furtherance of the respective business affairs of Borrowers for any one (1)
month, or ceases to be employed by Borrowers;
8.1.11 Any material provision of this Agreement or any of the
Documents ceases, for any reason, to be valid and binding on Borrowers;
8.1.12 A change unacceptable to Lender occurs in the majority of
the board of directors of any of Borrowers, or in the office of the president of
any Borrower, from that which exists on the date hereof;
-20-
8.1.13 The indictment or threatened indictment of any Obligor
under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against any Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
any of the property of such Obligor, which reasonably might be expected to
materially adversely affect the business prospects or condition of any Borrower;
or
8.1.14 Lender, for any reason, in good faith, reasonably deems
itself insecure with respect to the prospect of repayment or performance of
Borrowers' Obligations.
8.2 REMEDIES. Upon the occurrence of any Event of Default,
automatically, at Lender's option:
8.2.1 Lender's obligation to make any Credit Accommodation
available to Borrowers shall terminate;
8.2.2 All Obligations shall, without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived, be
forthwith due and payable;
8.2.3 all Obligations shall accrue interest at the Default
Rate; and
8.2.4 Lender may, immediately and without expiration of any
period of grace, enforce payment of all Obligations and exercise any and all
other remedies granted to it under the Documents, at law, in equity, or
otherwise, including but not limited to the placement of Lender's agents or
employees on Borrowers' premises to take all actions necessary to preserve the
value of the Collateral. If Lender shall, pursuant to the rights granted to
Lender under the terms of this Agreement or applicable law, dispose of any or
all of the Collateral after the occurrence of an Event of Default, such
disposition shall be deemed commercially reasonable if, in the written opinion
of three (3) commercial loan officers with three (3) or more years of workout
experience each, the manner of the disposition is not inconsistent with the
manner in which such commercial loan officers would have handled the
disposition.
9. TERMINATION. This Agreement shall terminate on the Termination Date,
at which time the unpaid principal balance of the Obligations shall be
immediately due and payable.
10. NO LIEN TERMINATION WITHOUT RELEASE. In recognition of Lender's right
to have all its attorneys' fees and other expenses incurred in connection with
this Agreement secured by the Collateral, notwithstanding payment in full of all
Obligations by Borrowers, Lender shall not be required to record any
terminations or satisfactions of any of its liens on the Collateral unless and
until Borrowers and all Guarantors have executed and delivered to Lender general
releases which conform to California Civil Code Section 1541-2.
-21-
11. DISCLAIMER FOR NEGLIGENCE. Lender shall not be liable for any claims,
demands, losses or damages made, claimed or suffered by Borrowers, except such
as may arise through or could be caused by Lender's gross negligence or willful
misconduct.
12. LIMITATION OF CONSEQUENTIAL DAMAGE. Lender shall not be responsible
for any lost profits of Borrowers arising from any breach of contract, tort
(excluding the Lender's gross negligence or willful misconduct), or any other
wrong arising from the establishment, administration or collection of the
Obligations.
13. SET-OFF. Lender may exercise its rights of set-off upon the occurrence
of any Event of Default with respect to the Obligations in the same manner as if
the Obligations were unsecured. Any reserves or balances to the credit of
Borrowers and any other property or assets of Borrowers in the possession of
Lender may be held by Lender as security for any Obligations and applied in
whole or partial satisfaction of such Obligations when due.
14. INDEMNIFICATION. Borrowers will indemnify and hold harmless Lender and
each person, if any, who controls Lender within the meaning of the Securities
Act of 1933 (an "Indemnitee"), against any lawsuits, claims, damages,
liabilities or expenses (including, but not limited to, the reasonable cost of
investigating and defending against any claims therefor, and any attorneys' fees
and expenses incurred in connection therewith), which may be incurred by or
asserted against any Indemnitee in connection with: (a) any proceeding arising
in connection with the Documents or Borrowers' use of the proceeds of any Credit
Accommodation, except any such claim, damage, liability or expense arising from
Lender's own gross negligence or willful misconduct; and (b) any violation of
any environmental law, rule or regulation or the release of any toxic substance
on or near any real property which constitutes part of the Collateral; provided,
however, that in no case shall Borrowers be liable with respect to any claims
made against any Indemnitee unless such Indemnitee has given Borrowers timely
written notice after the summons or other legal process first giving information
of the nature of the claim has been served upon Indemnitee.
15. ACCOUNT STATED. Lender shall render to Borrowers a statement setting
forth the transactions arising hereunder. Each statement shall be considered
correct and binding upon Borrowers as an account stated, except to the extent
that Lender receives, within sixty (60) days after the mailing of such
statement, written notice from Borrowers of any specific exceptions by Borrowers
to that statement.
16. RETENTION OF RECORDS. Lender shall retain any documents, schedules,
invoices or other papers delivered by Borrowers only for such period as Lender,
at its sole discretion, may determine necessary.
-22-
17. NOTICES TO THIRD PARTIES. Lender shall have the right at any time to
give any Guarantor or Subordinating Creditor notice of any fact or event
relating to this Agreement, as Lender may deem necessary or desirable in
Lender's sole discretion, including, without limitation, Borrowers' financial
condition. Borrowers shall provide to each Guarantor and Subordinating Creditor
a copy of each notice, statement or report required to be given to Lender under
any of the paragraphs of this section.
18. INFORMATION TO PARTICIPANTS. Lender may furnish any financial or other
information concerning Borrowers, or any of their respective Subsidiaries,
heretofore or hereafter provided by Borrowers to Lender, pursuant to this
Agreement or otherwise, to any prospective or actual purchaser of any
participation or other interest in any loans made by Lender to Borrowers
(whether under this Agreement or otherwise), or to any prospective purchaser of
any securities issued or to be issued by Lender.
19. BORROWERS' INSTRUCTIONS TO AUDITORS. Borrowers hereby irrevocably
instruct their outside auditors, as such may change from time to time (the
"Auditors") to: (a) send Lender copies of all final financial statements and
reports which are prepared as a result of any audit or other review of the
operations, finances or internal controls of Borrowers, specifically including
any reports dealing with improper accounting practices, defalcations, financial
reporting errors or misstatements or fraud; and (b) meet with Lender, upon
Lender's request, to discuss said financial statements and reports and any
questions Lender may have regarding same. Lender is irrevocably permitted to
advise the Auditors of this clause by delivering a copy of this Agreement to
them, and the Auditors are irrevocably authorized and directed, upon receipt
thereof (Borrowers' hereby waiving any claims against the Auditors arising out
of their compliance with this direction) to:
19.1 Provide copies of all such reports to Lender as same are
prepared and delivered to Borrowers;
19.2 Provide copies of all such reports previously prepared and
delivered to Borrowers between the date of this Agreement and the date of
Lender's request.
20. ENTIRE AGREEMENT. This Agreement and the Other Documents embody the
entire agreement and understanding among and between the parties hereto and
supersede all prior agreements and understandings relating to the subject matter
hereof. No course of prior dealings between the parties, no usage of the trade,
and no parol or extrinsic evidence of any nature, shall be used or be relevant
to supplement, explain or modify any term used herein. In the event of any
conflict between a term or condition of this Agreement and a term or condition
of any document(s) executed in connection herewith, the term or condition of
this Agreement shall govern. This Agreement has been fully reviewed and
negotiated between the parties and no uncertainty
-23-
or ambiguity in any term or provision of this Agreement shall be construed
strictly against Lender or Borrowers under any rule of construction or
otherwise. This Agreement and the Other Documents supersede the Original
Documents and this Agreement specifically amends and restates the Original
Credit Agreement and the Original Notes in their entirety.
21. NOTICES.
21.1 All notices required to be given to any party other than
Lender shall be deemed given upon the first to occur of:
21.1.1 deposit thereof in a receptacle under the control of the
United States Postal Service;
21.1.2 transmittal by electronic means to a receiver under the
control of such party; or
21.1.3 actual receipt by such party or an employee or agent of
such party.
21.2 All notices required to be given to Lender hereunder shall be
deemed given upon actual receipt by a responsible officer of Lender.
21.3 For the purposes hereof, notices hereunder shall be sent to
the following addresses, or to such other addresses as each such party may in
writing hereafter indicate:
BORROWERS
ADDRESS: 000 Xxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
OFFICER: Xxxxxxx X. Xxxx, Esq.
FAX NUMBER: (000) 000-0000
LENDER
ADDRESS: 000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
OFFICER: Xx. Xxxxx Xxxxxx
FAX NUMBER: (000) 000-0000
22. ATTORNEYS' FEES. Borrowers agrees to reimburse Lender on demand for:
22.1 the actual amount of all costs and expenses, including
reasonable attorneys' fees, which Lender has incurred or may incur in:
22.1.1 negotiating, preparing, or administering this Agreement
and any documents prepared in connection herewith;
-24-
21.1.2 any way arising our this Agreement;
21.1.3 protecting, preserving or enforcing any lien, security
interest or other right granted by Borrowers to Lender or arising under
applicable law, whether or not suit is brought;
22.2 the actual costs, including photocopying (which, if performed
by Lender's employees, shall be at the rate of $.10/page), travel, and
attorneys' fees and expenses incurred in complying with any subpoena or other
legal process attendant to any litigation in which Borrowers is a party;
22.3 either (the choice of which shall be in the sole discretion
of Lender):
22.3.1 the actual amount of all costs and expenses, including
reasonable attorneys' fees, which Lender may incur in enforcing this Agreement
and any documents prepared in connection herewith, or in connection with any
federal or state insolvency proceeding commenced by or against Borrowers,
including those (a) arising out the automatic stay, (b) seeking dismissal or
conversion of the bankruptcy proceeding or (c) opposing confirmation of
Borrowers' plan thereunder.
All such costs and expenses of Lender which have been incurred on or prior to
the execution hereof shall be paid contemporaneously with the execution hereof.
Any such costs and expenses incurred subsequent to the execution hereof shall
become part of the Obligations when incurred and may be added to the outstanding
principal amount due hereunder.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement,
PROVIDED that, this Agreement shall not become effective until all counterparts
hereof have been executed by all parties hereto.
24 SURVIVAL. All representations, warranties and agreements herein
contained shall be effective so long any portion of this Agreement remains
executory.
25. SEVERABILITY. In the event any one or more of the provisions contained
in this Agreement is held to be invalid, illegal or unenforceable in any
respect, then such provision shall be ineffective only to the extent of such
prohibition or invalidity, and the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
26. AMENDMENT. Neither this Agreement nor any provisions hereof may be
changed, waived, discharged or terminated orally (even if supported by new
consideration), but only by an instrument in writing
-25-
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
27. WAIVER. No failure to exercise and no delay in exercising any right,
power, or remedy hereunder shall impair any right, power, or remedy which Lender
may have, nor shall any such delay be construed to be a waiver of any of such
rights, powers, or remedies, or any acquiescence in any breach or default
hereunder; nor shall any waiver of any breach or default of Borrowers hereunder
be deemed a waiver of any default or breach subsequently occurring. All rights
and remedies granted to Lender hereunder shall remain in full force and effect
notwithstanding any single or partial exercise of, or any discontinuance of
action begun to enforce, any such right or remedy. The rights and remedies
specified herein are cumulative and not exclusive of each other or of any rights
or remedies which Lender would otherwise have. Any waiver, permit, consent or
approval by Lender of any breach or default hereunder must be in writing and
shall be effective only to the extent set forth in such writing and only as to
that specific instance.
28. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
29. CHOICE OF LAW. This Agreement and all transactions contemplated
hereunder and/or evidenced hereby shall be governed by, construed under, and
enforced in accordance with the laws of the State of California.
30. STATUTE OF LIMITATIONS. Borrowers waives the pleading of any statute
of limitations with respect to any and all actions in connection herewith. To
the extent that Borrowers may now or in the future have any claim against
Lender, arising out of this agreement or the transaction contemplated herein
whether in contract or tort or otherwise, Borrowers must assert such claim
within one year of it accruing. Failure to assert such claim within one year
shall constitute of waiver thereof. Borrowers agrees that such period is
reasonable and sufficient for it to investigate and act upon the claim. This
Section shall survive any termination of this agreement. A copy of the waiver
may be filed as a written consent in any judicial proceeding.
31. WAIVER OF TRIAL BY JURY. IN RECOGNITION OF THE HIGHER COSTS AND DELAY
WHICH MAY RESULT FROM A JURY TRIAL, THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING HEREUNDER,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE, AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
-26-
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
BIG DOG HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Title: PRESIDENT
-----------------------------
BIG DOG USA, INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Title: PRESIDENT
-----------------------------
FORTUNE DOGS INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Title: PRESIDENT
-----------------------------
ISRAEL DISCOUNT BANK LIMITED, LOS
ANGELES AGENCY
By: /s/ (Illegible)
--------------------------------
Title: (Illegible)
-----------------------------
-27-
FIRST AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THE PARTIES HERETO hereby Amend that certain Amended and Restated Credit
Agreement ("the Agreement") dated June 30, 1995 and the other loan documents, as
defined below, effective as of February 15, 1996, as follows:
1. AMENDMENT NOT A NOVATION. This Amendment amends and supplements all
the loan documents ("Original Documents") as defined by Section 1.2.25 and
"Documents" as defined by Section 1.2.10 of the Agreement. This Amendment is
not, and should not be construed as, a novation. All terms of the Original
Documents and Documents not specifically amended and altered by this Amendment
will remain in full force and effect, and the terms of which are incorporated
herein by reference.
2. INCREASE OF REVOLVING LINE OF CREDIT. Sections 1.2.4, 1.2.21,
1.2.31, 1.2.32, 1.2.33, 2.1, and 2.2 of the Agreement are amended only to
increase the Revolving Credit Facility, as defined by Sections 1.2.31, and
2.1, to $7,000,000. The total amount of indebtedness ("Maximum Commitment"),
as defined by Section 1.2.21 of the Agreement shall be increased to
$7,000,000.
3. RENEWAL OF LINE OF CREDIT. Section 1.2.45 of the Agreement is amended
only to provide that the Revolving Credit facility is extended to May 2, 1997,
and which time the Revolving Credit Facility shall terminate, unless terminated
early pursuant to the terms of the Agreement.
4. TERM LOAN SATISIFIED BY LINE OF CREDIT PROCEEDS. Sections 1.2.41,
1.2.42, 1.2.43, 1.2.44, and 2.3 of the Agreement are amended only to eliminate
the Term Loan Facility, as defined by Section 1.2.41 of the Agreement. The Term
Loan shall be satified by advancing available credit on the Revolving Credit
Facility to the extent necessary to satisfy the Term Loan Facility.
5. REDUCTION OF INTEREST RATE. Section 1.2.16 of the Agreement is
amended to only reduce the interest rate from Prime plus .75% to Prime plus
.50%. This reduction shall be effective on the last date of any signator to
this Agreement.
6. EXONERATION OF GUARANTOR. Israel Discount Bank shall exonerate and
eliminate Fortune Fashions, Inc. as a guarantor of the Revolving Credit
Facility.
7. GUARANTOR CONSENT AND OTHER GUARANTIES TO REMAIN IN FORCE. The
Guarantors, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx, and Xxxxxx Xxxxxxxx,
hereby acknowledge that,
1
in accordance with Section 6.1 of the their Guaranty, that the Original
Documents, and Credit Documents, as defined by Section 1.1 of the Guaranty, are
being modified. The Guarantors agree and consent to the modifications set forth
above. The Guarantors agree and acknowledge that their Guaranties, and all
terms contained therein, shall remain in full force and effect.
8. ENTIRE AGREEMENT. This Amendment embodies the entire agreement and
understanding among the parties hereto, except as to the Original Documents and
Documents defined above. There are no oral agreements or understandings. No
course of prior dealings, usage of trade, or oral conversation shall be
admissible to supplement or explain this Amendment. The parties have read
Section 20 of the Agreement, the terms of which are restated and incorporated
here by reference.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
the Amended and Restated Credit Agreement to be executed as of the date first
above written.
BIG DOG USA, INC. BIG DOG HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxxxxx
-------------------------------- ------------------------------------
Xxxxxx Xxxxxxxx, President Date Xxxxxx Xxxxxxxx, President Date
FORTUNE DOGS INC. ISRAEL DISCOUNT BANK
LIMITED, LOS ANGELES
AGENCY
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Xxxxxx Xxxxxxxx, President Date By: /s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx, Xx. Vice President Date
and Manager
XXXX XXXXX XXXXXX XXXXX
/s/ Xxxx Xxxxx 4/10/96 /s/ Xxxxxx Xxxxx 4/14/96
----------------------------------- ---------------------------------------
Guarantor Date Guarantor Date
XXXXXX XXXXXXXX XXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx
----------------------------------- ---------------------------------------
Guarantor Date Guarantor Date
2
SECOND AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THE PARTIES HERETO, BIG DOG HOLDINGS, Inc., a Delaware Corporation and BIG DOG
USA, INC., a California corporation (individually and collectively "Borrowers,"
Debtors," or "Makers"), Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx
Xxxxxxxx, and Feshbach Family Trust, U/A DTD 7-26-95, ("Guarantors") and Israel
Discount Bank Limited ("Lender," "Bank," "Creditor," or "Payee"), hereby Amend
that certain Amended and Restated Credit Agreement ("the Agreement") dated June
30, 1995 and the other loan documents, as defined below effective as of April
30, 1996, as follows:
RECITALS
A. Borrowers are currently indebted to Lender directly and contingently
and Guarantors are currently indebted to Lender contingently, pursuant to the
terms and conditions of the AGREEMENT, made by Borrowers to the order of Bank,
as payee; and together with all other documents executed in connection,
therewith, as such documents may have been, at any time, amended, otherwise
modified, renewed or extended to the date hereof, (the "Credit Agreements"); and
B. Borrowers and Lender have agreed to amend the Credit Agreements as set
forth herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties agree as follows;
AGREEMENT
1. AMENDMENT NOT A NOVATION. This Amendment amends and supplements all
the loan documents ("Original Documents") as defined by Section 1.2.25 and
"Documents" as defined by Section 1.2.10 of the Agreement. This Amendment is
not, and should not be construed as, a novation. All terms of the Credit
Agreements not specifically amended and altered by this Amendment will remain
in full force and effect, and the terms of which are incorporated herein by
reference.
2. REVIEWED JUNE 30 FINANCIAL STATEMENT. Section 6.1.2 of the Agreement
is amended to add at the beginning of the Section "Effective January 1, 1997,".
3. NOTICE TO LENDER RE: EXPANSION OF BUSINESS. Section 6.17 of the
Agreement is amended to change the total number of retail stores to 130.
4. INVESTMENT, ADVANCES, AND GUARANTIES. Section 7.5 of the Agreement is
amended to change the reference "$25,000" to "$30,000" and to read: "Other than
in the ordinary course of business, advance funds to any Person (whether by way
of loan, stock purchase, capital contribution, or otherwise) other than loans
not exceeding Thirty Thousand Dollars ($30,000) in any instance to employees of
Borrowers, or loans not exceeding $150,000 in any instance, or $1,000,000 in the
aggregate, made to employees and/or consultants under the Big Dog Holdings, Inc.
1996 Stock Incentive Plan (the "Stock Plan") which loans are used to purchase
shares of stock of Big Dog
Page 1 of 3 - 2nd Amendment of RCA/Big Dog - 11/21/96
Holdings, Inc. and which are secured by such stock, or incur any Indebtedness
with respect to the obligations of any Person, including by way of a guaranty of
indebtedness, or acquire by purchase of stock or by purchase of assets in
exchange for cash, shares of capital stock, or other securities of Borrowers, or
any other Person, all or any substantial division or portion of the assets or
business of any other Person."
5. NO INDEBTEDNESS. Section 7.6 of the Agreement is amended to change
"Six Million Five Hundred Twenty Thousand Dollars ($6,520,000)" to "Seven
Million Nine Hundred Twenty Thousand Dollars ($7,920,000)" and to add "or (d)
equipment, furniture and fixtures, and leasehold improvement debts (including
capital lease debts) incurred in the ordinary course of business not exceeding
in the aggregate One Million Three Hundred Thousand Dollars ($1,300,000).
6. DIVIDENDS, REDEMPTIONS. Section 7.7.2 of the Agreement is amended to
change "executive officers" to "employees and consultants."
7. LEASE OBLIGATIONS. Section 7.9 of the Agreement is amended to
increase the aggregate Indebtedness under a lease payable in any fiscal year to
Thirteen Million Dollars ($13,000,000) from $5,000,000.
8. COMPENSATION, SALARY, ETC. Section 7.10 of the Agreement is amended
to change "$1,100,000 to $1,500,000."
9. DEBT-TO-WORTH RATIO. Section 7.11.2 of the Agreement is amended to
read: "Permit the ratio of their consolidated aggregate debt to Tangible Net
Worth at any time to be greater than 1.3:1 except for the period May 1, 1996
through July 30, 1996 permit the ratio of their consolidated aggregate debt to
Tangible Net Worth at any time to be greater than 1.5:1."
10. NO MODIFICATION OF OTHER OBLIGATIONS. Except as is otherwise
specifically set forth herein, all obligations of Borrower and Lender, shall
remain unmodified and in full force and effect.
11. COSTS; EXPENSES; ATTORNEYS' FEES. Borrower shall reimburse Lender on
demand for all costs and expenses, including reasonable attorneys' fees expended
or incurred by Lender in the present and any future negotiation, preparation and
executions of this Agreement.
12. EXECUTION IN COUNTERPARTS. This Amendment Agreement may be executed
in counterparts and each counterpart shall constitute one and the same original
document.
13. USE OF COPY IN LIEU OF ORIGINAL. A copy of this Amendment Agreement
shall have the same force and effect as the original.
14. GUARANTOR CONSENT AND OTHER GUARANTIES TO REMAIN IN FORCE. The
Guarantors, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, and
Feshbach Family Trust, U/A dated 7-26-95, hereby acknowledge that, in accordance
with Section 6.1 of their Guaranty, that the Credit Agreements are being
modified. The Guarantors agree and consent to the modifications set forth
above. The Guarantors agree and acknowledge that their Guaranties, and all
terms contained therein, shall remain in full force and effect.
Page 2 of 3 - 2nd Amendment of RCA/Big Dog - 11/21/96
15. ENTIRE AGREEMENT. This Amendment embodies the entire agreement and
understanding among the parties hereto, except as to the Credit Agreements
defined above. There are no oral agreements or understandings. No course of
prior dealings, usage of trade, or oral conversation shall be admissible to
supplement or explain this Amendment. The parties have read Section 20 of the
Agreement, the terms of which are restated and incorporated here by reference.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first written above.
BIG DOG USA, Inc. Israel Discount Bank Limited
Los Angeles Agency
By: /s/ Xxxxxx Xxxxxxxx BY: /s/ [ILLEGIBLE]
-------------------------------- ------------------------------------
Title: President Date: Title: V.P. Date: 2/6/97
-------------- ---------- -------------- --------------
Big Dog Holdings, Inc. Feshbach Family Trust
By: /s/ Xxxxxx Xxxxxxxx BY: /s/ Xxxxxx Xxxxxxxx
-------------------------------- ------------------------------------
Guarantor Date
Title: President Date:
-------------- ----------
Xxxx Xxxxx - Individually Xxxxxx Xxxxxxxx - Individually
By: /s/ Xxxx Xxxxx BY: /s/ Xxxxxx Xxxxxxxx
-------------------------------- ------------------------------------
Guarantor Date Guarantor Date
Xxxxxx Xxxxx - Individually Xxxxxx Xxxxxxxx - Individually
By: /s/ Xxxxxx Xxxxx BY: /s/ Xxxxxx Xxxxxxxx
-------------------------------- ------------------------------------
Guarantor Date Guarantor Date
3 of 3 - 2nd Amendment of RCA/Big Dog - 11/21/96
THIRD AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THE PARTIES HERETO, BIG DOG HOLDINGS, Inc., a Delaware Corporation and BIG DOG
USA, INC., a California corporation (individually and collectively "Borrowers,"
Debtors," or "Makers"), Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx
Xxxxxxxx, and Feshbach Family Trust, U/A DTD 7-26-95, ("Guarantors") and Israel
Discount Bank Limited ("Lender," "Bank," "Creditor," or "Payee"), hereby Amend
that certain Amended and Restated Credit Agreement ("the Agreement") dated June
30, 1995 and the other loan documents, as defined below effective as of May 3,
1997, as follows:
RECITALS
A. Borrowers are currently indebted to Lender directly and contingently
and Guarantors are currently indebted to Lender contingently, pursuant to the
terms and conditions of the AGREEMENT, made by Borrowers to the order of Bank,
as payee; and together with all other documents executed in connection,
therewith, as such documents may have been, at any time, amended, otherwise
modified, renewed or extended to the date hereof, (the "Credit Agreements"); and
B. Borrowers and Lender have agreed to amend the Credit Agreements as set
forth herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties agree as follows;
AGREEMENT
1. AMENDMENT NOT A NOVATION. This Amendment amends and supplements all
the loan documents ("Original Documents") as defined by Section 1.2.25 and
"Documents" as defined by Section 1.2.10 of the Agreement. This Amendment is
not, and should not be construed as, a novation. All terms of the Credit
Agreements not specifically amended and altered by this Amendment will remain
in full force and effect, and the terms of which are incorporated herein by
reference.
2. INCREASE OF REVOLVING LINE OF CREDIT. Sections 1.2.4, 1.2.21, 1.2.31,
1.2.32, 1.2.33, 2.1, and 2.2 of the Agreement are amended only to increase the
Revolving Credit Facility, as defined by Sections 1.2.31 and 2.1, from
"$7,000,000" to "$10,500,000." The total amount of indebtedness ("Maximum
Commitment"), as defined by Section 1.2.21 of the Agreement shall be increased
to $10,500,000.
3. REDUCTION OF INTEREST RATE. Section 1.2.16 of the Agreement is
amended only to reduce the interest rate from "Prime plus .50%" to "Prime."
This reduction shall be effective on the last date of any signator to this
Agreement.
4. STATEMENT DATE. Section 1.2.36 of the Agreement is amended to read:
"December 31, 1996."
5. RENEWAL OF LINE OF CREDIT. Section 1.2.45 of the Agreement is amended
only to provide that the Revolving Credit Facility is extended to "May 2, 1998,"
at which time the Revolving Credit Facility shall terminate, unless terminated
early pursuant to the terms of the Agreement.
6. PRIORITY INTEREST. Section 5.8 of the Agreement is amended only to
add at the end of the Section "excluding Permitted Liens."
7. INVENTORY. Section 5.12 is to be added to the Agreement to read as
follows: "(a) at a minimum, 98% of all Inventory is now and at all times
hereafter shall be of good and merchandisable quality, free from defects; (b)
at Lender's request, Borrower shall, from time to time hereafter, execute and
deliver to Lender, schedules of Inventory, in a form satisfactory to Lender,
specifying Borrower's cost and the wholesale market value of Borrower's raw
materials, work in process, finished goods, and further, specifying any other
category which Lender may request, as well as such other matters and information
relating to the Inventory as Lender may request; (c) all of the Inventory is
and shall remain free from all liens, claims, encumbrances, and purchase money
or other security interests, liens or encumbrances (except as held by Lender);
(d) Borrower does now keep and hereafter at all times shall keep correct and
accurate records itemizing and describing the kind, type, quality and quantity
of the Inventory, and its cost therefor, all of which records shall be available
upon demand to any of Lender's officers, agents and employees for inspection and
copying; (e) the Inventory is not now and shall not at any time or times
hereafter be stored with a bailee, warehouseman or similar party without
Lender's prior written consent, and, in such event, Borrower will, concurrent
therewith, cause any such bailee, warehouseman or similar party to issue and
deliver to Lender, in a form acceptable to Lender, warehouse receipts in
Lender's name evidencing the storage of the Inventory; and (f) Lender shall
have the right, during Borrower's usual business hours, to inspect and examine
the Inventory and to check and test the same as to quality, quantity, value and
condition."
8. FINANCIAL STATEMENTS. Section 6.1.2 of the Agreement is amended to
read "Deleted." The numbering of the subsequent Sections will not change.
9. FINANCIAL STATEMENTS. Section 6.1.3 of the Agreement is amended only
to add at the end of the Section "and a statement certified by Borrower's chief
financial officer detailing the number, scope, and results of the cyclical
counts of inventory that were performed by Borrower during the month."
10. OTHER INFORMATION. Section 6.2.3 of the Agreement is amended only to
add at the end of the Section "and upon such inspection pay Lender a field
examination fee of $2,500. Lender anticipates that inspections will take place
four (4) times each year, but there is no obligation of Lender to inspect, nor
any limitation to the number of inspections. Inspections may occur as often as
eight (8) times per year, and Borrower will pay Lender the Field Examination Fee
each time.
11. NOTICE OF LITIGATION. Section 6.8 of the Agreement is amended only to
increase the notification trigger from "$50,000" to "$100,000."
12. NOTICE TO LENDER RE: EXPANSION OF BUSINESS. Section 6.17 of the
Agreement is amended only to increase the total number of retail stores from
"eighty-five (85)" to "one hundred seventy (170)."
13. INVESTMENT, ADVANCES, AND GUARANTIES. Section 7.5 of the Agreement is
amended only to change the reference "$30,000" to "$50,000" and to allow
acquisitions not requiring an investment, advance and/or guaranty in excess of
$2,000,000. Section 7.5 will now read as follows: "Other than in the ordinary
course of business, advance funds to any Person (whether by way of loan, stock
purchase, capital contribution, or otherwise) other than loans not exceeding
Fifty Thousand Dollars ($50,000) in any instance to employees of Borrowers, or
loans not exceeding One Hundred Fifty Thousand Dollars ($150,000) in any
instance, or One Million Dollars ($1,000,000) in the aggregate, made to
employees and/or consultants under the Big Dog Holdings, Inc. 1996 Stock
Incentive Plan (the "Stock Plan") which loans are used to purchase shares of
stock of Big Dog Holdings, Inc. and which are secured by such stock, or incur
any Indebtedness with respect to the obligations of any Person, including by way
of a guaranty of indebtedness, or acquire by purchase of stock or by purchase of
assets in exchange for cash, shares of capital stock, or other securities of
Borrowers, or any other Person, all or any substantial division or portion of
the assets or business of any other Person other than acquisitions not exceeding
Two Million Dollars ($2,000,000)."
14. NO INDEBTEDNESS. Section 7.5 (b) of the Agreement is amended only to
delete "PROVIDED, THAT, the aggregate amount of such subordinated indebtedness
shall not at any time exceed Seven Million Nine Hundred Twenty Thousand Dollars
($7,920,000)."
15. NO INDEBTEDNESS. Section 7.5 (d) of the Agreement is amended only to
increase the allowable amount from "One Million Three Hundred Thousand Dollars
($1,300,000)" to "Two Million Dollars ($2,000,000)."
16. LEASE OBLIGATIONS. Section 7.9 of the Agreement is amended only to
increase the aggregate Indebtedness allowable under a lease payable in any
fiscal year from "Thirteen Million Dollars ($13,000,000)" to "Eighteen Million
Dollars ($18,000,000)."
17. COMPENSATION, SALARY, ETC. Section 7.10 of the Agreement is amended
to read "Deleted." The numbering of the subsequent Sections will not change.
18. TANGIBLE NET WORTH. Section 7.11.1 of the Agreement is amended to
read: "Permit its tangible net worth at any time to be less than $12,000,000."
19. DEBT-TO-WORTH RATIO. Section 7.11.2 of the Agreement is amended to
read: "Permit the ratio of their consolidated aggregate debt to Tangible Net
Worth at any time to be greater than 1.1 to 1."
20. WORKING CAPITAL. Section 7.11.3 of the Agreement is amended to read:
"Permit its working capital (current assets minus current liabilities) at any
time to be less than $9,000,000."
21. EVENTS OF DEFAULT. Section 8.1.6 of the Agreement is amended only to
increase the beneficial interest percentage from "twenty (20%) percent" to
"forty-nine (49%) percent."
22. EVENTS OF DEFAULT. Section 8.1.10 of the Agreement is amended only to
decrease the minimum amount of efforts required of the Key Employee to devote to
the furtherance of the business of the Borrower from "100%" to "75%."
23. AMENDMENT OF NOTE. Effective as of the date hereof, the Revolving
Credit Note is amended by (a) adding after "Fortune Dogs" "and its affiliates
and successor(s) Big Dog Holdings, Inc. and Big Dog USA, Inc." and (b) deleting
the reference to "$1,500,000" therein and replacing such reference with
"$10,500,000."
24. NO MODIFICATION OF OTHER OBLIGATIONS. Except as is otherwise
specifically set forth herein, all obligations of Borrower and Lender, shall
remain unmodified and in full force and effect.
25. COSTS; EXPENSES; ATTORNEYS' FEES. Borrower shall reimburse Lender on
demand for all costs and expenses, including reasonable attorneys' fees expended
or incurred by Lender in the present and any future negotiation, preparation and
executions of this Agreement.
26. EXECUTION IN COUNTERPARTS. This Amendment Agreement may be executed
in counterparts and each counterpart shall constitute one and the same original
document.
27. USE OF COPY IN LIEU OF ORIGINAL. A copy of this Amendment Agreement
shall have the same force and effect as the original.
28. GUARANTOR CONSENT AND OTHER GUARANTIES TO REMAIN IN FORCE. The
Guarantors, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, and
Feshbach Family Trust, U/A dated 7-26-95, hereby acknowledge that, in accordance
with Section 6.1 of their Guaranty, that the Credit Agreements are being
modified. The Guarantors agree and consent to the modifications set forth
above. The Guarantors agree and acknowledge that their Guaranties, and all
terms contained therein, shall remain in full force and effect.
29. ENTIRE AGREEMENT, This Amendment together with all other Amendments
to the Agreement and all Other Documents executed in connection, therewith, as
such documents may have been amended, otherwise modified, or renewed, the Credit
Agreements, embody the entire agreement and understanding among the parties
hereto. There are no oral agreements or understandings. No course of prior
dealings, usage of trade, or oral conversation shall be admissible to supplement
or explain this Amendment. The parties have read Section 20 of the Agreement,
the terms of which are restated and incorporated here by reference.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
as of the day and year first written above.
BIG DOG USA, Inc. Israel Discount Bank Limited
Los Angeles Agency
By: /s/ Xxxxxx Xxxxxxxx BY:
-------------------------------- ------------------------------------
Title: President Date: 5/2/97 Title: Date:
-------------- ---------- -------------- --------------
Big Dog Holdings, Inc. Feshbach Family Trust
By: /s/ Xxxxxx Xxxxxxxx BY: /s/ Xxxxxx Xxxxxxxx 5/2/97
-------------------------------- ------------------------------------
Guarantor Date
Title: President Date: 5/2/97
-------------- ----------
Xxxx Xxxxx - Individually Xxxxxx Xxxxxxxx - Individually
By: By: /s/ Xxxxxx Xxxxxxxx 5/2/97
-------------------------------- ------------------------------------
Guarantor Date Guarantor Date
Xxxxxx Xxxxx - Individually Xxxxxx Xxxxxxxx - Individually
By: By: /s/ Xxxxxx Xxxxxxxx 5/2/97
-------------------------------- ------------------------------------
Guarantor Date Guarantor Date
