AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT
This Amendment Number Three to Loan and Security Agreement
("Amendment") is entered into as of July 31, 1995, between FOOTHILL
CAPITAL CORPORATION ("Foothill") and UNITED MERCHANTS AND
MANUFACTURERS, INC. ("Borrower").
FACT ONE: Foothill and Borrower entered into that certain
Amended and Restated Loan And Security Agreement as of June 28,1994,
as amended on August 26, 1994 and September 28, 1994 (the
"Agreement").
FACT TWO: Concurrently herewith Foothill and Victoria Creations,
Inc. ("Victoria") have entered into an Amended and Restated Loan and
Security Agreement. The purpose of this Amendment is to deal with the
balance of the Obligations owed by Borrower to Foothill after giving
effect to such agreement.
FACT THREE: Borrower and Foothill desire to amend the
Agreement as provided herein.
NOW, THEREFORE, Foothill and Borrower hereby amend the
Agreement as follows:
1. All references in the Agreement to Combined Term Note and
the terms and conditions related thereto are hereby deleted.
2. Section 1.1 of the Agreement is hereby amended to add the
following additional definition:
"Net Earnings" shall mean, for any period for which such
amount is being determined, the net earnings of Borrower and its
consolidated subsidiaries (other than Victoria) during such period
determined on a consolidated basis for such period in accordance
with generally accepted accounting principles, as set forth in the
consolidated financial statements of Borrower audited by one of
the "Big Six" accounting firms or other reputable accounting firm
reasonably acceptable to Foothill and which are included in
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual
Reports and Form 8-K Current Reports which are filed with the
Securities and Exchange Commission (or, in the event that
Borrower is no longer legally required to file such reports,
financial statements reflecting the same information and deliverable
on the same dates as the above-referenced filings), provided that
there shall be excluded (i) income of any Person (other than a
consolidated subsidiary of Borrower) in which Borrower or any of
its consolidated subsidiaries has an equity investment or
comparable interest, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or
any of its consolidated subsidiaries by such Person during such
period, (ii) the income of any subsidiary of Borrower to the extent
that the declaration or payment of dividends or similar
distributions by that subsidiary of the income is not at the time
permitted by any judgment, decree, order, statute, rule or
governmental regulation applicable to that subsidiary, and (iii) any
non-recurring (which shall include proceeds from the sale of Real
Property), non-cash gains and losses, net of any applicable income
taxes.
3. Section 2.1 of the Agreement is hereby deleted in its
entirety. All Obligations outstanding as of this date shall be evidenced
by the Term Note and shall be repayable in accordance with Section 2.3
and the Term Note.
4. Foothill shall no longer have an obligation to issue L/Cs or
L/C Guarantees on behalf of Borrower. In addition, Borrower shall
cause the two (2) letters of credit in the aggregate amount of One
Million Ninety Four Thousand Dollars ($1,094,000) in which the
Beneficiary of each is National Union Fire Insurance Company, to be
released within nine (9) months of the date of this Amendment. Once
such letters of credit are released, Section 2.2 shall automatically be
deleted.
5. Section 2.3 of the Agreement is amended in its entirety to
read as follows:
"2.3 Term Loans. Borrower's outstanding Obligations to
Foothill as of this date are in the aggregate principal amount of
Eleven Million Six Hundred Eighty Eight Thousand Dollars
($11,688,000). Such Obligations shall be evidenced by and
repayable in accordance with the terms of that certain Secured
Promissory Note (the "Term Note") dated July 31, 1995, and
executed by Borrower in favor of Foothill. All amounts evidenced
by the Term Note shall constitute Obligations. The Term Note
amends and supersedes in its entirety that certain Secured
Promissory Note in the original principal amount of Ten Million
Dollars ($10,000,000) payable by Borrower to Foothill together with
that certain Secured Promissory Note in the original principal
amount of Two Million Dollars ($2,000,000) payable jointly by
Borrower and Victoria to Foothill.
The Term Note shall be repayable from collections of
Borrower's Current Accounts and Inventory (as hereinafter
defined) from monies due to Borrower from Victoria, from
Borrower's pledge of Victoria's outstanding capital stock to
Foothill, and from Net Proceeds of sales of Borrower's Real
Property in an amount up to Three Million Dollars ($3,000,000).
Once Foothill has received such amount, Borrower shall be entitled
to retain the next Two Million Dollars ($2,000,000) in Net Proceeds
from sales of Real Property. Foothill and Borrower shall share
equally in any Net Proceeds from sale of Real Property in excess
of Five Million Dollars ($5,000,000). Foothill's portion of the Net
Proceeds described in the preceding sentence shall be applied to
the Term Note. For purposes of this section: (a) Real Property
shall not include Borrower's Buffalo Mill property or property
which is utilized by Victoria in the operation of its business, and
(b) "Net Proceeds" shall mean all proceeds of sale of each Real
Property, less the direct out-of-pocket expenses incurred by
Borrower regarding such sale (such as, but not limited to, real
estate commissions, escrow charges, and title insurance charges).
For purposes of this paragraph, Current Accounts and Inventory
means all of Borrower's presently existing accounts receivable and
Inventory, wherever located.
The Term Note shall also be repayable from fifty percent
(50%) of Borrower's Net Earnings.
6. Section 2.5(a) is hereby amended to read as follows:
"(a) Interest Rate. Commencing July 1, 1995, all
Obligations shall bear interest, on the average Daily Balance, at
the rate of twelve percent (12%) per annum. Borrower shall have
the right to have interest on the Obligations payable in the
months of August through December of 1995 and January through
April of 1996 added to principal each month as it becomes due.
Any of such interest shall be compounded by becoming a part of
the Obligations, and such interest shall thereafter accrue interest
at the rate provided in this section and in the Term Note.
7. Section 3.3 of the Agreement is amended to change the
Maturity Date to July 31, 2000.
8. Notwithstanding anything to the contrary in Section 7.4,
Borrower shall have the right to sell Real Property, other than the
property used by Victoria in the operation of its business, so long as
the proceeds of such sales are distributed as provided in Section 2.3.
9. The Victoria Guaranty is hereby released.
10. Section 7.5 of the Agreement is amended in its entirety to
read as follows:
"7.5 Change Name. Without at least thirty (30) days' prior
written notice to Foothill, change Borrower's name, FEIN, business
structure, identity or any new fictitious name."
11. Sections 2.4, 3.2, 5.2, 6.6, 6.12, 6.19 through 6.23, 7.7, 7.10,
7.11 and 7.16 of the Agreement are hereby deleted in their entirety.
12. In the event of a conflict between the terms and provisions
of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other
respects, the Agreement shall remain in full force and effect.
13. All initially capitalized terms used in this Amendment shall
have the meanings given to them in the Agreement unless specifically
defined herein.
IN WITNESS WHEREOF, Borrower and Foothill have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION
By /s/ Xxxxxx Xxxx
Title Vice President
UNITED MERCHANTS AND MANUFACTURERS, INC.
By /s/ Xxxxxx X. Nadzick
Title Executive Vice President
