EXHIBIT 10.25 AMENDMENT TO FINANCING AGREEMENT
As of April 6, 1998
Sharper Image Corporation
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Gentlemen:
Reference is made to (a) the Financing Agreement between us dated September 21,
1994, as amended (the "Financing Agreement") and (b) the Amendment Letter
between us dated May 15, 1996 (herein the "1996 Amendment Letter"). Capitalized
terms used herein shall have the same meanings as specified in the Financing
Agreement unless otherwise specifically defined herein.
Effective immediately, pursuant to mutual understanding, the Financing Agreement
shall be, and hereby is, amended as follows:
(A) Section 1 of the Financing Agreement shall be, and hereby is, amended by
amending the definitions of "Early Termination Date", "Early Termination Fee",
"Line of Credit" and "Line of Credit Fee" in their entirety to read as follows:
"Early Termination Date shall mean the date on which the Company
terminates this Financing Agreement or the Line of Credit which date is
prior to the fifth Anniversary Date."
"Early Termination Fee shall: i) mean the fee CITBC is entitled to
charge the Company in the event the Company terminates the Line of
Credit or this Financing Agreement on a date prior to the fifth
Anniversary Date (except as otherwise provided in Section 10 of this
Financing Agreement); and ii) be determined by calculating the sum of
(a) the average daily balance of the Revolving Loans for the period
from the date of this Financing Agreement to the Early Termination
Date, (b) the average daily undrawn face amount of the Letters of
Credit outstanding from the date of this Financing Agreement to the
Early Termination Date and (c) the average daily balance of CAPEX Term
Loans for the period from the effective date of the CAPEX Term Loan
Line of Credit to the Early Termination Date and multiplying that sum
by (i) one percent (1%) per annum if the Early Termination Date occurs
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prior to the second Anniversary Date; (ii) three-quarters of one
percent (3/4 of 1%) per annum if the Early Termination Date occurs on
or after the second Anniversary Date but prior to the third Anniversary
Date; and (iii) one-half of one percent (1/2 of 1%) per annum if the
Early Termination Date occurs on or after the third Anniversary Date
but prior to the fifth Anniversary Date, in each case for the number of
days from the Early Termination Date to the fifth Anniversary Date."
"Line of Credit shall mean the commitment of CITBC to make Revolving
Loans under Section 3 hereof, make CAPEX Term Loans under Section 3A
hereof and issue Letter of Credit Guaranties under Section 4 hereof,
all pursuant to and in accordance with Sections 3, 3A and 4 of this
Financing Agreement, in the aggregate amount of $24,500,000 at all
times, provided that (i) such amount shall be automatically and without
any further act by CITBC or the Company reduced by an amount equal to
the aggregate amount of all drawdowns of CAPEX Term Loans made by CITBC
to the Company hereunder and (ii) the aggregate outstanding balance of
Revolving Loans and Letters of Credit shall not exceed $20,000,000 at
all times except as set forth below:
(a) October 1 - December 31, 1998 $28,000,000.00
(b) October 1 - December 31, 1999 $30,000,000.00
(c) October 1 - December 31, 2000 $31,000,000.00
(d) October 1 - December 31, 2001 $32,000,000.00
(e) October 1 - December 31, 2002 $33,000,000.00"
"Line of Credit Fee shall: i) mean the fee due CITBC at the end of each
month for the Line of Credit, and ii) be determined by multiplying x)
the difference between the Line of Credit at the end of such month less
the sum of a) the average daily Revolving Loans outstanding during such
month, and b) the average daily undrawn face amount of all outstanding
Letters of Credit for said month by y) one half of one percent (.500%)
per annum for the number of days in said month during which this
Financing Agreement was in effect (herein the "Line of Credit
Percentage"), provided, however, the percentage set forth in y) shall
be subject to increase or decrease (herein each a "Fee Adjustment") as
outlined below:
(i) The Line of Credit Percentage may be reduced or increased in
accordance with the grid set forth below from the rate set forth in y)
above, based on the EBITDA of the Company for any fiscal quarter
commencing with the fiscal quarter ending January 31, 1998 and each
fiscal quarter thereafter.
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EBITDA for Four Consecutive Line of Credit
Quarters, then ended Percentage
-------------------- ----------
1. Less than $5,000,000.00 0.500% per annum
2. $5,000,000.00 or more
but less than $6,500,000.00* 0.375% per annum
3. $6,500,000.00 or more* 0.250% per annum
*except solely with respect to the fiscal quarter ended July 1998, the figure
"$6,500,000.00" set forth in #2 and #3 above shall be "$6,000,000.00."
(ii) In addition to the foregoing requirements, each Fee Adjustment is
subject to the Company's compliance with each of the following
conditions:
(x) as to any fee reduction, the timely delivery by the
Company of the Relevant Financial Statements (as hereinafter
defined) in accordance with Paragraph 7 of Section 6 of this
Financing Agreement and CITBC has had reasonable time to
review such financial statements to its satisfaction
("Financial Statement Test"), and the absence of any Default
or Event of Default on the date of determination of the
Financial Statement Test or the effective date of any such Fee
Adjustment; and
(y) each Fee Adjustment will be effective only after CITBC's
receipt and review of (a) the Company's latest financial
statements reflecting the four (4) consecutive most recently
ended quarters (the "Relevant Financial Statements") for the
applicable fiscal quarter and (b) a certificate signed by an
authorized officer of the Company setting forth the
calculations used to determine the applicable Line of Credit
Percentage based on the terms and conditions set forth herein.
Any such Fee Adjustment shall be effective on the first day of
the month following CITBC's receipt and review of such
Relevant Financial Statements.
(iii) Notwithstanding the foregoing, if the Company fails to timely
deliver to CITBC the Relevant Financial Statements under this Financing
Agreement, and/or a Default or an Event of Default has occurred under
this Financing Agreement as further provided in clause (x) above, the
Line of Credit Percentage shall be 0.500% per annum."
(B) Section 1 of the Financing Agreement shall be, and hereby is, further
amended by adding the
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following definitions in their proper alphabetical order as follows:
"Chase Manhattan Bank Rate shall mean the rate of interest per annum
announced by Chase Manhattan Bank from time to time as its prime rate
in effect at its principal office in the City of New York. (The prime
rate is not intended to be the lowest rate of interest charged by Chase
Manhattan Bank to its borrowers).
All references in the Financing Agreement to the "Chemical Bank Rate"
shall be, and hereby are, amended to the "Chase Manhattan Bank Rate."
"Interest Coverage Ratio shall mean a ratio determined as of the
relevant calculation date by dividing EBITDA by Interest Expense for
the relevant period."
(C) Section 3, Paragraph 1 shall be, and hereby is, amended by amending the
second sentence thereof in its entirety to read as follows:
"Such loans and advances shall be in amounts up to the sum of:
(a) twenty percent (20%) of the aggregate value of the Company's
Eligible Inventory which is Proprietary Products Inventory plus (b) (i)
fifty-five percent (55%) for the period January 1 through and including
September 30 of each year, (ii) sixty percent (60%) for the period from
October 1, through and including October 31 of each year,
(iii)sixty-five percent (65%) for the period from November 1, through
and including December 31 of each year, of the aggregate value of the
Company's other Eligible Inventory provided that in no event shall the
aggregate amount of Eligible Inventory computed pursuant to the clause
(a) above exceed twenty-five percent (25%) of the total of all Eligible
Inventory."
(D) Section 6, Paragraphs 8, 10 and 11 of the Financing Agreement shall be, and
each hereby is, amended as follows:
(i) The Net Worth covenant set forth in Paragraph 8 of Section 6 shall
be, and hereby is, amended by amending the Net Worth amount for all
fiscal quarters ending October of each fiscal year to be
"$24,000,000.00". Such covenant shall remain unchanged for all other
fiscal quarters and periods.
(ii) The Working Capital covenant set forth in Paragraph 10 of Section
6 shall be, and hereby is, amended by deleting it in its entirety and
substituting the following in lieu thereof:
"10. Intentionally Omitted."
(iii) The Fixed Charge Coverage Ratio covenant set forth in Paragraph
11 of Section
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6 shall be, and hereby is, amended by deleting it in its entirety and
substituting the following in lieu thereof:
"11. The Company shall maintain at the end of each fiscal
quarter for the four (4) consecutive fiscal quarters then
ending an Interest Coverage Ratio of at least 2.50 to 1.0."
(iii) The Leverage Ratio covenant set forth in Paragraph 12 of Section
6 shall be, and hereby is, amended by deleting it in its entirety and
substituting the following in lieu thereof:
"12. Without the prior written consent of CITBC, the Company
will not contract for, purchase, make expenditures for, lease
pursuant to a Capital Lease or otherwise incur obligations
with respect to Capital Expenditures (whether subject to a
security interest or otherwise) during any fiscal year in the
aggregate amount in excess of $10,000,000.00. Notwithstanding
the foregoing, if the Company, in any fiscal year, spends less
than the permitted Capital Expenditures for such year, then
fifty percent (50%) of such unused amount shall be added to
the amount permitted solely for the next succeeding fiscal
year."
(E) Paragraph 1 of Section 7 of the Financing Agreement shall be, and hereby is,
amended by adding the following subparagraph (d) to the end of such paragraph:
"(d) Subject to the conditions set forth in this subparagraph (d), the
interest rates set forth in Paragraph 1, subparagraphs (a) and (b)
shall be subject to increase or decrease (herein each a "Rate
Adjustment") as outlined below:
i) The spread over the Chase Manhattan Bank Rate and the Libor
may be reduced or increased in accordance with the grid set
forth below from the rate set forth in sub-Paragraphs (a) and
(b) above, as applicable (as such rate may be adjusted from
time to time hereunder) based on the EBITDA of the Company for
any fiscal quarter commencing with the fiscal quarter ending
January 31, 1998 and each fiscal quarter thereafter.
REVOLVING LOANS
---------------
EBITDA for Four Consecutive Chase Manhattan
--------------------------- ---------------
Quarters, then ended Bank Rate Margin Libor Margin
-------------------- ---------------- ------------
1. Less than $5,000,000.00 + 0.75% + 2.75%
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2. $5,000,000.00 or more
but less than $6,500,000.00* + 0.50% + 2.50%
3. $6,500,000.00 or more* + 0.25% + 2.25%
CAPEX LOANS
-----------
EBITDA for Four Consecutive Chase Manhattan
--------------------------- ---------------
Quarters, then ended Bank Rate Margin Libor Margin
-------------------- ---------------- ------------
1. Less than $5,000,000.00 + 1.00% + 3.00%
2. $5,000,000.00 or more
but less than $6,500,000.00* + 0.75% + 2.75%
3. $6,500,000.00 or more* + 0.50% + 2.50%
* except solely with respect to the fiscal quarter ended July, 1998, the figure
"$6,500,000.00" set forth in #2 and #3 in each grid above shall be
"$6,000,000.00."
(ii) In addition to the foregoing requirements, each Rate Adjustment is
subject to the Company's compliance with each of the following
conditions:
(x) as to any rate reduction, the timely delivery by the
Company of the Relevant Financial Statements (as hereinafter
defined) in accordance with Paragraph 7 of Section 6 of this
Financing Agreement and CITBC has had reasonable time to
review such financial statements to its satisfaction
("Financial Statement Test"), and the absence of any Default
or Event of Default on the date of determination of the
Financial Statement Test or the effective date of any such
Rate Adjustment; and
(y) each Rate Adjustment will be effective only after CITBC's
receipt and review of (a) the Company's latest financial
statements reflecting the four (4) consecutive most recently
ended fiscal quarters (the "Relevant Financial Statements")
for the applicable fiscal quarter and (b) a certificate signed
by an authorized officer of the Company setting forth the
calculations used to determine the applicable interest rate
margin based on the terms and conditions set forth herein. Any
such Rate Adjustment shall be effective as follows:
(A) as to the spread over the Chase Manhattan Bank
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Rate on the first day of the month following CITBC's
receipt and review of such Relevant Financial
Statements; and
(B) as to the spread over Libor on the first day of
the next interest period commencing after CITBC's
receipt and review of such Relevant Financial
Statements.
(iii) Notwithstanding the foregoing, if the Company fails to timely
deliver to CITBC the Relevant Financial Statements under this
Financing Agreement, the Chase Manhattan Bank Rate Margin or
the Libor Margin, as the case may be, shall be equal to the
highest rate set forth in the applicable grid set forth above;
provided, however, nothing contained herein shall be deemed to
affect CITBC's right to charge the Default Rate of Interest in
accordance with the terms of this Financing Agreement.
(F) Section 10 of the Financing Agreement shall be, and hereby is, amended as
follows:
(i) the reference to the seventh or any subsequent Anniversary Date" as
contained in the first sentence thereof shall be, and hereby is amended
to read "ninth or any subsequent Anniversary Date"; and
(ii) the reference to "fourth Anniversary Date" as contained in the
proviso at the end of the fourth sentence thereof shall be, and hereby
is, amended to read "fifth Anniversary Date".
(G) The Effectiveness of all of the amendments set forth above shall be, and
hereby is, subject to the fulfillment to CITBC's satisfaction of each of the
Conditions Precedent. The "Conditions Precedent" shall mean:
(i) The Company shall pay all Out-of-Pocket Expenses incurred by CITBC
in connection with the agreement and all the documents and transactions
contemplated hereby including, without limitation, the reasonable fees
and expenses of CITBC's outside legal counsel in connection with the
warrant referred to in clause (iii) below. All such amounts may be
charged to your Revolving Loan Account on the respective due dates
thereof.
(ii) CITBC's receipt of a secretary's certificate certifying Board of
Directors Resolutions authorizing the execution, delivery and
performance by the Company of this Agreement and all documents and
transactions contemplated hereby.
(iii) The Company shall enter into a warrant agreement in form and
substance
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satisfactory to CITBC and take all other actions necessary to grant to
CITBC or its assigns a warrant to purchase up to 75,000 shares of its
voting common stock at $4.125 a share.
Pursuant to mutual understanding, a typographical error of omission appearing in
(F) on page 6 of the 1996 Amendment Letter is hereby corrected by adding the
words "Paragraph 1 of" to the beginning of the first sentence in (F) prior to
the reference to "Section 7" therein.
Except to the extent set forth herein, no other change in any of the terms,
provisions or conditions of the Financing Agreement is intended or implied. If
the foregoing is in accordance with your understanding of our agreement kindly
so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
/s/ Xxxxxx Xxxxxx
-------------
By: Xxxxxx Xxxxxx
Title: Loan Officer
Read and Agreed to:
SHARPER IMAGE CORPORATION
/s/ Xxxxx X. Xxx
------------
By: Xxxxx X. Xxx
Title: Senior Vice President, Chief Financial Officer
/s/ Xxxxx Xxxxxxx
-------------
By: Xxxxx Xxxxxxx
Title: Vice Chairman, Chief Operating Officer
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