EXHIBIT 10.28
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of this 16th day of August, 2001, among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), Bank of America, N.A. (in its individual capacity, the "Bank") with
an office at 00 Xxxxx Xxxx Xxxxxx Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, as
Administrative Agent for the Lenders (in its capacity as Administrative Agent,
the "Administrative Agent"), General Electric Capital Corporation (in its
individual capacity, "GE Capital") with an office at 0000 Xxxxxxxxxx Xxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000, as documentation agent for the Lenders
(in its capacity as documentation agent, the "Documentation Agent"), and Good
Guys California, Inc. (formerly known as The Good Guys - California, Inc.), a
California corporation, with offices at 0000 Xxxxxx Xxx Xxxxxxx, Xxxxxxx,
Xxxxxxxxxx 00000 (the "Borrower"), with respect to that certain Loan and
Security Agreement, dated as of September 30, 1999 among the parties hereto (the
"Loan Agreement"), and with reference to the following facts:
RECITALS
A. Pursuant to the Loan Agreement, Lenders agreed to make certain
financial accommodations to or for the benefit of Borrower upon the terms and
conditions contained therein. Unless otherwise defined in this Amendment, (i)
capitalized terms used herein shall have the meanings attributed to them in the
Loan Agreement, and (ii) references to sections shall refer to sections of the
Loan Agreement.
B. Borrower has requested certain consents from Lenders and certain
changes to the Loan Agreement, each with respect to i) Borrower's changing its
fiscal year for accounting purposes, ii) Borrower's relocation of its chief
executive office, and entry into certain capital leases in connection with such
relocation, and iii) Borrower's investment in a third-party online venture.
C. Lenders have agreed to provide such consents and to make such
changes, in each case subject to the terms and conditions set forth in this
Amendment.
NOW, THEREFORE, in consideration of the continued performance by
Borrower of its promises and obligations under the Loan Agreement and the other
Loan Documents, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lenders hereby agree
as follows:
A G R E E M E N T
1. INCORPORATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS. Except as
expressly modified under this Amendment, all of the terms and conditions set
forth in the Loan Agreement and the other Loan Documents are incorporated herein
by this reference, and the obligations of Borrower under the Loan Agreement and
the other Loan Documents are hereby acknowledged, confirmed and ratified by
Borrower.
2. DEFINITIONS. Unless otherwise defined in this Amendment, capitalized
terms used herein have the meanings given to them in the Loan Agreement. Unless
otherwise indicated, all references to sections, schedules, or exhibits shall
mean sections, schedules, or exhibits of or to the Loan Agreement.
3. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement shall be amended as
follows:
3.1 REVISED DEFINITIONS.
(a) The definition of "General Intangibles" is hereby deleted in
its entirety and the following definition is substituted therefor:
"General Intangibles" means all of the Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and
all other intangible personal property of the Borrower of every kind and
nature (other than Accounts), including, without limitation, all
contract rights, Supporting Obligations, Letter of Credit Rights,
Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, patents, patent
applications, trademarks, service marks, trade names, trade secrets,
goodwill, copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due
to the Borrower in connection with the termination of any Plan or other
employee benefit plan or any rights thereto and any other amounts
payable to the Borrower from any Plan or other employee benefit plan,
rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds
thereof, proceeds of insurance covering the lives of key employees on
which the Borrower is beneficiary, and any letter of credit, guarantee,
claim, security interest or other security held by or granted to the
Borrower.
(b) The definition of "Fiscal Year" is hereby deleted in its
entirety and the following definition is substituted therefor:
"Fiscal Year" means the Borrower's fiscal year for financial accounting
purposes. From and after the Fiscal Year ending September 30, 2000,
Borrower's fiscal year will end on the last day of February of each
year.
3.2 NEW DEFINITIONS. New definitions of "Commercial Tort Claims,"
"First Amendment," "First Amendment Closing Date," "Letter of Credit Rights,"
"Online
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Venture," and "Supporting Obligations" are hereby added in appropriate
alphabetical order to read as follows:
"Commercial Tort Claim" shall mean a claim arising in tort with
respect to which (a) the claimant is an organization; or (b) the
claimant is an individual and the claim (i) arose in the course of the
claimant's business or profession, and (ii) does not include damages
arising out of personal injury to or the death of an individual.
"First Amendment" shall mean the First Amendment to Loan and Security
Agreement dated as of August 16, 2001.
"First Amendment Closing Date" shall mean the date of the
effectiveness of the First Amendment, as provided in paragraph 7 of the
First Amendment.
"Letter of Credit Rights" shall mean all of Borrower's now owned or
hereafter acquired "letter of credit rights," as such term is defined in
the UCC, including any right to payment or performance under any letter
of credit.
"Online Venture" shall mean xxxxxxxx.xxx, Inc., a Delaware
corporation.
"Supporting Obligations" shall mean all of Borrower's now owned or
hereafter acquired "supporting obligations," as such term is defined in
the UCC, including all of Borrower's interests in letter-of-credit
rights or secondary obligations that support the payment or performance
of an Account, Chattel Paper, a document, a General Intangible, an
instrument, or Investment Property.
3.3 AMENDMENT TO SECTION 6.1(a)(x). Section 6.1(a)(x) is hereby
deleted, and a new Section 6.1(a)(x) is inserted into the Loan Agreement, as
follows:
"(x) all accessions to, substitutions for and replacements, products
and proceeds of any of the foregoing, including, but not limited to,
proceeds of any insurance policies, claims against third parties, rights
to proceeds of written letters of credit, and condemnation or
requisition payments with respect to all or any of the foregoing."
3.4 AMENDMENT TO ARTICLE 9. Article 9 is hereby amended by adding
after Section 9.26 the following as a new Section 9.27 and a new Section 9.28:
9.27 Commercial Tort Claims. Borrower shall notify Lender in
writing of any Commercial Tort Claim with respect to which (i) Borrower
or Parent is the claimant, and (ii) Borrower or Parent has incurred or
expects to incur damages in excess of $100,000 individually or, together
with all other such claims, $250,000, within thirty (30) days of
Borrower's knowledge of the existence of such claim.
9.28 Accounts from Online Venture; Reserves.
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(a) Borrower shall not, at any time on or before December 1,
2001, (i) permit Accounts or other amounts owing to it from Online
Venture to exceed, in the aggregate, Five Hundred Thousand Dollars
($500,000), or (ii) provide to Online Venture more than thirty (30) day
payment terms on sales of Inventory.
(b) Borrower shall not, at any time on or after December 2, 2001,
(i) permit Accounts or other amounts owing to it from Online Venture to
exceed, in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000),
or (ii) provide to Online Venture more than fifteen (15) day payment
terms on sales of Inventory.
(c) Without limiting Administrative Agent's and Co-Agents'
discretion to establish additional or increased reserves in the exercise
of their reasonable credit judgment, there shall be a reserve against
the Borrowing Base in the amount of Five Hundred Thousand Dollars
($500,000) to address Accounts to Online Venture; provided, however,
that if, on or after December 2, 2001, Borrower has provided
Administrative Agent with written confirmation that Accounts or other
amounts owing to it from Online Venture do not then exceed, in the
aggregate, Two Hundred Fifty Thousand Dollars ($250,000), then such
reserve shall be reduced to Two Hundred Fifty Thousand Dollars
($250,000).
3.5 AMENDMENT TO SECTION 15.8. Section 15.8 shall be amended by
deleting that portion of Section 15.8 which designates addresses for notice to
Borrower, and substituting the following therefor:
If to the Borrower:
Good Guys California, Inc.
0000 Xxxxxx Xxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy No.: (000) 000-0000
with copies to:
Howard, Rice, Nemerovski, Canady, Xxxx & Xxxxxx
Three Xxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Nexon, Esq.
Telecopy No.: (000) 000-0000
4. ACKNOWLEDGMENTS.
4.1 ACKNOWLEDGMENT OF OBLIGATIONS. Borrower hereby acknowledges,
confirms and agrees that as of the close of business on August 13, 2001,
Borrower was indebted to Lenders in respect of the Revolving Loans in the
approximate principal
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amount of $23,807,680. The Revolving Loans, together with interest accrued and
accruing thereon, and fees, costs, expenses and other charges now or hereafter
payable by Borrower to Lenders, are unconditionally owing by Borrower to
Lenders, without offset, defense or counterclaim of any kind, nature or
description whatsoever.
4.2 ACKNOWLEDGMENT OF SECURITY INTERESTS. Borrower hereby
acknowledges, confirms and agrees that Co-Agents and Lenders have and shall
continue to have valid, enforceable and perfected first-priority liens upon and
security interests in the Collateral heretofore granted to Lenders pursuant to
the Loan Documents or otherwise granted to or held by Co-Agents and Lenders,
subject only to Permitted Liens.
4.3 BINDING EFFECT OF DOCUMENTS. Borrower hereby acknowledges,
confirms and agrees that: (a) each of the Loan Documents to which it is a party
has been duly executed and delivered to Documentation Agent by Borrower, and
each is in full force and effect as of the date hereof, (b) the agreements and
obligations of Borrower contained in such documents and in this Amendment
constitute the legal, valid and binding Obligations of Borrower, enforceable
against it in accordance with their respective terms, and Borrower has no valid
defense to the enforcement of such Obligations, and (c) Co-Agents and Lenders
are and shall be entitled to the rights, remedies and benefits provided for in
the Loan Documents and applicable law.
5. CONSENTS AND WAIVERS; RELATED REPRESENTATIONS OF BORROWER
5.1 CHANGE OF FISCAL YEAR. Notwithstanding anything contained in the
Loan Agreement, including Section 9.21, Co-Agents and Lenders, upon the
effectiveness of this First Amendment, consent to Borrower's changing its Fiscal
Year for accounting purposes to a fiscal year ending on the last day of February
of each year
5.2 CHANGE OF CHIEF EXECUTIVE OFFICE LOCATION; OPENING OF DALLAS
EXECUTIVE OFFICE. Notwithstanding anything contained in the Loan Agreement,
Co-Agents and Lenders, upon the effectiveness of this First Amendment, consent
to (i) the re-location of Borrower's chief executive office to 0000 Xxxxxx Xxx
Xxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, and (ii) the opening of an executive office
by Guarantor at 000 Xxxxx Xx. Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx, as
previously disclosed to Co-Agents.
5.3 CAPITAL LEASES. Notwithstanding anything contained in the Loan
Agreement, including Section 9.13, Co-Agents and Lenders, upon the effectiveness
of this First Amendment, consent to the incurrence by Borrower of obligations
under Capital Leases of up to One Million Dollars ($1,000,000).
5.4 ONLINE VENTURE. Notwithstanding anything contained in the Loan
Agreement, including Section 9.9, Section 9.10, and Section 9.17, Co-Agents and
Lenders, upon the effectiveness of this First Amendment, consent to the
licensing, service, assignment, and investment transactions between Borrower and
Online Venture, in each case on the terms set forth in the documents listed in
the attached Schedule B, copies of which Borrower has previously delivered to
Co-Agents. Co-Agents and
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Lenders acknowledge that Borrower has advised them of Borrower's consideration
of a possible merger with Online Venture on terms that may include the issuance
of stock of Borrower but no other consideration to be paid by Borrower to Online
Venture or the shareholders of Online Venture. Without altering, modifying,
amending or in any way affecting Section 9.9, or Co-Agents' and Lenders'
respective rights thereunder, Co-Agents and Lenders acknowledge to Borrower
their present willingness to consider consenting in their discretion to such a
merger, if and when Borrower and Online Venture have more particularly
determined the terms of any such transaction, and after appropriate due
diligence and credit analysis by Co-Agents and Lenders. Any consent from
Co-Agents and Lenders to such a merger transaction shall be made in writing in
accordance with Section 15.13.
5.5 WAIVER OF DEFAULTS. Upon the effectiveness of this First
Amendment, Co-Agents and Lenders waive (i) any Events of Default that may have
occurred or may otherwise be deemed to occur under the Loan Agreement solely by
reason of the transactions and events to which Co-Agents and Lenders have
consented pursuant to this paragraph 5, and (ii) the ability to assert any
rights or remedies against Borrower based on or arising under any such Events of
Default. The waiver contained in this paragraph is effective only in the
specific instance and for the specific purpose set forth above, and is subject
to the further limitations set forth in paragraph 11.5 of this Amendment.
5.6 REPRESENTATIONS OF BORROWER; FURTHER ASSURANCES. Borrower
represents and warrants that all material leases, contracts and agreements to
which the Borrower is a party or is bound as of the First Amendment Closing Date
with respect to the matters set forth in paragraphs 5.2, 5.3 and 5.4 (or current
drafts of agreements which have not yet been finalized, as indicated on Schedule
B) are set forth on the attached Schedule B, and that, each of such leases,
contracts and agreements is valid and enforceable in accordance with its terms
and is in full force and effect except as indicated on Schedule B. Upon request
of any Co-Agent, Borrower shall furnish to Co-Agents copies of the foregoing
materials or of any revised or finalized versions of such materials.
6. COMMERCIAL TORT CLAIMS. Borrower represents that, as of the First
Amendment Closing Date, it does not have any Commercial Tort Claims.
7. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
upon satisfaction of each of the following conditions:
(a) Documentation Agent shall have received copies of this Amendment
that bear the signatures of Borrower, GE Capital and Bank;
(b) Documentation Agent shall have received a copy of the
accompanying Acknowledgment executed by the Guarantor; and
(c) Documentation Agent shall have received each of the documents
listed on the First Addendum to Schedule of Documents attached hereto as
Schedule A.
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8. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants that the representations and warranties contained in the Loan Agreement
were true and correct in all material respects when made and, except to the
extent (a) that a particular representation or warranty by its terms expressly
applies only to an earlier date, (b) Borrower has previously advised Co-Agents
in writing as contemplated under the Loan Agreement, or (c) amended by this
Amendment, are true and correct in all material respects as of the date hereof.
The Loan Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof.
9. LOCATIONS. Without limiting paragraph 8 of this Amendment, Borrower
specifically represents and warrants that, as of the First Amendment Closing
Date, it has not established new locations or closed existing locations since
the Closing Date except as set forth in paragraph 5.2 of this Amendment, and
that the representations contained in Section 6.3 and Schedule 6.3 of the Loan
Agreement remain correct and complete (except that monthly rental amounts
payable and lease expiration dates reflected in Schedule 6.3 may have changed
since the Closing Date).
10. AMENDMENT FEE. In order to induce Agents and Lenders to enter into
this Amendment, and in consideration of the accommodations provided to Borrower
herein, Borrower shall pay to Administrative Agent, for the ratable benefit of
Lenders, on December 7, 2001, the sum of $75,000 for this Amendment (which
amount will have been fully earned by Agents on the First Amendment Closing Date
and shall not be in lieu of, but shall be in addition to Agents' entitlement
under the Loan Agreement to reimbursement of fees, costs and expenses in
connection with this Amendment, including the reasonable fees, costs and
expenses of counsel); provided, however, that Agents and Lenders shall waive
such amendment fee in its entirety, and Borrower shall have no obligation with
respect thereto, if (i) on December 7, 2001, no Event of Default has occurred
and is continuing, and (ii) by or before December 7, 2001, Borrower has provided
Administrative Agent with written confirmation that Accounts or other amounts
owing to it from Online Venture did not, as of December 2, 2001, exceed, in the
aggregate, Two Hundred Fifty Thousand Dollars ($250,000). Unless such fee will
have been waived by operation of the foregoing, Administrative Agent may receive
such fee on behalf of Lenders by making one or more Revolving Credit Advances in
the aggregate amount thereof on or after December 7, 2001.
11. ENTIRE AGREEMENT. This Amendment, together with the Loan Agreement
and the other Loan Documents, is the entire agreement between the parties hereto
with respect to the subject matter hereof. This Amendment supersedes all prior
and contemporaneous oral and written agreements and discussions with respect to
the subject matter hereof. Except as otherwise expressly modified herein, the
Loan Documents shall remain in full force and effect.
12. MISCELLANEOUS.
12.1 COUNTERPARTS. This Amendment may be executed in identical
counterpart copies, each of which shall be an original, but all of which shall
constitute
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one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile transmission shall be effective as delivery
of a manually executed counterpart of this Amendment. Any Person delivering this
Amendment by facsimile shall send the original manually executed counterpart of
this Amendment to Documentation Agent promptly after such facsimile
transmission.
12.2 HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Amendment, and are not to be taken into
consideration in interpreting this Amendment.
12.3 RECITALS. The recitals set forth at the beginning of this
Amendment are true and correct, and such recitals are incorporated into and are
a part of this Amendment.
12.4 GOVERNING LAW. This Amendment shall be governed by, and
construed and enforced in accordance with, the laws of the State of California
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws.
12.5 NO WAIVER. Except as specifically set forth in paragraphs 3 and
5 of this Amendment, the execution, delivery and effectiveness of this Amendment
shall not (a) limit, impair, constitute a waiver of or otherwise affect any
right, power or remedy by Administrative Agent, Documentation Agent or any
Lender under the Loan Agreement or any other Loan Document, (b) constitute a
waiver of any provision in the Loan Agreement or in any of the other Loan
Documents, or (c) alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Loan
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
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12.6 CONFLICT OF TERMS. In the event of any inconsistency between
the provisions of this Amendment and any provision of the Loan Agreement, the
terms and provisions of this Amendment shall govern and control.
IN WITNESS WHEREOF, the parties have entered into this Amendment on
the date first above written.
"Borrower"
GOOD GUYS CALIFORNIA, INC.
By /s/ XXXXXX XXXXXXXXXX
-----------------------------------
Xxxxxx Xxxxxxxxxx
Chief Financial Officer
"Administrative Agent"
BANK OF AMERICA, N.A., as the Administrative Agent
By /s/ XXXX X. XXXXXXX
-------------------------------------
Xxxx X. Xxxxxxx
Vice President
"Documentation Agent"
GENERAL ELECTRIC CAPITAL CORPORATION, as the
Documentation Agent
By /s/ XXXX X. XXXXXXX
-------------------------------------
Xxxx X. Xxxxxxx
Duly Authorized Signatory
"Lenders"
BANK OF AMERICA, N.A., as a Lender
By /s/ XXXX X. XXXXXXX
-------------------------------------
Xxxx X. Xxxxxxx
Vice President
GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender
By /s/ XXXX X. XXXXXXX
-------------------------------------
Xxxx X. Xxxxxxx
Duly Authorized Signatory
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