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Exhibit 4.1
FOURTH AMENDED AND RESTATED SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 5, 0000
XXXXXXX XXXX XX XXXXXXX XXXXXXXX
AND RAINBOW RENTALS, INC.
1. Loan Agreement Reference. This Fourth Amended and Restated
Supplement A, as it may be amended or modified from time to time, is a part of
the Loan and Security Agreement dated as of October 5, 1992 between Lender and
Borrower (together with all amendments, modifications and supplements thereto,
the "Loan Agreement") and amends and restates in its entirety that certain Third
Amended and Restated Supplement A dated July 15, 1998. Terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Loan
Agreement.
2. Revolving Credit Amount; Borrowing Base.
2.1. Revolving Credit Amount. The maximum amount of Revolving
Loans which Lender, in its discretion, will make available to Borrower (such
amount, as adjusted from time to time, is herein called the "Revolving Credit
Amount") is $16,000,000.
2.2. Borrowing Base. The term "Borrowing Base," as used
herein, shall mean an amount (the "Cash Receipts Availability") equal to the
lesser of (1) $16,000,000 or (2) 3.75 multiplied by the net amount of Borrower's
actual cash collections of Accounts Receivable from Account Debtors pursuant to
the terms of Rental Agreements for the immediately preceding two calendar months
(exclusive of collections for delivery, insurance, merchandise, sales and other
non-rental payments and after deduction of such reserves and allowances as
Lender deems proper and necessary).
2.3. Lender's Rights. Borrower agrees that nothing contained
in Supplement A (i) shall be construed as Lender's agreement to resort or look
to a particular type or item of Collateral as security for any specific Loan or
portion of the Liabilities or advance or in any way limit Lender's right to
resort to any or all of the Collateral as security for any of the Liabilities,
(ii) shall be deemed to limit or reduce any Lien upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.9 of the Loan Agreement.
3. Interest.
3.1.1. Revolving Loans.
(a) Interest to Maturity. The unpaid principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a per annum rate equal to the Reference Rate in effect
from time to time plus the Applicable Margin; provided that pursuant to the
provisions of Section 3.1.3 below, from time to time Borrower may elect to have
all or any portion of the Revolving Loans bear interest at the IBOR Rate plus
the Applicable Margin.
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(b) Default Rate. If any amount of the Revolving Loans is not
paid when due, whether by acceleration or otherwise, the entire unpaid principal
balance of the Revolving Loans (other than Overdraft Loans and Over Advances)
shall bear interest until paid at a rate per annum equal to the greater of (i)
the rate otherwise from time to time if effect plus 2.00% and (ii) 2.00% above
the rate otherwise in effect at the time such amount becomes due.
3.1.2. Intentionally Omitted.
3.1.3. IBOR Option.
Borrower shall have the right, from time to time, to designate
IBOR Revolving Portions by means of an IBOR Request. All IBOR Requests must be
received by Lender not later than 10:00 a.m., Chicago time, two (2) Banking Days
prior to the date the applicable Interest Rate Period is to begin (or is to be
continued). Notwithstanding the foregoing, (x) all undesignated portions of the
Revolving Loan shall constitute Reference Rate Loans, (y) Borrower shall not
have the right to designate IBOR Rate Loans at any time that an Event of Default
or an Unmatured Event of Default is in existence, notwithstanding a contrary
designation by Borrower, and (z) in no event may more than four (4) IBOR Rate
Loans having different Interest Rate Periods be outstanding at any one time.
Each designation by Borrower of a IBOR Rate Loan shall be irrevocable; provided,
however, that Borrower may specify in any such IBOR Request a maximum IBOR Rate
which it will accept for the related Interest Rate Period and the IBOR Option
elected in such IBOR Request shall not become effective if the applicable IBOR
Rate determined by Lender shall exceed such specified maximum.
3.2. Overdraft Loans; Over Advances. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to Section 2.7
or Section 2.8 of the Loan Agreement, as applicable.
3.3. Computation. Interest shall be calculated on the basis of
a year consisting of 360 days and paid for actual days elapsed; provided, that
the computation of interest on IBOR Rate Loans shall include the date on which
the applicable Interest Rate Period began, but shall exclude the last day of the
applicable Interest Rate Period. IBOR Rate Loans not repaid on the last day of
the Interest Rate Period applicable thereto shall be continued or converted into
Reference Rate Loans and shall bear interest at the applicable rate for
Reference Rate Loans of such type from and including the last day of such
Interest Rate Period. Changes in any interest rate provided for herein which are
due to changes in the Reference Rate shall take effect on the date of the change
in the Reference Rate.
3.4. Payment. Until maturity, interest on the Loans shall be
payable on the first day of each calendar quarter, and at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand; provided, that interest on IBOR Rate Loans shall be payable
in arrears on the last day of the Interest Rate Period applicable thereto and at
maturity.
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3.5. Funding Indemnification. If any payment of a IBOR Rate
Loan occurs on a date which is not the last day of the applicable Interest Rate
Period, whether because of acceleration, prepayment or otherwise, Borrower will
indemnify Lender for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Loan. Lender shall deliver a written
statement as to the amount due, if any, under this Section 3.5. Such written
statement shall set forth in reasonable detail the calculations upon which
Lender determined such amount and shall be final, conclusive and binding on
Borrower in the absence of manifest error. Determination of amounts payable
under this Section 3.5 shall be calculated as though Lender funded its IBOR Rate
Loans through the purchase of a deposit of the type and maturity corresponding
to the IBOR Rate Loan and applicable Interest Rate Period bearing interest at
the IBOR Base Rate, whether or not Lender actually funded the Loan in that
manner. The amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement. This Section 3.5 shall apply
to all payments of IBOR Rate Loans prior to the last day of the applicable
Interest Rate Period, including without limitation any such payment required to
be made in order to permit Borrower to pay any installment of principal due in
respect of the Revolving Loan under this Agreement.
3.6. Availability of Interest Rate Options. If Lender
determines that maintenance of any of its IBOR Rate Loans would violate any
applicable law, rule, regulation or directive, whether or not having the force
of law, Lender shall suspend the availability of such IBOR Rate Loans and
require any IBOR Rate Loans outstanding and so affected to be repaid; or if
Lender determines that (i) deposits of a type or maturity appropriate to match
fund IBOR Rate Loans are not available, (ii) the IBOR Rate does not accurately
reflect the cost of making such Loans, or (iii) Lender's ability to make or
maintain IBOR Rate Loans has been materially adversely affected by the
occurrence of any event after the date hereof, then Lender shall suspend the
availability of the IBOR Rate Loans, as applicable, after the date of any such
determination.
4. Additional Covenants. From the Closing Date and thereafter
until all of Borrower's Liabilities under the Loan Agreement are paid in full,
Borrower agrees that, unless Lender otherwise consents in writing, it will:
4.1. Net Worth. Not permit Borrower's Net Worth at any time to
be less than the Minimum Net Worth Amount as such time.
4.2. Capital Expenditures. Not and not permit any of its
Subsidiaries to purchase or otherwise acquire (including without limitation,
acquisition by way of capitalized lease), or commit to purchase or acquire, any
fixed asset, if after giving effect to such purchase or other acquisition, the
aggregate cost of all such fixed assets purchased or otherwise acquired would
exceed $3,000,000 in any Fiscal Year.
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4.3. Maximum Funded Debt to Earnings Ratio. Not permit, for
the period ending on the last day of each calendar quarter ending during any
period (inclusive) set forth below, the ratio of (a) Borrower's Indebtedness for
interest bearing borrowed money on the last day of each such calendar quarter
during such period set forth below plus the product of rental expenses for the
twelve month period ending on the last day of such calendar quarter multiplied
by a factor of 4 to (b) the product of (i) the Annualizing Factor multiplied by
(ii) Borrower's consolidated net earnings before interest expense, provision for
Taxes, depreciation and amortization for such twelve month period plus rental
expenses minus the sum of inventory purchases and Capital Expenditures for such
period, to be greater than the ratio set forth below opposite such period:
Period Maximum Ratio
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Calendar quarter ending June 30, 1999 3.25:1.00
Six month period ending September 30, 1999 3.25:1.00
Nine month period ending December 31, 1999 3.25:1.00
Twelve month period ending March 31, 2000, June 30,
2000, September 30, 2000 and December 31, 2000 3.00:1.00
Twelve month period ending March 31, 2001 and the
twelve month period ending on the last day of each
calendar quarter thereafter 2.75:1.00
For purposes of this Section 4.3 and Section 4.4, (i) consolidated net earnings
shall not include any gains on the sale or other disposition of Investments of
fixed assets and any extraordinary or nonrecurring items of income to the extent
that the aggregate of all such gains and extraordinary or nonrecurring items of
income exceeds the aggregate of losses on such sale or other disposition and
extraordinary or nonrecurring charges, and (ii) interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases, and shall
exclude the amortization of the closing fee, the modification fee, or any other
fee paid to Lender in connection with the Loans. The Annualizing Factor means a
factor of 4.0 for the period ending June 30, 1999, a factor of 2.0 for the
period ending September 30, 1999, a factor of 1.33 for the period ending
December 31, 1999 and a factor of 1.0 for each period ending on or after March
31, 2000.
4.4. Minimum Fixed Charge Coverage Ratio. Not permit, for any
period set forth below, the ratio of (a) Borrower's consolidated net earnings
before interest expense and provision for Taxes and the rental payments for
Borrower's stores for such period to (b) the sum of (i) Borrower's interest
expense for such period, (ii) scheduled principal payments with
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respect to Borrower's Indebtedness for borrowed money during such period, and
(iii) the rental payments for Borrower's stores for such period, to be less than
the ratio set forth below opposite such period:
Period Minimum Ratio
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Twelve month period ending June 30, 1999, September
30, 1999 and December 31, 1999 1.75:1.00
Twelve month period ending March 31, 2000 and the
twelve month period ending on the last day of each
calendar quarter thereafter 2.00:1.00
4.5. Percentage of Inventory on Rents. Not permit the
percentage of Inventory on rent to customers pursuant to valid and performing
rental agreements to total Inventory to be less than 80% at any time during the
first, second and fourth calendar quarters of each calendar year or less than
75% at any time during the third calendar quarter of each calendar year for
"Core Stores". "Core Stores" means Borrower's existing stores plus any acquired
stores which have been owned by Borrower for at least 120 days.
Borrower's Initials /s/ MAP
Lender's Initials _________
Date: March 1, 1999
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CONSENT AND AMENDMENT NO. 11 TO
LOAN AND SECURITY AGREEMENT
This Consent and Amendment No. 11 ("Amendment") to Loan and
Security Agreement is made as of March 1, 1999, between Rainbow Rentals, Inc.
(formerly known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America
National Trust and Savings Association (formerly known as Bank of America
Illinois, formerly known as Continental Bank Illinois, formerly known as
Continental Bank N.A.) ("Lender").
Reference is made to that certain Loan and Security Agreement
between Borrower and Lender dated October 5, 1992 (as amended, the "Loan
Agreement").
Borrower has informed Lender that Borrower desires to enter
into that certain Asset Purchase Agreement dated as of February 8, 1999 among
Borrower, Blue Ribbon Rentals, Inc. and Blue Ribbon Rentals II, Inc. Borrower
acknowledges that the execution and delivery of the Asset Purchase Agreement
requires the consent of Lender and has requested that Lender provide such
consent.
Borrower has also requested that the Loan Agreement be amended
in certain respects.
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. Consent. Lender hereby consents to the execution and
delivery of the Asset Purchase Agreement, together with any amendments thereto
that do not change the purchase price or otherwise materially amend the nature
of the transaction. This Consent shall not constitute (a) a modification or
alteration of the terms, conditions or covenants of the Loan Agreement or any
document entered into in connection therewith, or (b) a waiver, release or
limitation upon the exercise by Lender of any of its rights, legal or equitable,
hereunder, except as to the matters to which Lender herein expressly consents.
Except as set forth above, Lender reserves any and all rights and remedies which
it has had, has or may have under the Loan Agreement.
3. Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Applicable Margin" as follows:
"Applicable Margin" means, with respect to any portion of the
Revolving Loans constituting an IBOR Rate Loan, a percentage equal to
two percent (2.00%), with respect to any portion of Revolving Loans
constituting a Reference Rate Loan, a percentage equal to zero, and
with respect to the
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non-use fee described in Section 2.4.2, a percentage equal to
one-quarter of one percent (0.25%); provided, that the Applicable
Margin will be adjusted on the first day of each calendar quarter,
commencing on January 1, 2000, depending on the Leverage Ratio on the
last day of the calendar quarter immediately preceding such calendar
quarter, as follows:
Applicable IBOR Applicable Margin for Applicable Margin
Margin for Reference for
Leverage Ratio IBOR Rate Loans Rate Loans Non-Use Fee
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Greater than or equal to 2.25 % 0% 0.375%
1.75:1.00
Greater than or equal to 2.125% 0% 0.25 %
1.50:1.00, but less than
1.75:1.00
Greater than or equal to 2.00 % 0% 0.25 %
1.25:1.00, but less than
1.50:1.00
Less than 1.25:1.00 1.875% 0% 0.25 %
The calculation of the Leverage Ratio as of the last day of a calendar quarter
shall be based on the financial statements received by Lender pursuant to
Section 5.1.1. Each adjustment to the Applicable Margin shall be effective
retroactively as of the first day of each calendar quarter. For purposes hereof,
Leverage Ratio means, for the period ending on the last day of a calendar
quarter, the ratio of (a) Borrower's Indebtedness for interest bearing borrowed
money on the last day of such calendar quarter to (b) Borrower's consolidated
earnings before interest expense and provision for Taxes for the twelve (12)
month period ending on the last day of such calendar quarter.
(b) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Termination Date" as follows:
"Termination Date" means March 1, 2002.
(c) Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Minimum Net Worth Amount" as follows:
"Minimum Net Worth Amount" means (i) as of June 30, 1999, an
amount equal to at least Twenty-Seven Million Dollars ($27,000,000) and
(ii) at any time thereafter the sum of (A) Twenty-Seven Million Dollars
($27,000,000), plus (B) fifty percent (50%) of net income of Borrower,
determined in accordance with GAAP on a consolidated basis, for each
calendar quarter period that has ended on or after September 30, 1999;
provided, that any net loss of Borrower, determined in accordance with
GAAP on a consolidated basis, for any calendar quarter period shall not
be taken into account in the foregoing calculation.
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(d) Section 2.4.2 of the Loan Agreement is hereby amended to
replace the phrase "three hundred fifteen one thousandths of one percent
(0.315%) per annum on" with the phrase "the Applicable Margin for Non-Use Fee
multiplied by".
(e) Section 5.12 of the Loan Agreement is hereby amended and
restated as follows:
5.12 Merger, Purchase and Sale. Not, and not permit any
Subsidiary to: (a) be a party to any merger, liquidation or
consolidation; (b) except for sales or leases of Inventory in the
normal course of business, and except for sale of Equipment permitted
under Section 3.4(b) or the sale of its delivery vans, sell, transfer,
convey, lease or otherwise dispose of any of its assets; (c) sell or
assign, with or without recourse, any Accounts Receivable, Contract
Rights, notes receivable or chattel paper, except as provided in this
Agreement; or (d) purchase or otherwise acquire all or a part of the
assets or business of any Person outside the ordinary course of
business except the acquisition of substantially all of the assets or
equity interests in any Person that is in substantially the same line
of business as Borrower; provided, that (i) the aggregate consideration
for all such acquisitions (including, without limitation, cash purchase
price, liabilities assumed, deferred or financed purchase price and
purchase price characterized as consulting agreements, non-competition
payments and the like) in any Fiscal Year does not exceed Five Million
Dollars ($5,000,000) (for 1999, none of the acquisitions completed
prior to March 2, 1999, shall be counted against the foregoing
limitation), (ii) after giving effect to such proposed acquisition,
Borrower is in compliance with all covenants and representations and
warranties contained in this Agreement, (iii) no Default or Event of
Default has occurred and is continuing, (iv) Borrower gives the Lender
at least ten (10) Business Days prior written notice of any such
acquisition, (v) the Board of Directors and/or owners of the entity
whose business is proposed to be acquired by Borrower has approved the
proposed transaction; (vi) after giving effect to the proposed
acquisition, the ratio of Funded Debt to consolidated earnings of
Borrower before interest expense and provision for Taxes (for the most
recently ended twelve (12) month period) is less than 2:25:1.0, and
(vii) Borrower takes such actions as Lender shall request to grant and
perfect a security interest in the assets acquired in favor of Lender
to secure the Liabilities.
(f) Amendment and Restatement of Supplement A of the Loan
Agreement. Supplement A of the Loan Agreement is hereby amended in its entirety
in the form attached hereto as Exhibit A.
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4. Conditions Precedent. The amendment to the Loan Agreement
set forth in this Amendment shall become effective as of the date of this
Amendment upon the satisfaction of the following conditions precedent:
(a) No Default. No Event of Default, or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default, shall have occurred and be continuing.
(b) Resolutions. Borrower shall have delivered corporate
resolutions, in form and substance satisfactory to Lender, with respect to this
Amendment.
(c) Execution. The delivery of an executed copy of this
Amendment and the acknowledgments hereto to Lender.
(d) Closing Fee. Borrower shall have paid Lender a closing fee
of Twenty Thousand Dollars ($20,000).
5. Miscellaneous.
(a) Expenses. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this Section
5.1 shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.
(b) Governing Law. This Amendment shall be a contract made
under and governed by the internal laws of the State of Illinois.
(c) Counterparts. This Amendment may be executed in any number
of counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
(d) Reference to Loan Agreement. Except as herein amended, the
Loan Agreement shall remain in full force and effect and is hereby ratified in
all respects. On and after the effectiveness of the amendments to the Loan
Agreement accomplished hereby, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference to the Loan Agreement in any note and in any Related Agreements, or
other agreements, documents or other instruments executed and delivered pursuant
to the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
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(e) Successors. This Amendment shall be binding upon Borrower,
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By /s/ XXXXXXX X. XXXXXXX
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Its CHIEF FINANCIAL OFFICER
BANK OF AMERICA ILLINOIS
By
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Its
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