FIRST AMENDMENT
TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "First
Amendment") is entered into and effective as of October 31, 2001 by and among ZB
Company, Inc., a Delaware corporation with its chief executive office located at
00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx ("Borrower"), the financial
institutions from time to time party to the Loan Agreement referred to below
(collectively, the "Lenders" and each individually, a "Lender"), and XXXXX FARGO
RETAIL FINANCE, LLC, as agent for the Lenders under the Loan Agreement (in such
capacity, "Agent").
RECITALS
The parties signatory hereto wish to amend the Loan and Security Agreement
dated as of September 5, 2001 by and among Borrower, Agent and Lenders (as
amended by and through the date hereof and as may be further amended, restated,
supplemented or otherwise modified from time to time, the "Loan Agreement") as
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties signatory hereto agree
as follows.
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the respective meanings
ascribed to such terms in the Loan Agreement.
2. Amendments to the Loan Agreement.
(a) Section 1.1 of the Loan Agreement is hereby amended
(i) first, by inserting the following new defined terms in the
proper alphanumeric order:
"Availability Letter of Credit" means a
letter of credit in form and substance satisfactory
to Agent in Agent's Discretion in the amount of
$5,000,000 naming Agent as beneficiary and with an
expiry date of no earlier than December 27, 2001.
"First Amendment" means the First Amendment
to Loan and Security Agreement dated as of October
31, 2001 by and among Borrower, Agent and Lenders.
"Inventory Base Amount" means for each
calendar year of this Agreement, an amount equal to
(I) during the period from December 25 through
December 31 and the month of January, sixty percent
(60%) of the Cost value of Eligible Inventory (but
not to exceed the product of the Cost value of
Eligible Inventory multiplied by the Inventory Base
Factor), (II) during the months of February through
April, sixty-five percent (65%) of the Cost value of
Eligible Inventory (but not to exceed the product of
the Cost value of Eligible Inventory multiplied by
the Inventory Base Factor), and (III) during the
months of May through November, up to the product of
the Cost value of Eligible Inventory multiplied by
the Inventory Base Factor, provided, that for the
period from October 15 through October 31 of each
calendar year, Agent shall use the Net Retail
Liquidation Value corresponding to November 1 of such
calendar year as reported on then current appraisal
of Eligible Inventory; provided, further, that each
calendar year the Inventory Base Factor shall be
determined by Agent on the first Business Day of
December, shall be reduced by 1 percentage point per
Business Day thereafter until the date on which the
Inventory Base Factor is 70%, and from such date and
through December 24 of such calendar year, the
Inventory Base Factor shall be 70%.
"Inventory Base Factor" means the product,
expressed as a percentage, of 0.85 multiplied by Net
Retail Liquidation Value, as determined by Agent in
Agent's Discretion.
(ii) second, by inserting the words ", the First Amendment, the
Availability Letter of Credit" after the words "means this
Agreement," in the definition of the term "Loan Documents";
and
(iii) third, by amending and restating the definition of
"Required Lenders" in its entirety as follows:
"Required Lenders" means, at any time, Lenders whose
Pro Rata Shares in the aggregate constitute 50.1% or
more of the Commitments.
(b) Section 2.1(a)(x) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"(x) the lesser of (i) $100,000,000 or (ii) an amount
equal to sum of (a) the Inventory Base Amount, plus
(b) the lesser of (A) seventy-five percent (75%) of
Eligible Credit Card Accounts or (B) $7,500,000, less
the amount of the Dilution Reserve, and plus (c)
until December 24, 2001 only, one hundred percent
(100%) of the undrawn amount of the Availability
Letter of Credit; plus,"
(c) Section 9.1 of the Loan Agreement is hereby amended first by
deleting the word "and" immediately following the semicolon in subsection (l),
second by deleting the period at the end of subsection (m) and inserting "; and"
in lieu thereof and third by adding the following new subsection (n):
"(n) In the case of an Event of Default under Item C
of Schedule 7.21 (Minimum Availability), Agent may
draw upon the Availability Letter of Credit."
2
(d) Schedule 7.21 of the Loan Agreement is hereby amended by deleting
the text of Item C thereof in its entirety and inserting the following in lieu
thereof:
"C. Minimum Availability. At all times during the
term of this Agreement, Borrower shall have
Availability under the Standard Line of not less
than $5,000,000."
3. Advance Rates.
(a) Notwithstanding anything to the contrary contained in the Loan
Agreement or this First Amendment and so long as no Event of Default has
occurred and is continuing or would be caused by either of the following:
(i) For purposes of compliance with Section 7.21 of the Loan
Agreement, for the calendar months of October 2001 and
November 2001 only, the Effective Advance Rate shall be
calculated by dividing (i) the sum of the outstanding balance
of the Loan Account plus the amount of all outstanding
stand-by Letters of Credit in an aggregate amount in excess of
$1,000,000 by (ii) the sum of the value of Eligible Inventory
plus the undrawn amount of the Availability Letter of Credit.
(ii) For purposes of compliance with Section 7.21 of the Loan
Agreement, the maximum Effective Advance Rate for the calendar
month of December 2001 shall be 50%.
(b) It shall be deemed an Event of Default under the Loan Agreement if,
as of the applicable date of determination, the Effective Advance Rate as
calculated in subsection (a)(i) above exceeds the applicable maximum Effective
Advance Rates set forth in Schedule 7.21 of the Loan Agreement.
4. Conditions Precedent to First Amendment. The satisfaction of each of
the following, unless waived or deferred by Agent, in its sole discretion, shall
constitute conditions precedent to the effectiveness of this First Amendment and
each and every provision hereof:
(a) The representations and warranties in this First Amendment, the Loan
Agreement as amended by this First Amendment, and the other Loan Documents shall
be true and correct in all respects on and as of the date hereof, as though made
on such date (except to the extent that such representations and warranties
relate solely to an earlier date);
(b) No Event of Default shall have occurred and be continuing on the
date hereof, nor shall result from the consummation of the transactions
contemplated herein;
(c) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against Borrower or Agent;
(d) Agent shall have received the Availability Letter of Credit;
3
(e) Agent shall have received a first amendment fee of $7,500 from
Borrower; and
(f) Agent shall have received payment in full of its out-of pocket
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the Loan Agreement and this First Amendment.
5. Representations and Warranties. Borrower hereby represents and
warrants to Agent that (a) the execution, delivery, and performance of this
First Amendment and of the Loan Agreement are within Borrower's corporate
powers, have been duly authorized by all necessary corporate action, and are not
in contravention of any law, rule, or regulation, or any order, judgment,
decree, writ, injunction, or award of any arbitrator, court, or governmental
authority, or of the terms of its charter or bylaws, or of any contract or
undertaking to which it is a party or by which any of its properties may be
bound or affected, (b) this First Amendment and the Loan Agreement constitute
Borrower's legal, valid, and binding obligation, enforceable against Borrower in
accordance with its terms, and (c) this First Amendment has been duly executed
and delivered by Borrower.
6. Choice of Law. The validity of this First Amendment, its
construction, interpretation and enforcement, and the rights of the parties
hereunder, shall be determined under, governed by, and construed in accordance
with the laws of the State of New York.
7. Counterparts; Telefacsimile Execution. This First Amendment may be
executed in any number of counterparts and by different parties and separate
counterparts, each of which when so executed and delivered, shall be deemed an
original, and all of which, when taken together, shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
First Amendment by telefacsimile shall be as effective as delivery of a manually
executed counterpart of this First Amendment. Any party delivering an executed
counterpart of this First Amendment by telefacsimile also shall deliver a
manually executed counterpart of this First Amendment but the failure to deliver
a manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this First Amendment.
8. Effect on Loan Agreement. The Loan Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this First Amendment shall not operate as a waiver
of or, except as expressly set forth herein, as an amendment of, any right,
power, or remedy of the Agent under the Loan Agreement, as in effect prior to
the date hereof.
9. Further Assurances. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Agent, and take all actions as Agent may reasonably request from time to time,
to perfect and maintain the perfection and priority of the security interest in
the Collateral held by Agent and to fully consummate the transactions
contemplated under this First Amendment and the Loan Agreement, as amended by
this First Amendment.
4
10. Miscellaneous.
(a) Upon and after the effectiveness of this First Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Loan Agreement, and each
reference in the other Loan Documents to "the Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as modified and amended
hereby.
(b) The Loan Agreement and all other Loan Documents, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to Agent.
[The rest of this page is intentionally left blank]
5
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Loan and Security Agreement to be executed as of the date first above
written.
ZB COMPANY, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
XXXXX FARGO RETAIL FINANCE, LLC,
as Agent and as a Lender
By:/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Vice President
6
Acknowledgment and Consent
Reference is made to the Participation and Intercreditor Agreement
dated as of September 5, 2001 by and between Agent and Hilco Capital LP, a
Delaware limited partnership ("Participant"). By its signature below,
Participant acknowledges receipt of a copy of the First Amendment and consents
to the execution and delivery by Borrower, Agent and the Lenders of the First
Amendment and the execution and delivery of all other Loan Documents (as defined
in the Loan Agreement as amended by the First Amendment) to be executed in
connection therewith.
HILCO CAPITAL LP
By: /s/ Xxxxxx Xxxxxxx
Name: Xxxxxx Xxxxxxx
Title: Vice President
