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Exhibit 10.3
SECOND AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Amendment") is made as of this 14th day of August, 2000 by and
between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada corporation ("Borrower"), and
XXXXX FARGO CREDIT, INC., a Minnesota corporation ("Lender").
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms
and conditions of that certain Amended and Restated Loan and Security Agreement
dated as of April 10, 2000 between Borrower and Lender, as amended by First
Amendment to Amended and Restated Loan and Security Agreement dated as of July
10, 2000 (the "Loan Agreement"); and
WHEREAS, Borrower has failed to timely deliver the June 2000 fiscal
month-end financial statements to Lender and has advised Lender that it expects
to have incurred a $200,000 Net Loss for the June 2000 fiscal month and a
$750,000 Net Loss for the July 2000 fiscal month;
WHEREAS, Borrower has requested an extension of time to deliver its
June 2000 fiscal month-end financial statements to Lender and an amendment to
the financial covenants in the Loan Agreement consistent with its expected Net
Losses and Lender is willing to grant such extension of time and amendment on
the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Lender,
intending to be legally bound, agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings ascribed thereto in the Loan
Agreement.
2. Recitals. The recitals set forth above are true and accurate in
every respect.
3. No Offsets. Borrower acknowledges with respect to the amounts owing
to Lender that, as of the date of execution of this Amendment, Borrower has no
offset, defense or counterclaim with respect thereto, no claim or defense in the
abatement or reduction thereof, or any other claim against Lender or with
respect to any document forming part of the transaction in respect of which the
Prior Loan Agreement was made or forming part of any other transaction under
which Borrower is indebted to Lender. Borrower acknowledges that all interest
imposed under the Prior Loan Agreement and Loan Documents through the date of
execution hereof, and all fees and other charges that have been collected from
or known by Borrower to have been imposed upon Borrower with respect to the
Prior Loan Agreement were and are agreed to, and were properly computed and
collected, and that Lender has fully performed all obligations that it may have
had or now has to Borrower, and Lender has no obligation to make any additional
loan or extension of credit to or for the benefit of Borrower, except as
provided in the Loan Agreement.
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4. Release of Claims. In consideration of Lender's agreements contained
herein, Borrower and its successors and assigns each hereby fully release,
remise and forever discharge Lender and Bank and all of their past and present
officers, directors, agents, employees, servants, partners, shareholders,
attorneys and managers, and all of their respective heirs, personal
representatives, predecessors, successors and assigns, for, from and against any
and all claims, demands, causes of action, controversies, offsets, obligations,
losses, damages, and liabilities of every kind and character whatsoever,
including without limitation any action, omission, misrepresentation or other
basis of liability founded either in tort or contract and the duties arising
thereunder that Borrower, or any of its successors or assigns has had in the
past, or now has, or which may hereafter accrue, whether known or unknown,
whether currently existing or hereafter asserted, relating in any manner to, or
arising from or in connection with, the indebtedness evidenced by the Prior Loan
Agreement, this Agreement or the Loan Documents, any negotiations, loan
administration, exercise of rights and remedies, payment, offset with respect
to, or other matter relating to such indebtedness, any collateral securing
payment and performance of such indebtedness, or any matter preliminary to the
execution and delivery by Borrower and Lender of this Agreement, or any
statement, action, omission or conduct of Lender or Bank or any of their
officers, directors, agents, employees, servants, partners, shareholders,
attorneys and managers relating in any manner to such indebtedness, collateral
or this Agreement; provided, however, that the foregoing release and discharge
shall not apply to the obligations of Lender expressly set forth in this
Amendment or first arising after the date of this Amendment. Borrower
acknowledges and agrees that Lender is not and shall not be obligated in any way
to continue or undertake any loan, financing or other credit arrangement with
Borrower, including without limitation any renewal of the indebtedness evidenced
by the Loan Agreement, beyond the Maturity Date.
5. Representations and Warranties of Borrower. To induce Lender to
enter into this Amendment and the arrangement contemplated by this Amendment,
Borrower represents and warrants to Lender as follows:
(a) Borrower has all requisite corporate power and corporate
authority to execute this Amendment and to perform all of its obligations
hereunder, and this Amendment has been duly executed and delivered by Borrower
and constitutes the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with its terms.
(b) The execution, delivery and performance by Borrower of
this Amendment have been duly authorized by all necessary corporate action and
do not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any other Person, including, without limitation, the Subordinated
Creditors, that, if not obtained would have a material adverse effect on the
Borrower's financial condition, properties or operations; (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to Borrower, or the articles of
incorporation or by-laws of Borrower; or (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which Borrower is a party or by
which it or its properties may be bound or affected.
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(c) Except as disclosed in the Borrower's May 31, 2000
financial statements delivered to Lender or otherwise disclosed in writing to
Lender, all of the respective representations and warranties made by Borrower in
the Loan Agreement and Loan Documents remain true, complete and correct in all
material respects as of the date hereof, including, without limitation, the
representations and warranties in Article 5 of the Loan Agreement, except to the
extent of any changes to such representations and warranties previously
disclosed in writing to Lender.
(d) After the execution of this Amendment, Borrower will be in
compliance in all material respects with all of the covenants of Borrower under
the Loan Agreement and other Loan Documents as of the date of execution of this
Amendment.
(e) There are no oral agreements, understandings or course of
conduct that would modify, amend, rearrange, vary, diminish or impair the Loan
Agreement or other Loan Documents or the Obligation of Borrower evidenced
thereby or to perform fully the Obligations of Borrower in strict accordance
with the Loan Agreement and other Loan Documents, or which would permit Borrower
to void or avoid its obligations in whole or in part.
No representation or warranty made by Borrower and contained herein or in the
Loan Agreement or other Loan Documents, and no certificate, information or
report furnished or to be furnished by Borrower in connection with the Loan
Agreement or any of the other Loan Documents or any of the transactions
contemplated hereby or thereby, contains or will contain a misstatement of
material fact, or omits or will omit to state a material fact required to be
stated in order to make the statements contained herein or therein not
misleading in the light of the circumstances under which such statements were
made.
6. Amendment Fee. In consideration of Lender's agreements contained
herein, Borrower hereby agrees to pay Lender an amendment fee of $2,500 that is
deemed fully earned and non-refundable upon execution of this Amendment.
Borrower hereby agrees that the Lender may, but shall not be obligated to,
without further authorization by the Borrower, pay the amendment fee directly as
an advance under the Loan Agreement on the effective date of this Amendment.
7. Consent to Issuance of Convertible Debentures. Subject to the terms
and conditions of the Intercreditor Agreement dated August 14, 2000 among
Borrower, Esquire Trade & Finance Inc., Xxxxxxx Trust Reg. and Lender (the
"Intercreditor Agreement"), Lender hereby consents to the issuance of the
Convertible Debentures and the grant of a security interest in and to all of
Borrower's assets in favor of the holders of the Convertible Debentures. This
consent is effective only in this specific instance and only for the specific
purpose for which given and is expressly conditioned upon strict compliance with
the terms of the Intercreditor Agreement. This consent does not constitute a
waiver of any of the covenants and agreements of Borrower contained in the
Credit Agreement or Loan Documents with respect to any other transaction.
8. Consent to Transamerica Forbearance Agreement. Lender hereby
consents to the Transamerica Forbearance Agreement, including, without
limitation, the grant to Transamerica Commercial Finance Corporation of a first
lien Security Interest in the items of finished goods
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Inventory specifically listed on Exhibit A to the Transamerica Forbearance
Agreement (without any subsequent modifications) and the proceeds therefrom.
This consent is effective only in this specific instance and only for the
specific purpose and does not constitute Lender's consent to any amendments,
modifications or supplements to, or replacements of, the Transamerica
Forbearance Agreement. This consent does not constitute a waiver of any of the
covenants and agreements of Borrower contained in the Credit Agreement or Loan
Documents with respect to any other transaction.
9. Loan Agreement Definitions. Section 1.1 of the Loan Agreement is
hereby amended to add the following definitions in their proper alphabetical
order:
"Convertible Debentures" means $750,000 of 12%
Convertible Debentures of the Borrower issued pursuant to that
certain Securities Purchase Agreement dated as of August 14,
2000 between Borrower and Esquire Trade & Finance Inc. and
Xxxxxxx Trust Reg., including the grant of a Security Interest
in all assets and properties of Borrower in favor of the
holders of the Convertible Debentures, subordinate to the
Security Interest of Lender.
"Transamerica Forbearance Agreement" means that
certain Forbearance Agreement and Release dated August 1, 2000
between Borrower and Transamerica Commercial Finance
Corporation and specifically excludes any amendments,
modifications or supplements thereto, or replacements thereof
without the prior written consent of Lender.
10. Reporting Requirements. Section 6.1(b) of the Loan Agreement is
hereby deleted in its entirety and the following inserted therefor:
(a) as soon as available and in any event on or
before April 21, 2000 with respect to January 2000, February
2000 and March 2000 fiscal month-end reporting information,
August 22, 2000 with respect to June 2000 fiscal month-end
reporting information, and on or before thirty (30) days after
the end of each month thereafter, a balance sheet and
statements of income and retained earnings of the Borrower as
of the end of and for such month and for the year to date
period then ended, in reasonable detail and stating in
comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with
GAAP, and an aging of the Borrower's accounts payable; and
accompanied by a certificate of the Borrower's chief financial
officer, substantially in the form of Exhibit C hereto stating
(i) that such financial statements have been prepared in
accordance with GAAP, (ii) whether or not such officer has
knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so,
stating
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in reasonable detail the facts with respect thereto, and (iii)
all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrower is in
compliance with the requirements set forth in Sections 6.13,
6.14 and 7.10;
11. Minimum Net Income From Ordinary Operations. Section 6.13 of the
Loan Agreement is hereby deleted in its entirety and the following inserted
therefor:
Section 6.13 MINIMUM NET INCOME FROM ORDINARY
OPERATIONS. Borrower's monthly Net Loss for the May 2000
fiscal month shall not be more than $31,000; Borrower's
monthly Net Loss for the June 2000 fiscal month shall not be
more than $200,000; Borrower's monthly Net Loss for the July
2000 fiscal month shall not be more than $750,000; and
Borrower's monthly Net Loss for the August 2000 fiscal month
shall not be more than $500,000; provided, however, for
Borrower's June, July and August 2000 fiscal months only, Net
Income will be determined prior to reserving from, or making
adjustments to, Borrower's finished goods Inventory and raw
materials Inventory and Borrower's affiliate accounts
receivable, which reserves and adjustments shall not exceed
$750,000 in the aggregate.
12. Minimum Book Net Worth. Section 6.14 of the Loan Agreement is
hereby deleted in its entirety and the following inserted therefor:
Section 6.14 MINIMUM BOOK NET WORTH. Borrower's
cumulative Book Net Worth as of the end of Borrower's 2000
second fiscal quarter, i.e., July 1, 2000, shall not be less
than $3,800,000 before reserving from, or making adjustments
to, Borrower's finished goods Inventory and raw materials
Inventory in the June 2000 fiscal month (but not to exceed
$750,000 in the aggregate); Borrower's cumulative Book Net
Worth as of the end of Borrower's July 2000 fiscal month shall
not be less than $3,050,000; and Borrower's cumulative Book
Net Worth as of the end of Borrower's August 2000 fiscal month
shall not be less than $2,550,000; provided, however, for
Borrower's June, July and August 2000 fiscal months only, Book
Net Worth will be determined prior to reserving from, or
making adjustments to, Borrower's finished goods Inventory and
raw materials Inventory and Borrower's affiliate accounts
receivable, which reserves and adjustments shall not exceed
$750,000 in the aggregate.
13. Indebtedness. Section 7.2 of the Loan Agreement is hereby deleted
in its entirety and the following inserted therefor:
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Section 7.2 INDEBTEDNESS. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on
account of deposits or advances or any indebtedness for
borrowed money or letters of credit issued on the Borrower's
behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in
existence on the date hereof and listed in Schedule 7.2
hereto;
(c) indebtedness relating to liens permitted
in accordance with Section 7.1;
(d) subordinated indebtedness related to the
Convertible Debentures, but in no event more than $750,000 in
principal amount; and
(e) indebtedness related to the Transamerica
Forbearance Agreement, but in no event more than $1,262,091.75
in principal amount.
14. Events of Default. (a) Section 8.1(u) of the Loan Agreement is
hereby deleted and the following inserted therefor:
(u) the Capital Infusion has not occurred on or
before August 14, 2000; or
and (b) Section 8.1 of the Loan Agreement is hereby amended to add the
following:
(w) Lender has not received signed copies of the
Consent of Subordinated Creditors attached to the Second
Amendment from Advantage Fund II Ltd., Xxxx Investment Group
Limited, RCP Inc., Esquire Trade & Finance Inc. or Xxxxxxx
Trust Reg. on or before August 21, 2000, or Lender has not
received a signed copy of the Consent of Subordinated
Creditors attached to the Second Amendment from Oxford
International, Inc. on or before August 28, 2000.
15. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
16. Voluntary Agreement. Borrower represents and warrants to Lender
that (i) it has been represented by legal counsel of its choice in regard to the
transaction provided for by this Amendment; (ii) it is fully aware and clearly
understands all of the terms and provisions
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contained in this Amendment, including, without limitation, the release of
claims in Section 4 above; (iii) it has voluntarily, with full knowledge and
without coercion or duress of any kind, entered into this Amendment and the
documents executed in connection with this Amendment; (iv) it is not relying on
any representations, either written or oral, express or implied, made to it by
Lender other than as set forth in the Loan Agreement and other Loan Documents
and this Amendment; and (v) the consideration received by Borrower to enter into
this Amendment and the arrangement contemplated by this Amendment has been
actual and adequate.
17. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Arizona, without regard to its conflict
of laws rules.
18. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
combined shall constitute one and the same instrument.
19. Successors and Assigns. This Amendment shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
20. Transaction Expenses. Borrower agrees to pay any and all reasonable
costs and expenses incurred by Lender in connection with this Amendment,
including, without limitation, reasonable attorneys' fees and disbursements of
counsel to the Lender for the services performed by such counsel in connection
with the preparation of this Amendment and the documents and instruments
incidental hereto. Borrower hereby agrees that the Lender may, at any time or
from time to time in its sole discretion and without further authorization by
the Borrower, pay such costs and expenses directly as an advance under the Loan
Agreement.
21. Amendment. Except as otherwise amended hereby, all of the terms and
provisions of the Loan Agreement shall remain in full force and effect and shall
apply to each Advance thereunder.
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IS LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, this Amendment is executed as of the date first
above written.
BORROWER:
TITAN MOTORCYCLE CO. OF AMERICA, a Nevada corporation
By:
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Name:
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Title:
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LENDER:
XXXXX FARGO CREDIT, INC., a Minnesota corporation
By:
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Name:
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Title:
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CONSENT OF GUARANTORS
The undersigned, the Guarantors under the Guaranties, hereby (a)
acknowledge receipt of a copy of the attached Second Amendment to Amended and
Restated Loan and Security Agreement, (b) consent to the terms and conditions
contained therein, and (c) agree that the covenants, agreements, duties and
obligations of the undersigned, as Guarantors under your respective Guaranties,
shall remain in full force and effect with respect to the Obligations evidenced
by the Loan Agreement, as amended by the attached Second Amendment to Amended
and Restated Loan and Security Agreement.
Dated as of this ____ day of August, 2000.
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XXXXXXX XXXXX
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XXXXXXX XXXXX
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XXXXXXX XXXXX
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CONSENT OF SUBORDINATED CREDITORS
The undersigned, the Subordinated Creditors under the Subordination
Agreements, hereby (a) acknowledge receipt of a copy of the attached Second
Amendment to Amended and Restated Loan and Security Agreement, (b) consent to
the terms and conditions contained therein, and (c) agree that the covenants,
agreements, duties and obligations of the undersigned, as Subordinated Creditor
under the respective Subordination Agreements, shall remain in full force and
effect with respect to the Obligations evidenced by the Loan Agreement, as
amended by the attached Second Amendment to Amended and Restated Loan and
Security Agreement.
Dated as of this ____ day of August, 2000.
ADVANTAGE FUND II LTD., a British Virgin Islands
corporation
By:
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Name:
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Title:
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XXXX INVESTMENT GROUP LIMITED, a Delaware
corporation
By:
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Name:
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Title:
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OXFORD INTERNATIONAL, INC.
By:
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Name:
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Title:
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XXXXXXX XXXXX
XXXXXXX TRUST REG., a Liechtenstein trust
By:
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Name:
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Title:
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[SIGNATURES CONTINUED ON FOLLOWING PAGE]
ESQUIRE TRADE & FINANCE INC., a British Virgin
Islands corporation
By:
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Name:
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Title:
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RCP INC., a California corporation
By:
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Name:
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Title:
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