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EXHIBIT 10.19
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and
entered into this 11th day of June, 1998, by and between GADZOOKS, INC., a Texas
corporation (the "Company"), and XXXXX FARGO BANK (TEXAS), National Association
(the "Bank").
PRELIMINARY STATEMENTS
A. The Company and the Bank are parties to that certain Credit
Agreement, dated January 30, 1997 (the "Credit Agreement"); and
B. The Company and the Bank desire to amend the Credit Agreement and
the other Loan Documents (as defined in the Credit Agreement, as amended hereby)
to, among other things, increase the amount of and extend the Line of Credit (as
defined in the Credit Agreement) provided by the Bank to the Company from
$10,000,000.00 to $20,000,000.00 as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Credit
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
2.01 AMENDMENT TO SECTION 1.1(a). Effective as of the date hereof,
Section 1.1(a) of the Credit Agreement is hereby amended by deleting therefrom
the (i) dollar amount "$10,000,000.00" and substituting therefor the dollar
amount "$20,000,000.00", (ii) the date "June 5, 1998" and substituting therefor
the date "June 5, 1999" and (iii) the last sentence thereof and substituting the
following new sentence:
"Borrower's obligations to repay the advances under this Line of Credit
shall be evidenced by a First Amended and Restated Revolving Line of
Credit Note substantially in the form of Exhibit A-1 to that certain
First Amendment to Credit Agreement, dated as of June 11, 1998 ("Line
of Credit Note"), all of the terms of which are hereby incorporated
herein by reference."
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2.02 AMENDMENT TO SECTION 1.1(b). Effective as of the date hereof,
Section 1.1(b) of the Credit Agreement is hereby amended by deleting therefrom
the word "for" between the words "resulting" and "the sale" and substituting
therefor the word "from."
2.03 AMENDMENT TO SECTION 1.1(c). Effective as of the date hereof,
Section 1.1(c) of the Credit Agreement is hereby amended by deleting therefrom
the (i) dollar amount "Ten Million Dollars ($10,000,000.00)" and substituting
therefor the dollar amount "Twenty Million Dollars ($20,000,000.00)" and (ii)
the date "May 2, 1998" and substituting therefor the date "May 2, 1999."
2.04 AMENDMENT TO SECTION 1.2(c); FEE PAYMENT. Effective as of the date
hereof, Section 1.2(c) of the Credit Agreement is hereby amended by deleting
therefrom the non-refundable loan origination fee amount from "FIFTEEN THOUSAND
DOLLARS ($15,000.00)" and substituting therefor the non-refundable loan
origination fee amount of "TWENTY-SEVEN THOUSAND FOUR HUNDRED ($27,400.00)".
Such fee shall be payable on the date hereof. Section 1.2(c) shall be further
amended by deleting therefrom the date "March 15, 1999" and substituting
therefor the date "June 11, 1998."
2.05 AMENDMENT TO SECTION 1.2(d). Effective as of the date hereof,
Section 1.2 (d) of the Credit Agreement is hereby amended by deleting therefrom
the phrase "Borrower shall pay to Bank a fee equal to one-half percent (.50%)
per annum" and substituting therefor the phrase "Borrower shall pay to Bank a
fee equal to thirty-five basis points (0.35%) per annum."
2.06 AMENDMENT TO SECTION 2.5. Effective as of the date hereof, Section
2.5 of the Credit Agreement is hereby amended by deleting therefrom the date
"September 28, 1996" and substituting therefor the date "May 2, 1998."
2.07 AMENDMENT TO SECTION 3.1(b). Effective as of the date hereof,
Section 3.1 (b) of the Credit Agreement is hereby amended by adding the
following last sentence:
"The foregoing documents, the documents described in Section 3.2(b)
below, and such other documents, instruments and agreements as may be
executed and/or delivered in connection with this Credit Agreement, as
the same may be amended, modified, extended, renewed or supplemented
from time to time, shall be called the `Loan Documents'."
2.08 AMENDMENT TO ADD NEW SECTION 3.3. Effective as of the date hereof,
the Credit Agreement is hereby amended by adding the following new Section 3.3:
"SECTION 3.3. Subsidiary Guaranty. So long as an obligation
exists under this Agreement, the Line of Credit Note or any other Loan
Document, Borrower will cause any now or hereafter existing Subsidiary
(as defined in Section 4.10 of this Agreement) promptly (upon becoming
a Subsidiary) to execute and deliver to Bank an unconditional guaranty
of such obligations of Borrower in form and substance satisfactory to
Bank."
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2.09 AMENDMENT TO SECTION 4.3(c). Effective as of the date hereof,
Section 4.3(c) of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"(c) not later than 30 days after the end of each of the first
eleven months in Borrower's fiscal year; and within 45 days after the
end of the twelfth month of such fiscal year, a financial statement of
Borrower, prepared by Borrower in accordance with Borrower's customary
or historical methods of accounting for such statements;"
2.10 AMENDMENT TO SECTION 4.3(e). Effective as of the date hereof,
Section 4.3(e) of the Credit Agreement is deleted in its entirety.
2.11 AMENDMENT TO SECTION 4.9(a). Effective as of the date hereof,
Section 4.9 (a) of the Credit Agreement is hereby deleted in its entirety.
2.12 AMENDMENT TO SECTION 4.9(b). Effective as of the date hereof,
Section 4.9(b) of the Credit Agreement is hereby amended by deleting therefrom
the dollar amount "15,000,000.00" and substituting therefor the dollar amount
"$25,000,000.00."
2.13 AMENDMENT TO SECTION 4.9(c). Effective as of the date hereof,
Section 4.9(c) of the Credit Agreement is deleted and amended and restated in
its entirety to read as follows:
"(c) Tangible Net Worth not at any time less than
$55,000,000.00."
2.14 AMENDMENT TO SECTION 4.9(g). Effective as of the date hereof,
Section 4.9(g) of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
"(g) Maintain a ratio of (i) an amount equal to the sum of (A)
the face amount of all outstanding Letters of Credit, plus (B) the
indebtedness under the Line of Credit Note to (ii) total inventory of
the Company, of not more than sixty-five (65%) throughout the term
hereof."
2.15 AMENDMENT TO SECTION 4.10. Effective as of the date hereof, of
Section 4.10 the Credit Agreement is hereby amended by (a) deleting the word
"or" after the words "to any Plan"; and (b) inserting after the word "property"
at the end thereof, the following clause:
"or (e) the existence, now or hereafter, by formation, acquisition or
otherwise, of any subsidiary of Borrower or of any subsidiary thereof
(each a `Subsidiary')."
2.16 AMENDMENT TO ARTICLE V. Effective as of the date hereof, of the
first paragraph of Article V (Negative Covenants) of the Credit Agreement is
hereby amended by replacing the words "Borrower will not without Bank's prior
written consent" with the words "Borrower will not, and will not permit any
Subsidiary to, without Bank's prior written consent."
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2.17 AMENDMENT OF SECTION 7.11. Effective as of the date hereof, the
last paragraph of Section 7.11 shall be amended and restated in its entirety to
read as follows:
"7.11 Nonapplicability of Chapter 346; Selection of Optional
Interest Rate Ceilings. Borrower and Lender hereby agree that, except
for Section 346.004 thereof, the provisions of Chapter 346 of the Texas
Finance Code (Vernon's Texas Code Annotated), as amended from time to
time (as amended, the "Texas Finance Code") shall not apply to this
Agreement or any of the other Financing Agreements. To the extent that
any of the optional interest rate ceilings provided in Chapter 303 of
the Texas Finance Code may be available for application to any loan(s)
or extension(s) of credit under this Agreement for the purpose of
determining the maximum allowable interest hereunder pursuant to the
Texas Finance Code, the applicable "weekly ceiling" (as such term is
defined in Chapter 303 of the Texas Finance Code) from time to time in
effect shall be used to the extent that it is so available."
2.18 AMENDMENT TO ADD NEW SECTION 7.15. Effective as of the date
hereof, the Credit Agreement is hereby amended by adding the following new
Section 7.15:
7.15 Waiver Of Consumer Rights. BORROWER HEREBY WAIVES ITS
RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT,
SECTION 17.41 ET. SEQ. BUSINESS & COMMERCE CODE, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF ITS OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS
WAIVER. BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT IT (a) IS NOT
IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER,
AND (b) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
ARTICLE III
CONDITIONS PRECEDENT
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by the Bank:
(a) The Bank shall have received the following documents, each
in form and substance satisfactory to the Bank and its legal counsel:
(i) this Amendment duly executed by the Company;
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(ii) the First Amended and Restated Revolving Line of
Credit Note, in the form of Exhibit A-1 attached
hereto, duly executed by the Company;
(iii) a Company General Certificate certified by the
Secretary of the Company acknowledging that (A) the
Company's Board of Directors has by unanimous written
consent adopted resolutions which authorize the
execution, delivery and performance by the Company of
this Amendment and all other Loan Documents to which
the Company is or will be a party to, and (B) the
names of the officers of the Company authorized to
sign this Amendment and all other Loan Documents to
which the Company is or will be a party to, together
with specimen signatures of such officers; and
(iv) the payment of the fee referred to in Section 2.04 above.
(b) The representations and warranties contained herein and in
the Credit Agreement and the other Loan Documents, as each is amended
hereby, shall be true and correct as of the date hereof, as if made on
the date hereof;
(c) No default or Event of Default shall have occurred and be
continuing, unless such default or Event of Default has been
specifically waived in writing by the Bank; and
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to the Bank and its legal counsel.
ARTICLE IV
NO WAIVER
4.01 Except as otherwise specifically provided for in this Amendment,
nothing contained herein shall be construed as a waiver by the Bank of any
covenant or provision of the Credit Agreement, the other Loan Documents, this
Amendment, or of any other contract or instrument between the Company and the
Bank, and the failure of the Bank at any time or times hereafter to require
strict performance by the Company of any provision thereof shall not waive,
affect or diminish any right of the Bank to thereafter demand strict compliance
therewith. The Bank hereby reserves all rights granted under the Credit
Agreement, the other Loan Documents, this Amendment and any other contract or
instrument between the Company and the Bank.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Credit Agreement and the other Loan Documents are ratified and confirmed
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and shall continue in full force and effect. The Company and the Bank agree that
the Credit Agreement and the other Loan Documents, as amended hereby, shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Bank that (a) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of the Company and will not violate the Articles of Incorporation or
Bylaws of the Company; (b) the representations and warranties contained in the
Credit Agreement, as amended hereby, and the other Loan Documents are true and
correct on and as of the date hereof and on and as of the date of execution
hereof as though made on and as of each such date; (c) no default or Event of
Default under the Credit Agreement, as amended hereby, has occurred and is
continuing, unless such default or Event of Default has been specifically waived
in writing by the Bank; (d) the Company is in full compliance with all covenants
and agreements contained in the Credit Agreement and the other Loan Documents,
as amended hereby; and (e) the Company has not amended its Articles of
Incorporation or its Bylaws since the date of the Credit Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in the Loan Agreement or any other Loan Documents,
including, without limitation, any document furnished in connection with this
Amendment, shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by the Bank or any closing shall
affect the representations and warranties or the right of the Bank to rely upon
them.
6.02 REFERENCE TO CREDIT AGREEMENT. Each of the Credit Agreement and
the other Loan Documents, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby
amended so that any reference in the Credit Agreement and such other Loan
Documents to the Credit Agreement shall mean a reference to the credit Agreement
as amended hereby.
6.03 EXPENSES OF THE BANK. The Company agrees to pay on demand all
reasonable costs and expenses incurred by the Bank in connection with any and
all amendments, modifications, and supplements to the Loan Documents, including,
without limitation, the costs and fees of the Bank's legal counsel, and all
costs and expenses incurred by the Bank in connection with the enforcement or
preservation of any rights under the Credit Agreement, as amended hereby, or any
other Loan Documents, including, without, limitation, the costs and fees of the
Bank's legal counsel.
6.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this
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Amendment and the effect thereof shall be confined to the provision so held to
be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of the Bank and the Company and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Bank.
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by the
Bank to or for any breach of or deviation from any covenant or condition by the
Company shall be deemed a consent to or waiver of any other breach of the same
or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 FINAL AGREEMENT. THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY THE COMPANY AND THE BANK.
6.11 RELEASE. THE COMPANY HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "INDEBTEDNESS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES
OF ANY KIND OR NATURE FROM THE BANK. THE COMPANY HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES THE BANK, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED,
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SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE COMPANY MAY NOW OR HEREAFTER HAVE AGAINST THE BANK, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY LOANS OR EXTENSIONS OF
CREDIT FROM THE BANK TO THE COMPANY UNDER THE CREDIT AGREEMENT OR THE OTHER LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE CREDIT AGREEMENT
OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
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IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
COMPANY:
GADZOOKS, INC.
By: /s/ XXXXX X. XXXXXXXXX
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Xxxxx X. Xxxxxxxxx,
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
BANK:
XXXXX FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By: /s/ XXXX X. XXXXX
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Xxxx X. Xxxxx
Vice President
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