SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
DMI FURNITURE, INC., a Delaware corporation (the "Company"), and BANK ONE,
INDIANAPOLIS, NATIONAL ASSOCIATION, a national banking association (the "Bank"),
parties to an Amended and Restated Credit Agreement dated June 9, 1994, as
amended by a First Amendment to Amended and Restated Credit Agreement dated
October 11, 1994, by a Second Amendment to Amended and Restated Credit Agreement
dated January 10, 1995, by a Third Amendment to Amended and Restated Credit
Agreement dated March 10, 1995, by a Fourth Amendment to Amended and Restated
Credit Agreement effective as of August 15, 1995, by a Fifth Amendment to
Amended and Restated Credit Agreement dated November 1, 1995, and by a Sixth
Amendment to Amended and Restated Credit Agreement dated January 11, 1996
(collectively, as amended, the "Original Agreement"), agree to amend the
Original Agreement by this Seventh Amendment to Amended and Restated Credit
Agreement (this "Seventh Amendment") as follows:
1. DEFINITIONS. Sections 2.p and 2.q of the Original Agreement are
amended and restated in their entireties and new Sections 2.fffff, 2.ggggg,
2.hhhhh, 2.iiiii, 2.jjjjj, 2.kkkkk, and 2.lllll are added to the Original
Agreement, all to read as follows:
p. BORROWING BASE. "Borrowing Base" means an amount equal to the sum of
(i) eighty percent (80%) of the adjusted book value of the Company's
accounts receivable, excluding all accounts receivable for inventory
used in showrooms or displays for which the Company makes available
longer repayment terms than are available for other inventory of the
Company sold in the ordinary course of business, plus (ii) fifty
percent (50%) of the book value of the Company's finished goods
inventory, plus (iii) for the period from June 1, 1996, through August
3, 1996, the period from November 30, 1996, through March 1, 1997, and
for the period from May 31, 1997, through August 2, 1997, $500,000.00,
plus (iv) fifty percent (50%) of the book value of the Company's
timber, logs, rough cut lumber and full-board stock that, in the sole
discretion of the Bank, is readily marketable in its current state,
plus (v) twenty-five percent (25%) of the book value of the Company's
remaining raw materials inventory, excluding all lumber of the Company
cut or otherwise altered so as to constitute components to be
assembled into items that, when completed, will be finished goods
inventory, plus (vi) the Borrowing Base Adjustment. For purposes of
the preceding sentence, the phrase "adjusted book value of the
Company's accounts receivable" means the book value of the Company's
accounts receivable less any accounts which are sixty (60) days or
more past due, or which are due from an account debtor known to the
Company to be the subject of a bankruptcy or other insolvency
proceeding or known to the Company to have ceased doing business, and
less all accounts due from any account debtor if twenty-five percent
(25%) or more of the aggregate amount of the accounts receivable from
such debtor are sixty (60) days or more past due, and provided that
any account receivable otherwise includable in
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the Borrowing Base shall be reduced, but not below zero, by the amount
of any accounts payable to the account debtor from which such account
is due.
q. BORROWING BASE ADJUSTMENT. "Borrowing Base Adjustment" means (i) zero
at any time that any amount is deposited with the Agent under either
of the Escrow Agreements, and (ii) $125,000 at all other times.
fffff. SEVENTH AMENDMENT. "Seventh Amendment" means that agreement entitled
"Seventh Amendment to Amended and Restated Credit Agreement" between
the Company and the Bank dated July 17, 1996.
ggggg. ESCROW AGREEMENT. "Escrow Agreement" means either the Escrow
Agreement (Xxxxxx) or the Escrow Agreement (Hill), as the context
requires, and when used in the plural form refers to both of the
Escrow Agreement.
hhhhh. ESCROW AGREEMENT (XXXXXX). "Escrow Agreement (Xxxxxx)" means the
Escrow Agreement dated as of the date of the Seventh Amendment among
the Company, the Bank, Xxxxxx X. Xxxxxx and the Agent, as it may be
amended from time to time.
iiiii. ESCROW AGREEMENT (HILL). "Escrow Agreement (Hill)" means the Escrow
Agreement dated as of the date of the Seventh Amendment among the
Company, the Bank, Xxxxxx X. Xxxx and the Agent, as it may be amended
from time to time.
jjjjj. AGENT. "Agent" means Fifth Third Bank of Kentucky, Inc., a Kentucky
banking corporation acting in its capacity as the Agent under each of
the Escrow Agreements, and any successor thereto in such capacity.
kkkkk. CHANGE IN CONTROL. "Change in Control means the occurrence of any of
the following:
(i) Any "person," as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, or any of the existing Series
C Preferred stockholders), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 40% or more of the combined
voting power of the Company's then outstanding securities.
(ii) During any period of two consecutive years (not including
any period ending prior to the date of the Seventh Amendment),
individuals who at the beginning of such period constitute the Board
of Directors of the Company cease to constitute at least a majority
thereof. If the election or nomination for election by the Company's
stockholders of a new director (other than a director designated by a
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person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition)
was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, that director shall not be counted for purposes of the
preceding sentence.
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
80% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 40%
of the combined voting power of the Company's then outstanding
securities.
(iv) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale of disposition
by the Company of all or substantially all of the Company's assets.
(v) Any other transaction which is of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act occurs.
lllll. CHANGE IN MANAGEMENT. "Change in Management" means either (i) Xxxxxx
X. Xxxxxx is no longer the Chairman, President and Chief Executive
Officer of the Company, or (ii) Xxxxxx X. Xxxx is no longer the Vice
President-Finance and Chief Financial Officer of the Company.
All other terms defined in the Original Agreement and used in this Seventh
Amendment shall have their respective meanings stated in the Agreement.
2. THE REVOLVING LOAN. Section 3.a(i) of the Original Agreement is
amended and restated in its entirety to read as follows:
a. (i) THE REVOLVING LOAN COMMITMENT -- USE OF PROCEEDS. From the date
of the Seventh Amendment and until the Revolving Loan Maturity
Date, the Bank agrees to make Advances (collectively, the
"Revolving Loan") under a revolving line of credit from time to
time to the Company of amounts not exceeding the lesser of
Thirteen Million Five Hundred Thousand and No/100 Dollars
($13,500,000.00) (the "Revolving Loan Commitment") or the
Revolving Loan Availability Amount in the aggregate at any time
outstanding, provided that all of the conditions of lending
stated in Section 9 of this Agreement as being applicable to the
Revolving Loan have been fulfilled at the time of each Advance.
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Proceeds of the Revolving Loan may be used by the Company only to
fund working capital requirements, provided that the Company may
deposit an amount not to exceed $649,834.33 with the Agent for
the Escrow Agreement (Xxxxxx) and an amount not to exceed
$350,165.67 with the Agent for the Escrow Agreement (Hill), but
only if (x) no Event of Default or Unmatured Event of Default has
occurred and is continuing at the time of the deposit, (y) no
Event of Default or Unmatured Event of Default would result from
the deposit, and (z) the Bank shall have the right to receive the
funds deposited in the Escrow Agreements (to be applied toward
the Obligations or as provided in Section 11.f) if (A) an Event
of Default (other than an Event of Default under Section 10.g of
this Agreement) occurs and is continuing, or (B) on any date
after the Bank's consent to the deposits has expired (currently
July 17, 1997) and the Bank, in its sole discretion, has decided
not to extend the expiration date of its consent.
3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
Seventh Amendment, the Company affirms that the representations and warranties
contained in the Original Agreement are correct as of the date of this Seventh
Amendment, except that (i) they shall be deemed also to refer to this Seventh
Amendment, as well as all documents named herein, and (ii) Section 5.d shall be
deemed also to refer to the most recent audited (dated September 2, 1995) and
most recent unaudited financial statements of the Company furnished to the Bank.
4. AFFIRMATIVE COVENANTS. Section 7.g of the Original Agreement is
amended and restated in its entirety to read as follows:
(i) CURRENT RATIO. The Company shall maintain the ratio of its current
assets to its current liabilities at levels not less than those shown
in the following table during the periods indicated:
Period Current Ratio
------ -------------
at each fiscal year end 2.25 to 1.0
during each fiscal year until fiscal year end 2.00 to 1.0
(ii) TANGIBLE NET WORTH. The Company shall maintain its Tangible Net Worth
at levels not less than those shown in the following table during the
periods indicated:
Period Tangible Net Worth
------ ------------------
at May 4, 1996, and $ 8,500,000
until August 31, 1996
at August 31, 1996, and $ 8,800,000
until November 30, 1996
at November 30, 1996, and $ 9,100,000
until March 1, 1997
at March 1, 1997, and $ 9,400,000
until May 31, 1997
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at May 31, 1997, and $ 9,700,000
until fiscal year end 1997
at fiscal year end 1997 and $10,000,000
at all times thereafter
(iii) RATIO OF DEBT TO TANGIBLE NET WORTH. The Company shall maintain the
ratio of its total liabilities to its Tangible Net Worth at levels not
greater than those show in the following table during the periods
indicated:
Period Ratio
------ -----
at March 30, 1996 and until
fiscal year end 1996 2.95 to 1.0
at fiscal year end 1996 and at
all times thereafter 2.60 to 1.0
For purposes of testing compliance with this covenant, the term
"liabilities" shall include the present value of all capital lease
obligations of the Company, determined as of any date the ratio is to be
tested.
(iv) FIXED CHARGE COVERAGE RATIO. For each period of four consecutive
fiscal 13-week periods ending on and after March 30, 1996, the Company
shall maintain a fixed charge coverage ratio at levels not less than
those shown in the following table during the periods indicated:
End of Period Ratio
------------- -----
from March 30, 1996, and
until November 30, 1996 0.90 to 1.00
from November 30, 1996, and
until March 1, 1997 0.95 to 1.00
from March 1, 1997, and
until May 31, 1997 1.00 to 1.00
from May 31, 1997, and
until fiscal year end 1997 1.15 to 1.00
from fiscal year end 1997 and
at each quarter end thereafter 1.25 to 1.00
For purposes of this covenant, the phrase "fixed charge coverage
ratio" means the ratio of the sum of net income before taxes (adjusted
to exclude the reserve set aside for the closing of the Company's
facility in Gettysburg, Pennsylvania, occurring during fiscal year
1996 in an amount not to exceed $995,000, which adjustment shall be
made only so long as such reserve was set aside during the period
tested) plus depreciation, amortization and interest expense over the
sum of current maturities of term debt, including current capital
lease payments, plus interest expense plus expenditures for fixed
assets, plus cash used to pay income tax expenses.
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5. NEGATIVE COVENANTS. A new Section 8.n is added to the Original
Agreement to read as follows:
n. FUNDING OF ESCROW AGREEMENTS. The Company shall not deposit with the
Agent more than $649,834.33 for the Escrow Agreement (Xxxxxx), nor
deposit with the Agent more than $350,165.67 for the Escrow Agreement
(Hill).
6. EVENTS OF DEFAULT. Section 10.g of the Original Agreement is amended
and restated in its entirety and a new Section 10.h is added to the Original
Agreement, all to read as follows:
g. CHANGE IN CONTROL PLUS CHANGE IN MANAGEMENT. If (i) a Change in
Control occurs, and (ii) a Change in Management occurs.
h. NONCOMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT. Failure of the
Company to comply with or perform any covenant or other provision of
this Agreement or to perform any other Obligation (which failure does
not constitute an Event of Default under any of the preceding
provisions of this Section 10) and continuance of such failure for
thirty (30) days after notice thereof to the Company from the Bank.
The Company certifies that no Event of Default or Unmatured Event of Default
under the Original Agreement, as amended by this Seventh Amendment, has occurred
and is continuing as of the execution date of this Seventh Amendment.
7. EFFECT OF EVENT OF DEFAULT. A new Section 11.f is added to the
Original Agreement to read as follows:
f. DEMAND OF FUNDS DEPOSITED PURSUANT TO ESCROW AGREEMENTS. The Bank may
notify the Agent of the Event of Default (other than an Event of
Default under Section 10.g of this Agreement) with the result that the
Agent will, as required by the Escrow Agreements, distribute to the
Bank all "Escrowed Funds" (as that term is defined in each of the
Escrow Agreements). The Bank shall be entitled, in its sole
discretion, to use all or any portion of the Escrowed Funds to repay
Obligations then outstanding in any order as the Bank in its sole
discretion determines, or to deposit all or any portion of the
Escrowed Funds in the Special Collateral Account established pursuant
to Section 11.d of this Agreement, with any funds that are deposited
into the Special Collateral Account under the authority of this
Section 11.f subject, after deposit, to the pledge and other
provisions of Section 11.d.
8. CLOSING DOCUMENTS. As conditions precedent to the effectiveness of
this Seventh Amendment, the Bank shall first receive the following
contemporaneously with the execution and delivery of this Seventh Amendment,
each duly executed, dated and in form and substance satisfactory to the Bank:
A. The Escrow Agreements;
B. A certified copy of the resolutions of the Board of Directors of the
Company, authorizing the execution, performance and delivery of this
Seventh Amendment and the other documents named herein; and
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C. Such other documents as are reasonably required by the Bank.
9. EFFECT OF SEVENTH AMENDMENT. Except as amended in this Seventh
Amendment, all of the terms and conditions of the Original Agreement shall
continue unchanged and in full force and effect together with this Seventh
Amendment.
IN WITNESS WHEREOF, the Company and the Bank, by their respective duly
authorized officers, have executed and delivered in Indiana this Seventh
Amendment to Amended and Restated Credit Agreement on this 17th day of
July, 1996.
DMI FURNITURE, INC.
By:/s/Xxxxxx X. Xxxx
--------------------------------
Xxxxxx X. Xxxx, Chief Financial
Officer
BANK ONE, INDIANAPOLIS, NA
By:/s/D. Xxxxx Xxxxxxxx
----------------------------------
D. Xxxxx Xxxxxxxx, Vice President
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