EXHIBIT 10.21
THIRD AMENDMENT
TO
CREDIT AGREEMENT
This Third Amendment is made this 27th day of June, 1997, by and between
ULTIMATE ELECTRONICS, INC., a Delaware corporation (the "Borrower"), NORWEST
BANK COLORADO, NATIONAL ASSOCIATION (the "Lender") and NORWEST BUSINESS CREDIT,
INC, a Minnesota corporation, as administrative agent for the Lender (the
"Administrative Agent").
RECITALS
The Borrower, the Lender and the Administrative Agent entered into a Credit
Agreement dated as of November 21, 1996, as amended (the "Credit Agreement").
The Borrower has requested that the Lender change certain definitions and
affirmative covenants in the Credit Agreement. The Lender is willing to do so
on the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
1. The definition of Acceptable Facility set forth in Section 1.1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"`Acceptable Facility' means a distribution facility or retail store
(a) either (i) owned by the Borrower or (ii) leased by the Borrower or any
of its subsidiaries subject to a lease acceptable to the Administrative
Agent pursuant to which the landlord under such lease has executed a
landlord's waiver acceptable to the Administrative Agent, and (b)
identified in the Security Agreement as a location at which Inventory will
be located or otherwise identified in writing by the Borrower to the
Administrative Agent as a location at which Inventory will be located."
2. The definition of Acceptable Inventory set forth in Section 1.1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"`Acceptable Inventory' means consumer electronics products held for
sale, net of any unearned vendors' discounts (a) in which the Lender has a
valid perfected first priority security interest, (b) which are located in
an Acceptable Facility, (c) which are subject to no other lien, encumbrance
or security interest, and (d) which are owned
(i) by Borrower or (ii) by Audio King, Inc. on June 27, 1997. Without
limiting the foregoing, the following shall not be Acceptable Inventory:
(1) Supplies and packaging inventory;
(2) Inventory that is damaged, defective, obsolete or not currently
saleable in the normal course of the Borrower's operations;
(3) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the vendor
thereof, including, without limitation, factory returns;
(4) Inventory in an amount equal to the Borrower's invoice variance
reserves;
(5) Discontinued inventory in an amount in excess of 12% of total
Inventory (determined after deducting unearned vendors' discounts);
(6) Free goods;
(7) That portion of the Borrower's aggregate service and parts
Inventory, and Inventory consisting of cellular phones, promotional items,
custom items and third party warranties which, in the aggregate, exceeds
12% of total Inventory (determined after deducting unearned vendors'
discounts); and
(8) Inventory otherwise deemed ineligible by the Administrative Agent
in its sole discretion; provided, however, that unless an Event of Default
or event that with notice or the passage of time would constitute an Event
of Default then exists, the Administrative Agent will give Borrower (20)
days' notice of any change in the types or amount of Inventory which shall
be Acceptable Inventory and shall base any such change on the
Administrative Agent's good faith judgment as to the liquidation value of
such Inventory."
3. The definition of Net Worth set forth in Section 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:
"`Net Worth' shall mean the sum of the par or stated value of all
outstanding capital stock, surplus and undivided profits of the Borrower,
less any amounts attributable to treasury stock and any intangible assets,
including, but not limited to, goodwill, patents, copyrights, mailing
lists, catalogues, trademarks, bond discount and underwriting expenses,
organization expenses and other like intangibles, all as
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determined in accordance with generally accepted accounting principles, in
excess of $3,200,000."
4. Section 5.13 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 5.13 SUBSIDIARIES AND AFFILIATES. Borrower does not have any
affiliates or Subsidiaries other than those Subsidiaries described on
Exhibit D hereto."
5. Section 6.13 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 6.13 FINANCIAL COVENANTS. Maintain the following:
(a) A ratio of current assets to the sum of current liabilities plus
the aggregate outstanding balance under the Loan of at least 1.00 to 1.00
computed monthly as of the end of each month. Current assets and current
liabilities shall be calculated in accordance with GAAP. For purposes of
this Section 6.13(a), prepaid expenses and stockholder receivables included
in the calculation of current assets shall not exceed $1,600,000.
(b) Maintain during each of the periods set forth below, a minimum
Net Worth calculated as at the end of each month in such period in an
amount which is greater than or equal to the amount set forth opposite such
period; PROVIDED THAT the minimum Net Worth that the Borrower is required
to maintain shall be increased by the sum of 100% of the net proceeds
received by the Borrower for the sale of any equity securities after the
date of this Agreement:
Period Minimum Net Worth
------ -----------------
February 28, 1997 to and including $41,000,000
June 30, 1997
July 1, 1997 to and including $42,800,000
November 30, 1997
December 1, 1997 to and including $44,300,000
January 31, 1998
February 1, 1998 to and including $43,950,000
September 30, 1998
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(c) Maintain on each of the dates set forth below a maximum ratio of
Funded Indebtedness to EBITDA determined for the four fiscal quarters of
the Borrower ending on such date that is less than or equal to the ratio
set forth opposite such date:
Date Ratio
---- -----
July 31, 1997 5.55 to 1.00
October 31, 1997 5.55 to 1.00
January 31, 1998 4.75 to 1.00
April 30, 1998 4.25 to 1.00
July 31, 1998 3.75 to 1.00"
6. Section 7.1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.1 FIXED ASSETS EXPENDITURES. Make any capital
expenditures (as such term is defined in accordance with GAAP) or
expenditures for fixed assets, excluding the purchase by the Borrower of
all of the issued and outstanding shares of Audio King Corporation (a) in
excess of $6,600,000 during the Borrower's 1998 fiscal year, and (b) in an
aggregate amount in excess of $400,000 per quarter cumulating quarterly
with respect to unused amounts during its 1999 fiscal year."
7. Section 7.2 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.2 INDEBTEDNESS. Create, incur, permit, assume or suffer to
exist any Indebtedness, except (a) the obligations created hereby; (b)
Indebtedness created or incurred in the ordinary course of business which
constitutes trade payables or obligations other than indebtedness for
borrowed money or Indebtedness representing the deferred purchase price of
goods, (c) leases which are or should be classified as operating leases in
accordance with GAAP; (d) Manufacturer Payables, (e) the Bond Indebtedness,
(f) the capital leases and term debt described on Schedule 7.2 hereto and
additional capital leases for store locations entered into in the ordinary
course of business, and (g) indebtedness assumed by Borrower pursuant to a
letter agreement between Borrower and Audio King, Inc., dated June 27,
1997."
8. Section 7.7 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.7 LOAN. Make any loan or salary advance to any Person;
except loans or salary advances to Borrower's officers, directors,
shareholders or employees not in
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excess of $100,000 in the aggregate outstanding at any one time for all such
loans and advances and loans made by Borrower to Audio King, Inc. pursuant
to a letter agreement between Borrower and Audio King, Inc., dated June 27,
1997."
9. Section 7.11 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.11 USE OF FUNDS. Use funds advanced under this Agreement
for any purpose other than for ordinary working capital purposes or the
acquisition of all of the capital stock of Audio King Corporation."
10. Section 7.14 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.14 SUBSIDIARY OR AFFILIATE. Form or consent to or take
part in the formation of any Subsidiary or affiliate other than those
subsidiaries described on Exhibit D hereto."
11. Section 7.16 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Section 7.16 INVESTMENTS AND NEW BUSINESSES. Make any acquisitions
of or capital contributions to or other investments in any Person other
than (a) investments in open market commercial paper, maturing within 365
days after acquisition thereof, with a credit rating of at least A-1 or P-1
by either Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc.,
(b) marketable obligations issued or unconditionally guaranteed by the
United States of America or an instrumentality or agency thereof and
entitled to the full faith and credit of the United States of America, (c)
municipal bonds with a credit rating of at least A by either Standard &
Poor's or Moody's, (d) demand deposits, time deposits (including
certificates of deposit), and money market accounts, or (e) the acquisition
of all of the capital stock of Audio King Corporation."
12. The Credit Agreement is hereby amended to add an Exhibit D which shall
read in its entirety as follows:
"EXHIBIT D
(Attached to and forming a part of Credit
Agreement between Ultimate Electronics, Inc. and
NORWEST Business Credit, Inc. and
NORWEST Bank Colorado, National Association)
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LIST OF SUBSIDIARIES
Ultimate AKquisition Corp.
Audio King, Inc.*
Audio King Iowa, Inc.**
Specialty Home Electronics Repair, Inc.
Fast Trak, Inc.***
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* To be merged into Ultimate AKquisition Corp.
** To be merged into Audio King, Inc.
*** To be merged into Specialty Home Electronics Repair, Inc."
13. Except as specifically amended hereby, the Credit Agreement shall
remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
be duly executed as of the day and year first above written.
ULTIMATE ELECTRONICS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Its: Vice President of Finance
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NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By: /s/ Xxxxx X. Xxxxx
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Its: Vice President
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NORWEST BUSINESS CREDIT, INC.
By: /s/ Xxxxxx Xxxxxxx
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Its: Assistant Vice President
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