Exhibit 10.40
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Fifth
Amendment"), dated effective as of the 4th day of December, 1996,
by and among CATHERINES, INC., a Delaware corporation (the
"Company"), CATHERINES STORES CORPORATION, a Tennessee corporation
(successor by merger to Catherines Stores Corporation, a Delaware
Corporation) (the "Parent"), CATHERINES OF PENNSYLVANIA, INC., a
Tennessee corporation ("PA Co."), CATHERINES OF CALIFORNIA, INC.,
a California corporation ("RT Co."), CATHERINES PARTNERS, L.P., a
Tennessee limited partnership ("Intex"), FIRST AMERICAN NATIONAL
BANK ("FANB") individually and in its capacity as Agent (as defined
in the Agreement) (the "Agent"), HIBERNIA NATIONAL BANK
("Hibernia"), THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
("Hongkong") (FANB, Hibernia and Hongkong, together with their
respective successors, transferees and assigns from time to time
parties hereto referred to collectively as the "Banks" and each
individually referred to as a "Bank").
RECITALS
The Company, Parent and Banks (together with Added Dimensions,
Inc., Xxxxx Xxxxx-Large Size Factory Outlet, Inc., and The Answer-
The Elegant Large Size Discounter, Inc. which have been merged into
Virginia Specialty Stores, Inc. ("VSS") and VSS which has been
merged into the Company) are parties to that certain Credit
Agreement dated as of March 31, 1994 (the "Credit Agreement").
Hibernia and Hongkong became parties to the Credit Agreement
by virtue of that certain Commitment Transfer Supplement dated of
even date with the Credit Agreement.
PA Co., RT Co. and Intex (together with CSC Sub, Inc. which
was the predecessor corporation of Parent) became Credit Parties to
the Credit Agreement and said Credit Agreement was amended by the
Credit Parties by virtue of that certain First Amendment to Credit
Agreement (the "First Amendment") dated as of January 29, 1995.
The Credit Agreement was further amended by virtue of that
certain Second Amendment to Credit Agreement (the "Second
Amendment") dated as of December 6, 1995, that certain Third
Amendment to Credit Agreement dated as of April 26, 1996 (the
"Third Amendment") and that certain Fourth Amendment to Credit
Agreement dated as of September 4, 1996 (the "Fourth Amendment")
(the Credit Agreement, the First Amendment, the Second Amendment,
the Third Amendment and the Fourth Amendment referred to
collectively as the "Agreement").
The Credit Parties have requested that the Banks make certain
changes to the Agreement.
The Banks consent to and approve the foregoing request of the
Credit Parties, subject to the terms and conditions of this Fifth
Amendment.
All corporate actions required for the execution, delivery and
performance of the obligations hereunder incurred have been duly
taken.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
SECTION ONE: DEFINITIONS
1.01 Amended Definitions. Each of the following definitions
contained in Section 1 of the Agreement is hereby deleted and the
following definitions substituted in lieu thereof:
"Basic Documents" shall mean, collectively, the Credit
Agreement (including all schedules and exhibits thereto), as
amended by the First Amendment, the Second Amendment, the Third
Amendment, the Fourth Amendment and the Fifth Amendment (including
all schedules and exhibits hereto and thereto), the Working Capital
Notes, the Term Notes, the Swingline Note, the Security Documents,
the First Amendment Security Documents, the Second Amendment
Security Documents and the Fourth Amendment Security Documents.
SECTION TWO: AMENDMENTS
2.01 Amendment to Subsection 2.8. Subsection 2.8 to the
Agreement is amended by deleting subsection 2.8 in its entirety and
by substituting in lieu thereof the following:
2.8 Prepayments of the Working Capital Loans and
Swingline Loans. The Company shall prepay the Working
Capital Loans and Swingline Loans so that for at least
thirty (30) consecutive days (the "Pay Down Period") of
each Fiscal Year the aggregate principal amount of
outstanding Working Capital Loans and Swingline Loans
(exclusive of Letters of Credit) shall not exceed
$5,000,000.00. Notwithstanding the foregoing, the Banks
hereby waive the prepayment requirement of this
Subsection 2.8 for the 1996 Fiscal Year.
2.02 Amendment to Subsection 9.1. Subsection 9.1 to the
Agreement is amended by adding the following subparagraph thereto:
(i) A subordinated term loan to be incurred by the
Company on a one-time basis (the "Subordinated Debt")
subject to the following conditions: (A) the
Subordinated Debt shall not exceed $15,000,000.00; (B)
the terms and conditions of the borrowing under the
Subordinated Debt shall be, in the sole discretion of the
Banks, satisfactory in all respects; (C) the loan
documentation evidencing the Subordinated Debt shall
contain provisions in respect of subordination,
amortization, rate of interest and acceleration of the
due date of such interest and acceleration of the due
date of such indebtedness prior to its stated maturity
which, in the sole discretion of the Banks, are
acceptable in form and substance to the Banks; (D) the
payment and financial covenants of the Subordinated Debt
shall be subordinate in all respects to the payment and
financial covenants contained in the Agreement with
respect to the Loans and shall be evidenced by a
subordination agreement in form and substance
satisfactory to the Bank in their sole discretion, to be
executed by the Company, the Subordinated Debt lender and
the Banks, (E) the Banks shall determine, in their sole
discretion, that the Subordinated Debt will not impact
the Company's financials in such a manner as to be
unsatisfactory to the Banks; (F) the Banks shall receive
such other information and documentation with respect to
the Subordinated Debt as the Banks shall deem necessary
and such information and documentation shall be
satisfactory to the Banks: and (G) the Company shall pay
all of the fees and expenses incurred by the Banks,
including legal fees and expenses of Banks' legal
counsel.
2.03 Amendment to Subsection 9.8. Subsection 9.8 to the
Agreement is amended by deleting subsection 9.8 in its entirety and
by substituting in lieu thereof the following:
9.8 Consolidated Net Worth. Permit Consolidated
Net Worth on the last day of any month to be less than
$68,500,000 (the "Minimum Consolidated Net Worth
Requirement") which Minimum Consolidated Net Worth
Requirement shall be adjusted at the end of each Fiscal
Year. Such Minimum Consolidated Net Worth Requirement
shall be increased beginning with the 1997 Fiscal Year by
adding to the preceding Fiscal Year's Minimum
Consolidated Net Worth Requirement one hundred percent
(100%) of Net Income for the preceding Fiscal Year. The
Minimum Consolidated Net Worth Requirement shall be
increased at the end of each Fiscal Year thereafter by
adding to the previous Fiscal Year's Minimum Consolidated
Net Worth Requirement fifty percent (50%) of Net Income
for the preceding Fiscal Year.
2.04 Amendment to Section 9.9. Section 9.9 of the Agreement
is hereby deleted in its entirety and the following substituted
therefor:
9.9 Capital Expenditures. Permit Capital
Expenditures to exceed an aggregate of $11,000,000.00 in
the 1996 Fiscal Year and an aggregate of $8,000,000.00 in
any Fiscal Year thereafter commencing with the 1997
Fiscal Year.
2.05 Amendment to Section 9.10. Section 9.10 of the
Agreement is hereby deleted in its entirety and the following
substituted therefor:
9.10 Debt Coverage Ratio. Permit the Debt Coverage
Ratio, in each case for the period of four (4) fiscal
quarters ending on the last day of each fiscal quarter
commencing with the fiscal quarter ending January 31,
1997, to be less than 2.50 to 1.0.
2.06 Amendment to Subsection 9.12. Subsection 9.12 of the
Agreement is hereby deleted in its entirety and the following
substituted therefor:
9.12 Limitation on Dividends. Declare any cash
dividends on any shares of any class of stock of the
Credit Parties or make any payment on account of, or set
apart assets for s inking or other analogous fund for,
the purchase, redemption, retirement or other acquisition
of any shares of any class of stock of the Credit
Parties, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in
obligations of the Credit Parties; except that the
Company or the Parent may declare dividends on any class
or series of stock of the Company or the Parent, provided
that, (i) (A) no Default or Event of Default exists and
(B) the Dividend Ratio for such Fiscal Year exceeds 1.05
to 1.0 or (ii) dividends paid by the Company to the
Parent are used by the Parent to satisfy obligations of
the Parent and the Company under the Consulting Agreement
and the Noncompetition Agreement.
SECTION THREE: CONDITIONS PRECEDENT
3.01 Conditions to the Execution of the Fifth Amendment. The
obligation of the Banks to enter into the Fifth Amendment shall be
subject to the following conditions to the satisfaction of the
Agent:
(a) Fifth Amendment. Each Bank shall have received an
original of the Fifth Amendment duly executed by a duly authorized
officer of each of the Credit Parties.
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on the date of the
Fifth Amendment. No Event of Default (or condition which would
constitute an Event of Default with the giving of notice, the lapse
of time, or both) under material (in the reasonable opinion of the
Company and the Agent) contracts of the Credit Parties such as, but
not limited to, agreements with respect to capital stock, financing
documents and lease agreements shall have occurred and be
continuing on the date of the Fifth Amendment.
(c) Amendment Fee. Agent shall have received an amendment
fee of $25,000.00 which shall be distributed on an equal basis to
the Banks by Agent.
(d) Legal Opinion of Counsel to the Credit Parties. Each
Bank shall have received a counterpart of an opinion, dated the
date of the Fifth Amendment, of Waring Xxx, counsel to the Credit
Parties, in substantially the form of Exhibit "A".
(e) Corporate Proceedings. Each Bank shall have received an
execution copy of the resolutions of the Boards of Directors of the
applicable Credit Parties authorizing the execution, delivery and
performance of the Fifth Amendment certified by the Secretary or
Assistant Secretary of the relevant Credit Partners as of the date
of the Fifth Amendment, which certificate shall state that the
resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of the Fifth Amendment.
(f) Representations and Warranties. The representations,
warranties and disclosures made by the Credit Parties in the
Agreement, as amended by the Fifth Amendment, or in any Basic
Document or made by any of the Credit Parties in any certificate,
document or financial or other statement furnished in connection
herewith or therewith, shall be true and correct in all material
respects on and as of the date of the Fifth Amendment with the same
effect as if made on such date.
SECTION FOUR: REPRESENTATIONS AND WARRANTIES
4.01 Entity Existence; Compliance with Law.
(a) Each of the corporate Credit Parties (i) is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, (ii) has the corporate power
and authority and the legal right to own or lease and operate its
property, and to conduct the business in which it is currently
engaged, (iii) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where failure to
so qualify and remain in good standing would materially and
adversely affect its ability to own or lease and operate its
property or to conduct the business in which it is currently
engaged or intends to engage in the future and (iv) is in
compliance with all Requirements of Law, except where non-
compliance would not have material adverse effect on the business,
operations, assets or financial conditions of each such Credit
Party.
(b) Intex (i) is duly organized, validly existing and in good
standing under the laws of Tennessee, (ii) has the partnership
power and authority and the legal right to own or lease and operate
its property, and to conduct the business in which it is currently
engaged, (iii) is duly qualified as a foreign limited partnership
and in good standing under the laws of each jurisdiction where
failure so to qualify and remain in good standing would
immaterially and adversely affect its ability to own or lease and
operate its property or to conduct the business in which it is
currently engaged or intends to engage in the future and (iv) is in
compliance with all Requirements of Law, except where non-
compliance would not have material adverse effect on the business,
operations, assets or financial conditions of Intex.
4.02 Entity Power; Authorization; Enforceable Obligations.
(a) Each of the corporate Credit Parties has the corporate
power and authority, and Intex has the partnership power and
authority, to make, deliver and perform all of its respective
obligations in connection with the Agreement as amended by the
Fifth Amendment; each corporate Credit Party has taken all
necessary corporate action, and Intex has taken all necessary
partnership action, to authorize the execution, delivery and
performance of the Fifth Amendment. No consent or authorization
of, filing with, or other act by or in respect of, any other Person
is required in connection with the execution, delivery or
performance by each of the Credit Parties or the validity of or
enforceability against each of the Credit Parties, of the Fifth
Amendment (except such filings as are necessary in connection with
perfection of the Liens created by such documents, which filings
have been duly made and/or obtained and are in full force and
effect). The Fifth Amendment has been duly executed and delivered
on behalf of each such Credit Party. The Fifth Amendment
constitutes a legal, valid and binding obligation of each Credit
Party, enforceable against each such Credit Party in accordance
with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally, and except as enforceability
may be limited by general principles of equity (whether considered
in a suit at law or in equity).
4.03 No Legal Bar. The execution, delivery and performance
by each of the Credit Parties of the Fifth Amendment do not and
will not violate any Requirement of Law or any Contractual
Obligation applicable to or binding upon the Credit Parties or any
of their properties or assets, except where noncompliance would not
have a material effect on the business, operations, property,
assets or financial condition of the Credit Parties taken as a
whole and will not result in the creation or imposition of any Lien
on any such properties or assets pursuant to the provisions of any
Requirement of Law or any Contractual Obligations other than the
Lien of the Security Documents.
4.04 No Default. None of the Credit Parties is in default in
the payment or performance of any of its Contractual Obligations in
any respect that is material to the Credit Parties, and no Default
or Event of Default has occurred and is continuing. None of the
Credit Parties is in default in any respect that is material to it
under any order, award or decree of any Governmental Authority or
arbitrator binding upon or affecting it or by which any of its
properties or assets may be bound or affected.
SECTION FIVE: MISCELLANEOUS
5.01 Governing Law; No Third-Party Rights. THIS AGREEMENT
AND THE RIGHTS AND DUTIES OF THE PARTIES UNDER THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TENNESSEE.
5.02 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
5.03 No Other Amendments. All other terms and provisions of
the Agreement not modified or amended hereby shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Fifth
Amendment to Credit Agreement as of the day and year first above
written.
CATHERINES, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Executive
Vice President
CATHERINES STORES CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx, Executive
Vice President
CATHERINES OF PENNSYLVANIA, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx, Executive
Vice President
CATHERINES OF CALIFORNIA, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx, Executive
Vice President
CATHERINES PARTNERS, L.P.
By: CATHERINES, INC., its general
partner
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx, Executive
Vice President
FIRST AMERICAN NATIONAL BANK,
individually and as Agent
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Title: Assistant Vice President
HIBERNIA NATIONAL BANK
By: /s/ Xxxxxxx Xxxx
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Xxxxxxx Xxxx
Title: Vice President
THE HONGKONG AND SHANGHAI BANKING
CORPORATION LIMITED
By: /s/ Xxxxx Xxxxxxxxxxx
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Xxxxx Xxxxxxxxxxx
Title: AVP
