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EXHIBIT 4.4
RAINBOW RENTALS, INC.
AMENDMENT NO. 10 TO
LOAN AND SECURITY AGREEMENT
This Amendment No. 10 ("Amendment") to Loan and Security
Agreement is made as of July 15, 1998, between Rainbow Rentals, Inc. (formerly
known as Rainbow Home Rentals, Inc.) ("Borrower") and Bank of America National
Trust and Savings Association (formerly known as Bank of America Illinois,
formerly known as Continental Bank Illinois, formerly known as Continental Bank
N.A.) ("Lender").
Reference is made to that certain Loan and Security Agreement
between Borrower and Lender dated October 5, 1992 (as amended, the "Loan
Agreement").
Borrower has consummated an initial public offering of its
capital stock in connection with which it received net cash proceeds in excess
of Twenty Million Dollars ($20,000,000).
Borrower has requested that the Loan Agreement be amended in
certain respects.
Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
Release of Guaranty; Consent to Repayment of Subordinated
Debt. The Lender hereby agrees that the obligations of Xxxxxxx Xxxxxxx and Xxxxx
Xxxxxxx under that certain Guaranty dated October 5, 1992 are hereby released.
Lender hereby consents to the repayment in full of the "Subordinated Redemption
Notes," the "Subordinated Severance Note" and the "Subordinated Consulting Note"
(as each such term is defined in that certain Consent and Amendment No. 8 dated
as of April 21, 1997 between Borrower and Lender), subject to Lender's receipt
of such notes marked cancelled.
Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Liabilities" as follows:
"Liabilities" means all of the liabilities, obligations and
indebtedness of Borrower to Lender or any affiliate of Lender of any
kind or nature, however created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing or due
or to become due, and including but not limited to (a) Borrower's
obligations under any Note, (b) Borrower's obligations under this
Agreement, (c) Borrower's obligations with respect to any Letter of
Credit or any Application therefor, (d) interest, charges, expenses,
Attorneys' Fees and other sums chargeable to Borrower by Lender under
this Agreement or any Related Agreement and (e) the obligations of
Borrower under any Related Agreement, including obligations of
performance. "Liabilities" shall also include any and all amendments,
extensions, renewals, refundings or refinancings of any of the
foregoing.
Section 1.1 of the Loan Agreement is hereby amended by
amending and restating the definition of "Termination Date" as follows:
"Termination Date" means July 15, 2001.
Section 1.1 of the Loan Agreement is hereby amended by
inserting the following definitions in the appropriate places, alphabetically:
"Applicable Margin" means, at any time, (a) with respect to
the unpaid principal amount of each IBOR Rate Loan, two percent (2%)
per annum; (b) with respect to the unpaid principal
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amount of each Reference Rate Loan, zero percent (0%); and (c) with
respect to the outstanding Letters of Credit, two percent (2%) per
annum.
"Minimum Net Worth Amount" means (i) during the period
commencing on June 30, 1998 and ending September 29, 1998, an amount
equal to Twenty-Four Million Dollars ($24,000,000) and (ii) at any time
thereafter the sum of (A) Twenty-Four Million Dollars ($24,000,000),
plus (B) fifty percent (50%) of net income of Borrower, determined in
accordance with GAAP on a consolidated basis, for each calendar quarter
period that has ended on or after September 30, 1998; provided, that
any net loss of Borrower, determined in accordance with GAAP on a
consolidated basis, for any calendar quarter period shall not be taken
into account in the foregoing calculation.
Section 2.2(b) of the Loan Agreement is hereby amended and
restated as follows:
(b) Borrower agrees to pay Lender, on demand, Lender's
standard administrative operating fees and charges in effect from time
to time for issuing and administering any Letters of Credit. With
respect to standby Letter of Credit, Borrower further agrees to pay
Lender a per annum commission equal to the Applicable Margin then in
effect for Letters of Credit (calculated on the basis of a year
consisting of three hundred sixty (360) days and paid for actual days
elapsed) of the daily average of the undrawn amount of each such
standby Letter of Credit and on each L/C Draft accepted by Lender in
connection therewith. Such standby Letter of Credit commissions shall
be paid quarterly in arrears. With respect to commercial and
documentary Letters of Credit, Borrower further agrees to pay Lender a
per annum commission equal to the Applicable Margin then in effect for
Letters of Credit of the maximum undrawn amount of each such Letter of
Credit. Such commercial and documentary Letter of Credit commissions
shall be paid quarterly in arrears. Lender may provide for the payment
of any fees, charges or commissions due hereunder by advancing the
amount thereof to Borrower as a Revolving Loan. At all times that any
Default Rate is being charged under this Agreement, the Letter of
Credit commission shall be equal to the otherwise applicable commission
plus two percent (2.0%).
Section 2.4.2 of the Loan Agreement is hereby amended to
replace the phrase "three-eighths of one percent (0.375%)" with the phrase
"three hundred fifteen one thousandths of one percent (0.315%)".
Section 2.5(c) of the Loan Agreement is hereby amended and
restated as follows:
Borrower further agrees to provide to Lender a current
Borrowing Base Certificate within twenty-five (25) days after the end
of each month and at such other times as Lender may request. Such
Borrowing Base Certificate shall be in substantially the same form as
that attached hereto as Exhibit A, executed and certified as accurate
by such officers or employees of Borrower as Borrower designates in
writing to Lender pursuant to duly adopted resolutions of Borrower's
Board of Directors authorizing such action, and accompanied by a cash
receipts report in form and substance satisfactory to Lender.
Clause (a) to Section 5.1.1 of the Loan Agreement is hereby
amended and restated as follows:
(a) Annual Audit Report. Within the earlier of five (5) days
of filing its Form 10-K with the Securities Exchange Commission and
ninety-five (95) days after each Fiscal Year of Borrower, a copy of the
Form 10-K filing by Borrower which shall include the annual audit
report of Borrower and its Subsidiaries prepared on a consolidated
basis and in conformity with GAAP and certified by an independent
public accountant who shall be satisfactory to Lender, together with a
certificate from such accountant containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in this Section 5 or in Supplement A;
Clause (b) to Section 5.1.1 of the Loan Agreement is hereby
amended and restated as follows:
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(b) Quarterly Financial Statement. Within the earlier of five
(5) days of filing its Form 10-Q with the Securities and Exchange
Commission and fifty (50) days after each of the first three (3) Fiscal
Quarters of each Fiscal Year of Borrower, a copy of the Form 10-Q
filing by Borrower signed by Borrower's chief financial officer which
shall include the unaudited financial statement of Borrower and its
Subsidiaries prepared in accordance with Regulation S-X as promulgated
by the Securities and Exchange Commission and which consist of at least
a balance sheet as at the close of such Fiscal Quarter and statements
of earnings and cash flows for such Fiscal Quarter and for the period
from the beginning of such Fiscal Year to the close of such Fiscal
Quarter;
Clause (c) of Section 5.1.1 of the Loan Agreement is hereby
amended to replace the number "twenty (20)" contained in the first and second
lines thereof with the number "thirty (30)".
Clause (d) of Section 5.1.1 of the Loan Agreement is hereby
amended to replace the phrase "clauses (a), (b) and (c)" with the phrase
"clauses (a) and (b)".
Section 5.12 of the Loan Agreement is hereby amended and
restated as follows:
5.12 Merger, Purchase and Sale. Not, and not permit any
Subsidiary to: (a) be a party to any merger, liquidation or
consolidation; (b) except for sales or leases of Inventory in the
normal course of business, and except for sale of Equipment permitted
under Section 3.4(b) or the sale of its delivery vans, sell, transfer,
convey, lease or otherwise dispose of any of its assets; (c) sell or
assign, with or without recourse, any Accounts Receivable, Contract
Rights, notes receivable or chattel paper, except as provided in this
Agreement; or (d) purchase or otherwise acquire all or a part of the
assets or business of any Person outside the ordinary course of
business except the acquisition of substantially all of the assets or
equity interests in any Person that is in substantially the same line
of business as Borrower; provided, that (i) the aggregate consideration
for all such acquisitions (including, without limitation, cash purchase
price, liabilities assumed, deferred or financed purchase price and
purchase price characterized as consulting agreements, non-competition
payments and the like) since July 15, 1998 does not exceed Three
Million Dollars ($3,000,000), (ii) after giving effect to such proposed
acquisition, Borrower is in compliance with all covenants and
representations and warranties contained in this Agreement, (iii) no
Default or Event of Default has occurred and is continuing, (iv)
Borrower gives the Lender at least ten (10) Business Days prior written
notice of any such acquisition, (v) the Board of Directors and/or
owners of the entity whose business is proposed to be acquired by
Borrower has approved the proposed transaction; (vi) after giving
effect to the proposed acquisition, the ratio of Funded Debt to
consolidated earnings of Borrower before interest expense and provision
for Taxes (for the most recently ended twelve (12) month period) is
less than 2:25:1.0, and (vii) Borrower takes such actions as Lender
shall request to grant and perfect a security interest in the assets
acquired in favor of Lender to secure the Liabilities.
Section 6.1(n) of the Loan Agreement is hereby amended and
restated as follows:
(n) Ownership; Chairman. If Xxxxxxx Xxxxxxx fails to own at
least twenty-five percent (25%) of the voting stock of Borrower; or if
Xxxxxxx Xxxxxxx fails to be the Chairman of the Board of Directors and
the Chief Executive Officer of Borrower;
Amendment and Restatement of Supplement A of the Loan
Agreement. Supplement A of the Loan Agreement is hereby amended in its entirety
in the form attached hereto as Exhibit A.
Conditions Precedent. The amendment to the Loan Agreement set
forth in this Amendment shall become effective as of the date of this Amendment
upon the satisfaction of the following conditions precedent:
No Default. No Event of Default, or event which, with the
giving of notice or the passage of time, or both, would become an Event of
Default, shall have occurred and be continuing.
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Resolutions. Borrower shall have delivered corporate
resolutions, in form and substance satisfactory to Lender, with respect to this
Amendment.
Execution. The delivery of an executed copy of this Amendment
and the acknowledgments hereto to Lender.
Closing Fee. Borrower shall have paid Lender a closing fee of
Twenty Thousand Dollars ($20,000).
Miscellaneous.
Expenses. Borrower agrees to pay on demand all costs and
expenses of Lender (including the reasonable fees and expenses of outside
counsel for Lender) in connection with the preparation, negotiation, execution,
delivery and administration of this Amendment and all other instruments or
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. In addition, Borrower agrees to pay, and save Lender
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of this Amendment, the borrowings
under the Loan Agreement, as amended hereby, and the execution and delivery of
any instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided in this Section
5.1 shall survive any termination of this Amendment or the Loan Agreement as
amended hereby.
Governing Law. This Amendment shall be a contract made under
and governed by the internal laws of the State of Illinois.
Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
Reference to Loan Agreement. Except as herein amended, the
Loan Agreement shall remain in full force and effect and is hereby ratified in
all respects. On and after the effectiveness of the amendments to the Loan
Agreement accomplished hereby, each reference in the Loan Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference to the Loan Agreement in any note and in any Related Agreements, or
other agreements, documents or other instruments executed and delivered pursuant
to the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
Successors. This Amendment shall be binding upon Borrower,
Lender and their respective successors and assigns, and shall inure to the
benefit of Borrower, Lender and the successors and assigns of Borrower and
Lender.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
and delivered at Chicago, Illinois as of the date first above written.
RAINBOW RENTALS, INC.
By__________________________________
Its_________________________________
BANK OF AMERICA ILLINOIS
By__________________________________
Its_________________________________
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THIRD AMENDED AND RESTATED SUPPLEMENT A
TO LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 5, 0000
XXXXXXX XXXX XX XXXXXXX XXXXXXXX
AND RAINBOW RENTALS, INC.
Loan Agreement Reference. This Third Amended and Restated
Supplement A, as it may be amended or modified from time to time, is a part of
the Loan and Security Agreement dated as of October 5, 1992 between Lender and
Borrower (together with all amendments, modifications and supplements thereto,
the "Loan Agreement") and amends and restates in its entirety that certain
Second Amended and Restated Supplement A dated May 21, 1997. Terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Loan
Agreement.
Revolving Credit Amount; Borrowing Base.
Revolving Credit Amount. The maximum amount of Revolving Loans
which Lender, in its discretion, will make available to Borrower (such amount,
as adjusted from time to time, is herein called the "Revolving Credit Amount")
is $10,000,000.
Borrowing Base. The term "Borrowing Base," as used herein,
shall mean an amount (the "Cash Receipts Availability") equal to (A) the product
of up to the "Cash Collection Percentage" (as defined below) multiplied by the
net amount of Borrower's actual cash collections of Accounts Receivable from
Account Debtors pursuant to the terms of Rental Agreements for the immediately
preceding two calendar months (exclusive of collections for delivery, insurance,
merchandise, sales and other non-rental payments and after deduction of such
reserves and allowances as Lender deems proper and necessary), divided by (B)
two. "Cash Collection Percentage" (as defined below) means 375%.
Lender's Rights. Borrower agrees that nothing contained in
Supplement A (i) shall be construed as Lender's agreement to resort or look to a
particular type or item of Collateral as security for any specific Loan or
portion of the Liabilities or advance or in any way limit Lender's right to
resort to any or all of the Collateral as security for any of the Liabilities,
(ii) shall be deemed to limit or reduce any Lien upon any portion of the
Collateral or other security for the Liabilities or (iii) shall supersede
Section 2.9 of the Loan Agreement.
Interest.
Revolving Loans.
Interest to Maturity. The unpaid principal balance of the
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a per annum rate equal to the Reference Rate in effect
from time to time plus the Applicable Margin; provided that pursuant to the
provisions of Section 3.1.3 below, from time to time Borrower may elect to have
all or any portion of the Revolving Loans bear interest at the IBOR Rate plus
the Applicable Margin.
Default Rate. If any amount of the Revolving Loans is not paid
when due, whether by acceleration or otherwise, the entire unpaid principal
balance of the Revolving Loans (other than Overdraft Loans and Over Advances)
shall bear interest until paid at a rate per annum equal to the greater of (i)
the rate otherwise from time to time if effect plus 2.00% and (ii) 2.00% above
the rate otherwise in effect at the time such amount becomes due.
Intentionally Omitted.
IBOR Option.
Borrower shall have the right, from time to time, to designate
IBOR Revolving Portions by means of an IBOR Request. All IBOR Requests must be
received by Lender not later than 10:00 a.m., Chicago time, two (2) Banking Days
prior to the date the applicable Interest Rate Period is to begin (or is to be
continued). Notwithstanding
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the foregoing, (x) all undesignated portions of the Revolving Loan shall
constitute Reference Rate Loans, (y) Borrower shall not have the right to
designate IBOR Rate Loans at any time that an Event of Default or an Unmatured
Event of Default is in existence, notwithstanding a contrary designation by
Borrower, and (z) in no event may more than four (4) IBOR Rate Loans having
different Interest Rate Periods be outstanding at any one time. Each designation
by Borrower of a IBOR Rate Loan shall be irrevocable; provided, however, that
Borrower may specify in any such IBOR Request a maximum IBOR Rate which it will
accept for the related Interest Rate Period and the IBOR Option elected in such
IBOR Request shall not become effective if the applicable IBOR Rate determined
by Lender shall exceed such specified maximum.
Overdraft Loans; Over Advances. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to Section 2.7
or Section 2.8 of the Loan Agreement, as applicable.
Computation. Interest shall be calculated on the basis of a
year consisting of 360 days and paid for actual days elapsed; provided, that the
computation of interest on IBOR Rate Loans shall include the date on which the
applicable Interest Rate Period began, but shall exclude the last day of the
applicable Interest Rate Period. IBOR Rate Loans not repaid on the last day of
the Interest Rate Period applicable thereto shall be continued or converted into
Reference Rate Loans and shall bear interest at the applicable rate for
Reference Rate Loans of such type from and including the last day of such
Interest Rate Period. Changes in any interest rate provided for herein which are
due to changes in the Reference Rate shall take effect on the date of the change
in the Reference Rate.
Payment. Until maturity, interest on the Loans shall be
payable on the first day of each calendar quarter, and at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand; provided, that interest on IBOR Rate Loans shall be payable
in arrears on the last day of the Interest Rate Period applicable thereto and at
maturity.
Funding Indemnification. If any payment of a IBOR Rate Loan
occurs on a date which is not the last day of the applicable Interest Rate
Period, whether because of acceleration, prepayment or otherwise, Borrower will
indemnify Lender for any loss or cost incurred by it resulting therefrom,
including without limitation any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Loan. Lender shall deliver a written
statement as to the amount due, if any, under this Section 3.5. Such written
statement shall set forth in reasonable detail the calculations upon which
Lender determined such amount and shall be final, conclusive and binding on
Borrower in the absence of manifest error. Determination of amounts payable
under this Section 3.5 shall be calculated as though Lender funded its IBOR Rate
Loans through the purchase of a deposit of the type and maturity corresponding
to the IBOR Rate Loan and applicable Interest Rate Period bearing interest at
the IBOR Base Rate, whether or not Lender actually funded the Loan in that
manner. The amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement. This Section 3.5 shall apply
to all payments of IBOR Rate Loans prior to the last day of the applicable
Interest Rate Period, including without limitation any such payment required to
be made in order to permit Borrower to pay any installment of principal due in
respect of the Revolving Loan under this Agreement.
Availability of Interest Rate Options. If Lender determines
that maintenance of any of its IBOR Rate Loans would violate any applicable law,
rule, regulation or directive, whether or not having the force of law, Lender
shall suspend the availability of such IBOR Rate Loans and require any IBOR Rate
Loans outstanding and so affected to be repaid; or if Lender determines that (i)
deposits of a type or maturity appropriate to match fund IBOR Rate Loans are not
available, (ii) the IBOR Rate does not accurately reflect the cost of making
such Loans, or (iii) Lender's ability to make or maintain IBOR Rate Loans has
been materially adversely affected by the occurrence of any event after the date
hereof, then Lender shall suspend the availability of the IBOR Rate Loans, as
applicable, after the date of any such determination.
Additional Covenants. From the Closing Date and thereafter
until all of Borrower's Liabilities under the Loan Agreement are paid in full,
Borrower agrees that, unless Lender otherwise consents in writing, it will:
Net Worth. Not permit Borrower's Net Worth at any time to be
less than the Minimum Net Worth Amount as such time.
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Capital Expenditures. Not and not permit any of its
Subsidiaries to purchase or otherwise acquire (including without limitation,
acquisition by way of capitalized lease), or commit to purchase or acquire, any
fixed asset, if after giving effect to such purchase or other acquisition, the
aggregate cost of all such fixed assets purchased or otherwise acquired would
exceed $2,000,000 in any Fiscal Year.
Maximum Funded Debt to Earnings Ratio. Not permit, for the
twelve month period ending on the last day of each calendar quarter ending
during any period (inclusive) set forth below, the ratio of (a) Borrower's
Indebtedness for interest bearing borrowed money on the last day of each such
calendar quarter during such period set forth below to (b) Borrower's
consolidated net earnings before interest expense and provision for Taxes for
such twelve month period, to be greater than the ratio set forth below opposite
such twelve month period:
Period Maximum Ratio
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September 30, 1998 and the twelve month period ending on the last 2.50:1.00
day of each calendar quarter thereafter
For purposes of this Section 4.3 and Section 4.4, (i) consolidated net earnings
shall not include any gains on the sale or other disposition of Investments of
fixed assets and any extraordinary or nonrecurring items of income to the extent
that the aggregate of all such gains and extraordinary or nonrecurring items of
income exceeds the aggregate of losses on such sale or other disposition and
extraordinary or nonrecurring charges, and (ii) interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases, and shall
exclude the amortization of the closing fee, the modification fee, or any other
fee paid to Lender in connection with the Loans.
Minimum Fixed Charge Coverage Ratio. Not permit, for any
period set forth below, the ratio of (a) Borrower's consolidated net earnings
before interest expense and provision for Taxes and the rental payments for
Borrower's stores for such period to (b) the sum of (i) Borrower's interest
expense for such period, (ii) scheduled principal payments with respect to
Borrower's Indebtedness for borrowed money during such period, and (iii) the
rental payments for Borrower's stores for such period, to be less than the ratio
set forth below opposite such period:
Period Maximum Ratio
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July 1, 1998 through September 30, 1998 1.75:1.00
July 1, 1998 through December 31, 1998 1.75:1.00
The period commencing on the first day of each calendar year 1.75:1.00
thereafter (commencing with the calendar year beginning January 1,
1999) and ending on the last day of each calendar quarter during such
calendar year
Borrower's Initials _______
Lender's Initials _________
Date: July 15, 1998
